UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the interim period ended: September 30, 2016

 

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ___________ to____________

 

Commission File Number: 000-55549

 

PROGRESSIVE GREEN SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

 

Nevada	45-3539010
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

 

445 County Road 101, Suite E
Yaphank, New York	11980
(Address of principal executive offices)	(Zip Code)

 

(631) 775-8920

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes  x  No  ¨

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files. Yes  x  No  ¨

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	¨	Smaller reporting company	x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  ¨  No  x

 

As of December 19, 2016 there were 48,400,851 shares outstanding of the Registrant’s common stock issued and outstanding.

 

 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements.	F-1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	3
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	6
Item 4.	Controls and Procedures.	6
PART II – OTHER INFORMATION
Item 1.	Legal Proceedings.	7
Item 1A.	Risk Factors.	7
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds.	7
Item 3	Defaults Upon Senior Securities.	7
Item 4.	Mine Safety Disclosures.	7
Item 5.	Other Information.	8
Item 6.	Exhibits.	9
Signatures		10

 

 

PART I – FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

Progressive Green Solutions, Inc.

 

Index to the Unaudited Condensed Consolidated Financial Statements

 

Contents		Page(s)
Condensed Consolidated Balance Sheets at September 30, 2016 (Unaudited) and December 31, 2015		F-2
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2016 and September 30, 2015 (Unaudited)		F-3
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2016 and September 30, 2015 (Unaudited)		F-4
Notes to the Condensed Consolidated Financial Statements (Unaudited)		F-5

 

 

Progressive Green Solutions, Inc.

Condensed Consolidated Balance Sheets

 

		September 30, 2016				December 31, 2015
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash		$	100,010			$	521
Accounts receivable, net			824,492				1,007,099
Prepayments and other current assets			130,792				34,851
Total current assets			1,055,294				1,042,471
PROPERTY, PLANT and EQUIPMENT, NET			1,979,189				836,627
INTANGIBLES, NET			2,222				27,222
OTHER ASSETS
Security deposits			34,693				34,693
Deposit on potential purchases			225,000				225,000
Total other assets			259,693				259,693
Total assets		$	3,296,398			$	2,166,013
LIABILITIES AND DEFICIT
CURRENT LIABILITIES
Accounts payable and accrued expenses		$	2,433,162			$	2,180,370
Factor advance			-				192,710
Notes payable - related parties			1,895,546				1,123,501
Advances from stockholders			250,086				32,339
Advances from third party			373,608				117,264
Deferred rent, current portion			25,264				46,252
Customer deposits			98,000				-
Equipment loan, current portion			98,975				21,911
Total current liabilities			5,174,641				3,714,347
NON-CURRENT LIABILITIES
Deferred rent, net of current portion			-				14,265
Equipment loan, net of current portion			430,467				69,001
Loans payable			1,000,000				-
Total non-current liabilities			1,430,467				83,266
Total liabilities			6,605,108				3,797,613
COMMITMENTS AND CONTINGENCIES
DEFICIT
PROGRESSIVE GREEN SOLUTIONS, INC. STOCKHOLDERS’ DEFICIT
Preferred stock par value $0.001: 10,000,000 shares authorized; none issued and outstanding  at September 30, 2016 and December 31, 2015
Common stock par value $0.001: 300,000,000 shares authorized; 48,400,851 and 33,086,782 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively			48,401				33,087
Additional paid-in capital			3,807,070				2,999,636
Accumulated deficit			(6,793,042	)			(4,572,206	)
Total Progressive Green Solutions, Inc. stockholders' deficit			(2,937,571	)			(1,539,483	)
Non-Controlling Interest			(371,139	)			(92,117	)
Total deficit			(3,308,710	)			(1,631,600	)
Total liabilities and deficit		$	3,296,398			$	2,166,013

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

Progressive Green Solutions, Inc.

Condensed Consolidated Statements of Operations

(Unaudited)

 

		For the Nine Months				For the Nine Months				For the Three Months				For the Three Months
		Ended				Ended				Ended				Ended
		September 30, 2016				September 30, 2015				September 30, 2016				September 30, 2015
NET REVENUE		$	3,068,808			$	3,337,757			$	792,215			$	1,902,958
COST OF GOODS SOLD			3,573,914				3,023,027				1,038,778				1,748,140
GROSS (LOSS) PROFIT			(505,106	)			314,730				(246,563	)			154,818
OPERATING EXPENSES:
Salaries and wages			504,101				487,143				177,669				214,221
Professional fees			211,192				247,510				31,154				83,917
Rent and occupancy			345,765				438,484				138,076				180,175
Selling, general and administrative			711,857				506,992				258,847				263,354
Bad debt expense			143,874				46,023				-				46,023
Total operating expenses			1,916,790				1,726,152				605,746				787,690
LOSS FROM OPERATIONS			(2,421,896	)			(1,411,422	)			(852,309	)			(632,872	)
OTHER (INCOME) EXPENSE:
Other (income) expense			(30,911	)			(1,035	)			(22,946	)			(597	)
Penalties and interest			108,874				54,356				42,843				40,732
Total other expense, net			77,963				53,321				19,897				40,135
LOSS BEFORE INCOME TAX PROVISION			(2,499,859	)			(1,464,743	)			(872,207	)			(673,007	)
INCOME TAX PROVISION			-				-				-				-
NET LOSS			(2,499,859	)			(1,464,743	)			(872,207	)			(673,007	)
Net loss attributable to non-controlling interest			(279,021	)			(38,279	)			(123,266	)			(20,397	)
Net loss attributable to PGS Inc. stockholders		$	(2,220,838	)		$	(1,426,464	)		$	(748,941	)		$	(652,610	)
Net loss per common share attributable to PGS Inc. stockholders
- Basic and diluted		$	(0.07	)		$	(0.04	)		$	(0.02	)		$	(0.02	)
Weighted average common shares outstanding
- Basic and diluted			33,773,564				33,086,782				35,123,332				33,086,782

 

See accompanying notes to the unaudited consolidated condensed financial statements.

 

 

Progressive Green Solutions, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

		For the Nine Months				For the Nine Months
		Ended				Ended
		September 30, 2016				September 30, 2015
Net loss before non-controlling interest		$	(2,499,858	)		$	(1,464,743	)
Adjustments to reconcile net loss before non-controlling interest to net cash used in operating activities
Depreciation and amortization			210,919				119,280
Amortization expense, management agreement			25,000				14,445
Changes in operating assets and liabilities:
Accounts receivable			(4,392	)			(724,146	)
Inventories			-				339,532
Prepayments and other current assets			(95,941	)			20,783
Accounts payable and accrued expenses			259,950				1,546,171
Customer deposits			-				(239,660	)
Deferred rent			(35,253	)			(30,284	)
Net cash used in operating activities			(2,139,575	)			(418,622	)
Cash flows from investing activities:
Purchase of property and equipment			(324,630	)			(44,558	)
Purchase of leasehold improvements			(51,949	)			(127,546	)
Purchase of software and hardware			-				(11,993	)
Purchase of vehicles			(27,500	)			-
Management agreement			-				(50,000	)
Deposit on potential purchase			-				(200,000	)
Net cash used in investing activities			(404,079	)			(434,097	)
Cash flows from financing activities:
Advances from stockholders			217,747				38,981
Proceeds from notes payable - related parties			1,498,114				759,200
Payments made for notes payable-related parties			(120,000	)
Advances from third party			256,344				4,000
Factor advance			(192,710	)			(6,033	)
Equipment Loan			(16,352	)			-
Other Loans			1,000,000				-
Net cash provided by financing activities			2,643,143				796,148
Net change in cash			99,489				(56,571	)
Cash at beginning of the reporting period			521				62,337
Cash at end of the reporting period		$	100,010			$	5,766
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Interest paid		$	3,638			$	-
Income taxes paid		$	-			$	-
Non-Cash Financing and Investing Activities:
Accrued payments for leasehold improvements		$	-				74,555
Plant purchased for note payable		$	-				119,000
Common stock issued for conversion or related party notes payable and interest		$	822,747			$	-
Total value of equipment acquired through barter with customer for $187,000, with related party loan for $200,000, and remaining customer deposit $98,000		$	485,000			$	-
Equipment financed under capital lease		$	454,882			$	-
Equipment purchased for accounts payable		$	9,520			$	-

 

See accompanying notes to the unaudited consolidated condensed financial statements.

 

 

Progressive Green Solutions, Inc.

September 30, 2016 and 2015

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1 – Organization and Operations

 

Progressive Green Solutions, Inc.

 

Progressive Green Solutions, Inc. (the “Company”) was incorporated on August 26, 2011, under the laws of the State of Nevada as MarketingMobileText, Inc. which subsequently changed its corporate name to Progressive Green Solutions, Inc.

 

On March 7, 2014, the Company acquired all of the membership interests of Green Remanufacturing Solutions LLC (“GRS LLC”) in exchange for 23,000,000 newly issued post-split shares of the Company’s common stock (the “Exchange”). In connection with the Exchange, the Company adopted the business plan of GRS LLC, and amended its Articles of Incorporation to change its name to Progressive Green Solutions, Inc., effectuate a forward-split on a ten for one basis and increase its authorized capital stock to 300,000,000 shares of common stock and 10,000,000 shares of blank check preferred stock.

 

As a result of the controlling financial interest of the former members of GRS LLC, for financial statement reporting purposes, the merger between the Company and GRS LLC has been treated as a reverse acquisition with GRS LLC deemed the accounting acquirer and the Company deemed the accounting acquiree under the acquisition method of accounting in accordance with section 805-10-55 of the FASB Accounting Standards Codification. The reverse acquisition is deemed a capital transaction and the net assets of GRS LLC (the accounting acquirer) are carried forward to the Company (the legal acquirer and the reporting entity) at their carrying value before the acquisition.  The acquisition process utilizes the capital structure of the Company and the assets and liabilities of GRS LLC which are recorded at their historical cost.  The equity of the Company is the historical equity of GRS LLC retroactively restated to reflect the number of shares issued by the Company in the transaction.

 

Green Remanufacturing Solutions, Inc.

 

Green Remanufacturing Solutions, Inc. (“GRS Inc.”) was incorporated on June 27, 2011, under the laws of the State of New York. GRS Inc. specialized in reverse logistics, repair and recovery, engineering/quality assurance, warehousing and fulfillment, secondary market sales and e-commerce for retailers and manufacturers of major appliances, small appliances, floor care products, air-conditioning/filtration products, power tools and outdoor power equipment products.

 

Green Remanufacturing Solutions LLC

 

Green Remanufacturing Solutions LLC (“GRS LLC”) was formed on May 31, 2012, under the laws of the State of Delaware. The sole purpose of GRS LLC was to carry-on GRS Inc.’s business in the form of a limited liability company. The assets and liabilities of GRS Inc. were carried forward to GRS LLC at their historical costs on the date of conversion. On September 5, 2013 a Certificate of Merger was filed with the State of New York Department of State, Division of Corporations, merging GRS Inc. and GRS LLC.

 

Applianceplace.com, LLC

 

Applianceplace.com, LLC was formed on November 29, 2012 under the laws of the State of New York and is 100% owned by the Company.

 

 

Speyside Holdings LLC

 

Speyside Holdings LLC was formed on March 25, 2015 under the laws of the State of Delaware. Speyside Holdings LLC is engaged in the fine and coarse aggregates business in Highland Mills, New York.

 

On September 12, 2016, the operating agreement of Speyside Holdings LLC was amended and restated. As a result of the amended and restated operating agreement, the Company directly owns 60 Class A Units in Speyside Holdings LLC. On October 12, 2016, the operating agreement of Speyside Holdings LLC was again amended and restated and as result, the Company directly owns 51 Class A Units in Speyside Holdings LLC.

 

CEM III LLC

 

CEM III LLC (“CEM”) was formed on July 13, 2015 under the laws of the State of New York. CEM’s purpose is to take title and manage a parcel of real property in Highland Mills, New York.

 

On September 12, 2016, the operating agreement CEM III LLC was amended and restated. As a result of the amended and restated operating agreement, the Company indirectly owns 36 Class A Units in CEM III LLC. On October 12, 2016, the operating agreement of and CEM III LLC was again amended and restated and as a result the Company indirectly owns 26 Class A Units in CEM III LLC.

 

Speyside Holdings II LLC

 

On September 21, 2016, Speyside Holdings LLC formed a wholly owned subsidiary named Speyside Holdings II LLC. Speyside Holdings II LLC is a New York limited liability company whose purpose is to take title and to manage a parcel of real property in Highland Mills, New York.

 

Note 2 – Significant and Critical Accounting Policies and Practices

 

The Management of the Company is responsible for the selection and use of appropriate accounting policies and the appropriateness of accounting policies and their application. Critical accounting policies and practices are those that are both most important to the portrayal of the Company’s financial condition and results and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. The Company’s significant and critical accounting policies and practices are disclosed below as required by generally accepted accounting principles.

 

Basis of Presentation - Unaudited Interim Financial Information

 

The accompanying unaudited interim consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim consolidated financial statements should be read in conjunction with the consolidated financial statements of the Company for the year ended December 31, 2015 and notes thereto contained in the Company’s annual report on Form 10-K for the fiscal year ended December 31, 2015, as filed with the SEC on March 23, 2016.

 

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

 

Critical accounting estimates are estimates for which (a) the nature of the estimate is material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change and (b) the impact of the estimate on financial condition or operating performance is material. The Company’s critical accounting estimates and assumptions affecting the financial statements were:

 

 

(i)

Assumption as a going concern : Management assumes that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business;

 

(ii)

Allowance for doubtful accounts : Management’s estimate of the allowance for doubtful accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole.

 

(iii)

Inventory Obsolescence and Markdowns : The Company’s estimate of potentially excess and slow-moving inventories is based on evaluation of inventory levels and aging, review of inventory turns and historical sales experiences. The Company’s estimate of reserve for inventory shrinkage is based on the historical results of physical inventory cycle counts.

 

(iv)

Fair value of long-lived assets : Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some examples of important indicators that may trigger an impairment review: (A) significant under-performance or losses of assets relative to expected historical or projected future operating results; (B) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (C) significant negative industry or economic trends; (D) increased competitive pressures; (E) a significant decline in the Company’s stock price for a sustained period of time; and (F) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

 

(v)

Valuation allowance for deferred tax assets : Management assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”) carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability to raise additional funds to support its daily operations by way of a public or private offering, among other factors.

 

These significant accounting estimates or assumptions bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates or assumptions are difficult to measure or value.

 

Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

 

Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.

 

Actual results could differ from those estimates.

 

 

Principles of Consolidation

 

The Company applies the guidance of Topic 810 “Consolidation” of the FASB Accounting Standards Codification (“ASC”) to determine whether and how to consolidate another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8 the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership, for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned subsidiaries, if any, in which the parent’s power to control exists.

 

On September 12, 2016, the operating agreements of Speyside Holdings LLC and CEM III LLC were amended and restated. As a result of the amended and restated operating agreement, the Company directly owns 60 Class A Units in Speyside Holdings LLC and indirectly own 36 Class A Units in CEM III LLC as of September 30, 2016.

 

On October 12, 2016, the operating agreements of Speyside Holdings LLC and CEM III LLC were amended and restated. As a result of the amended and restated operating agreements, the Company directly owns 51 Class A Units in Speyside Holdings LLC and indirectly own 26 Class A Units in CEM III LLC.

 

The Company’s consolidated subsidiaries and/or entities are as follows as of December 19, 2016:

 

Name of consolidated subsidiary or entity		State or other jurisdiction of incorporation or organization		Date of incorporation or formation (date of acquisition, if applicable) (date of disposition, if applicable)		Attributable interest to Company as of December 19, 2016
Green Remanufacturing LLC		The State of Delaware		May 31, 2012 (March 7, 2014) (N/A)			100	%
Applianceplace.com, LLC		The State of New York		November 29, 2012 (March 7, 2014) (N/A)			100	%
Speyside Holdings LLC		The State of Delaware		March 25, 2015 (April 23, 2015) (N/A)			51	%
CEM III LLC		The State of New York		July 31, 2015 (April 23, 2015)			26	%
Speyside Holdings II LLC		The State of New York		September 21, 2016 (September 21, 2016) (N/A)			51	%

The consolidated financial statements include all accounts of the Company and consolidated subsidiaries and/or entities as of and for the reporting periods then ended.

 

All inter-company balances and transactions have been eliminated.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

 

·

Level 1 – Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

·

Level 2 – Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

·

Level 3 – Pricing inputs that are generally observable inputs and not corroborated by market data

 

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one significant model assumption or input is unobservable.

 

The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.

 

The carrying amounts of the Company’s financial assets and liabilities, such as cash, accounts receivable, prepayments and other current assets, accounts payable and accrued expenses, advances from third party and deferred rent approximate their fair values because of the short maturity of these instruments.

 

The Company’s equipment loans approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at December 31, 2015.

 

Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.

 

Fair Value of Non-Financial Assets or Liabilities Measured on a Recurring Basis

 

The Company’s non-financial assets include inventories. The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories. The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle counts.

 

Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Pursuant to FASB ASC paragraph 310-10-35-47 trade receivables that management has the intent and ability to hold for the foreseeable future shall be reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for doubtful accounts. The Company follows FASB ASC paragraphs 310-10-35-7 through 310-10-35-10 to estimate the allowance for doubtful accounts. Pursuant to FASB ASC paragraph 310-10- 35-9 Losses from uncollectible receivables shall be accrued when both of the following conditions are met: (a) Information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset has been impaired at the date of the financial statements, and (b) The amount of the loss can be reasonably estimated. Those conditions may be considered in relation to individual receivables or in relation to groups of similar types of receivables. If the conditions are met, accrual shall be made even though the particular receivables that are uncollectible may not be identifiable. The Company reviews individually each trade receivable for collectability and performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general economic conditions that may affect a client’s ability to pay. Bad debt expense is included in general and administrative expenses, if any.

 

 

Pursuant to FASB ASC paragraph 310-10-35-41 Credit losses for trade receivables (uncollectible trade receivables), which may be for all or part of a particular trade receivable, shall be deducted from the allowance. The related trade receivable balance shall be charged off in the period in which the trade receivables are deemed uncollectible. Recoveries of trade receivables previously charged off shall be recorded when received. The Company charges off its trade account receivables against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

 

The Company has a provision for doubtful accounts of $161,177 as of September 30, 2016, which is based upon an analysis of the Company’s prior collection experience, customer creditworthiness and current economic trends.

 

Inventory

 

The Company values inventories, consisting of raw materials, consumables, packaging material, finished goods, and purchased merchandise for resale, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method for raw materials and packaging materials and the weighted average cost method for finished goods. Cost of finished goods comprises direct labor, direct materials, direct production cost and an allocated portion of production overhead. The Company reduces inventories for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value. Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates; (ii) estimates of future demand; (iii) competitive pricing pressures; (iv) new product introductions; (v) product expiration dates; and (vi) component and packaging obsolescence. The Company had no Inventory at September 30, 2016 and December 31, 2015.

 

Property and Equipment

 

Property and equipment are recorded at cost. Expenditures for major additions and betterments are capitalized. Maintenance and repairs are charged to operations as incurred. Depreciation of property, plant and equipment is computed by the straight-line method (after taking into account their respective estimated residual values) over the estimated useful lives of the respective assets as follows:

  

		Estimated Useful Life (Years)
Leasehold improvement (*)		3-6
Property and equipment		7-15
Software		3
Vehicles		7
Management Agreement (^)		1.5

 

(*) Amortized on a straight-line basis over the term of the lease or the estimated useful lives, whichever is shorter.

(^) Amortized on a straight-line basis over the term of the Management Agreement or its termination date, whichever is shorter.

 

 

Upon sale or retirement, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.

 

Carrying Value, Recoverability and Impairment of Long-Lived Assets

 

The Company has adopted Section 360-10-35 of the FASB Accounting Standards Codification for its long-lived assets. Pursuant to ASC Paragraph 360-10-35-17 an impairment loss shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC Paragraph 360-10-35-20 if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration of a previously recognized impairment loss is prohibited.

 

Pursuant to ASC Paragraph 360-10-35-21 the Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. The Company considers the following to be some examples of such events or changes in circumstances that may trigger an impairment review: (a) significant decrease in the market price of a long-lived asset (asset group); (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition; (c) A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator; (d) An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group); (e) A current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group); and (f) A current expectation that, more likely than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously estimated useful life. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

 

Pursuant to ASC Paragraphs 360-10-35-29 through 35-36 Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall include only the future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise as a direct result of the use and eventual disposition of the asset (asset group). Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall incorporate the entity’s own assumptions about its use of the asset (asset group) and shall consider all available evidence. The assumptions used in developing those estimates shall be reasonable in relation to the assumptions used in developing other information used by the entity for comparable periods, such as internal budgets and projections, accruals related to incentive compensation plans, or information communicated to others. However, if alternative courses of action to recover the carrying amount of a long-lived asset (asset group) are under consideration or if a range is estimated for the amount of possible future cash flows associated with the likely course of action, the likelihood of those possible outcomes shall be considered. A probability-weighted approach may be useful in considering the likelihood of those possible outcomes. Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall be made for the remaining useful life of the asset (asset group) to the entity. For long-lived assets (asset groups) that have uncertainties both in timing and amount, an expected present value technique will often be the appropriate technique with which to estimate fair value.

 

Pursuant to ASC Paragraphs 360-10-45-4 and 360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amount of that loss. A gain or loss recognized on the sale of a long-lived asset (disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amounts of those gains or losses.

 

 

Leases

 

Lease agreements are evaluated to determine whether they are capital leases or operating leases in accordance with paragraph 840-10-25-1 of the FASB Accounting Standards Codification (“Paragraph 840-10-25-1”). Pursuant to Paragraph 840-10-25-1 A lessee and a lessor shall consider whether a lease meets any of the following four criteria as part of classifying the lease at its inception under the guidance in the Lessees Subsection of this Section (for the lessee) and the Lessors Subsection of this Section (for the lessor): a. Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title. b. Bargain purchase option. The lease contains a bargain purchase option. c. Lease term. The lease term is equal to 75 percent or more of the estimated economic life of the leased property. d. Minimum lease payments. The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.

 

In accordance with paragraphs 840-10-25-29 and 840-10-25-30, if at its inception a lease meets any of the four lease classification criteria in Paragraph 840-10-25-1, the lease shall be classified by the lessee as a capital lease; and if none of the four criteria in Paragraph 840-10-25-1 are met, the lease shall be classified by the lessee as an operating lease. Pursuant to Paragraph 840-10-25-31 a lessee shall compute the present value of the minimum lease payments using the lessee’s incremental borrowing rate unless both of the following conditions are met, in which circumstance the lessee shall use the implicit rate: a. It is practicable for the lessee to learn the implicit rate computed by the lessor. b. The implicit rate computed by the lessor is less than the lessee’s incremental borrowing rate. Capital lease assets are depreciated on a straight line method, over the capital lease assets estimated useful lives consistent with the Company’s normal depreciation policy for tangible fixed assets. Interest charges are expensed over the period of the lease in relation to the carrying value of the capital lease obligation.

 

Operating leases primarily relate to the Company’s leases of office spaces. When the terms of an operating lease include tenant improvement allowances, periods of free rent, rent concessions, and/or rent escalation amounts, the Company establishes a deferred rent liability for the difference between the scheduled rent payment and the straight-line rent expense recognized, which is amortized over the underlying lease term on a straight-line basis as a reduction of rent expense.

 

Related Parties

 

The Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.

 

Pursuant to Section 850-10-20 the related parties include (a.) affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that, directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person, as such terms are used in and construed under Rule 405 under the Securities Act); (b.) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; (c.) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d.) principal owners of the Company and members of their immediate families ; (e.) management of the Company and members of their immediate families ;; (f.) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and (g.) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

 

Pursuant to ASC Paragraphs 850-10-50-1 and 50-5 financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. The disclosures shall include: (a.) the nature of the relationship(s) involved; (b.) a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; (c.) the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and (d.) amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement. Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated.

 

Commitments and Contingencies

 

The Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.

 

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.

 

On December 8, 2016, the Company was served with a Summons with Notice in the Supreme Court of the State of New York, County of Nassau.  The action, entitled Tynes v. Progressive Green Solutions, Inc., names the Company, Eugene Fernandez, its President and Chairman, and several other unrelated parties.  The Summons with Notice alleges, unspecific to which defendant, breach of agreements, breach of fiduciary duty, gross negligence and general and securities fraud. The Summons and Notice, also unspecific as to which defendant, seeks relief in an indeterminate amount not less than $500,000. The Company’s time to appear in the action has not yet passed and it intends to vigorously defend against the Action.

 

Non-controlling Interest

 

The Company follows paragraph 810-10-65-1 of the FASB Accounting Standards Codification to report the non-controlling interest in the consolidated balance sheets within the equity section, separately from the Company’s stockholders’ equity. Non-controlling interest represents the non-controlling interest holder’s proportionate share of the equity of the Company’s majority-owned subsidiary. Non-controlling interest is adjusted for the non-controlling interest holder’s proportionate share of the earnings or losses and other comprehensive income (loss), if any, and the non-controlling interest continues to be attributed its share of losses even if that attribution results in a deficit non-controlling interest balance.

 

Revenue Recognition

 

The Company applies paragraph 605-10-S99-1 of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii) the product has been shipped or the services have been rendered to the customer; (iii) the sales price is fixed or determinable; and (iv) collectability is reasonably assured.

 

The Company derives its revenues from sales contracts with customers with revenues being generated upon the completion of the reconditioning process and/or the shipment of goods and merchandise. Persuasive evidence of an arrangement is demonstrated via sales invoice or contract; product delivery is evidenced by warehouse shipping log as well as a signed bill of lading from the transport company and title transfers upon shipment; the sales price to the customer is fixed upon acceptance of the signed purchase order or contract and there is no separate sales rebate, discount, or volume incentive. When the Company recognizes revenue, no provisions are made for returns because, historically, there have been very few sales returns and adjustments that have impacted the ultimate collection of revenues.

 

 

Net sales of products represent the invoiced value of goods, net of sales taxes. The Company is not subject to charge sales tax as the Company sells to wholesale distributors and is thereby exempt from charging sales tax. Sales or Output sales tax is borne by customers in addition to the invoiced value of sales and Purchase or Input sales tax is borne by the Company in addition to the invoiced value of purchases to the extent not exempt due to the purpose of the acquisition.

 

Shipping and Handling Costs

 

The Company accounts for shipping and handling fees in accordance with paragraph 605-45-45-19 of the FASB Accounting Standards Codification. While amounts charged to customers for shipping products are included in revenues, the related costs are classified in cost of goods sold as incurred.

 

Equity Instruments Issued to Parties Other Than Employees for Acquiring Goods or Services

 

The Company accounts for equity instruments issued to parties other than employees for acquiring goods or services under the guidance of Sub-topic 505-50 of the FASB Accounting Standards Codification (“Sub-topic 505-50”).

 

Pursuant to ASC paragraphs 505-50-25-6 and 505-50-25-7, a grantor shall recognize the goods acquired or services received in a share-based payment transaction when it obtains the goods or as services are received. A grantor may need to recognize an asset before it actually receives goods or services if it first exchanges share-based payment for an enforceable right to receive those goods or services. Nevertheless, the goods or services themselves are not recognized before they are received. If fully vested, nonforfeitable equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments when they are issued (in most cases, when the agreement is entered into). Pursuant to ASC paragraph 505-50-45-1, a grantor may conclude that an asset (other than a note or a receivable) has been received in return for fully vested, nonforfeitable equity instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other than employees in exchange for goods or services.

 

Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9, an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions. Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments. A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise expires unexercised.

 

Pursuant to ASC Paragraphs 505-50-30-2 and 505-50-30-11 share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty’s performance is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum (“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.

 

 

Pursuant to ASC Paragraph 718-10-55-21 if an observable market price is not available for a share option or similar instrument with the same or similar terms and conditions, an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:

  

a.

The exercise price of the option.

 

b.

The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments.  The Company uses historical data to estimate holder’s expected exercise behavior.  If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.

 

c.

The current price of the underlying share.

   

d.

The expected volatility of the price of the underlying share for the expected term of the option.  Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement.  Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market.  The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.

 

e.

The expected dividends on the underlying share for the expected term of the option.  The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.

 

f.

The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.

 

Pursuant to ASC paragraph 505-50-S99-1, if the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should be recorded.

 

 

Deferred Tax Assets and Income Taxes Provision

 

Prior to March 7, 2014, GRS LLC was treated as a partnership for federal income tax purposes, i.e. members of an LLC are taxed separately on their distributive share of the LLC’s earnings (loss) whether or not that income is actually distributed.

 

Effective March 7, 2014, the Company accounts for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statements of operations in the period that includes the enactment date.

 

The Company adopted section 740-10-25 of the FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.

 

The estimated future tax effects of temporary differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded on its consolidated balance sheets and provides valuation allowances as management deems necessary.

 

Management makes judgments as to the interpretation of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion, adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates, additional allowances or reversals of reserves may be necessary.

 

Limitation on Utilization of NOLs due to Change in Control

 

Pursuant to the Internal Revenue Code Section 382 (“Section 382”), certain ownership changes may subject the NOL’s to annual limitations which could reduce or defer the NOL. Section 382 imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change, utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of its stock at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over to later years. The imposition of this limitation on its ability to use the NOLs to offset future taxable income could cause the Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such NOLs to expire unused, reducing or eliminating the benefit of such NOLs.

 

Earnings per Share

 

Earnings per share (“EPS”) is the amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs 260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends accumulated for the period on cumulative preferred stock (whether or not earned) from net income (loss). The computation of diluted EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or warrants.

 

 

Pursuant to ASC Paragraphs 260-10-45-45-21 through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting entity shall be reflected in diluted EPS by application of the treasury stock method. Equivalents of options and warrants include non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions. Under the treasury stock method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later) and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included in the denominator of the diluted EPS computation. Pursuant to ASC Paragraphs 260-10-45-40 through 45-42 convertible securities shall be reflected in diluted EPS by application of the if converted method. The convertible preferred stock or convertible debt shall be assumed to have been converted at the beginning of the period (or at time of issuance, if later). In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would be anti-dilutive.

 

There were no potentially dilutive common shares outstanding for the interim period ended September 30, 2016.

 

Cash Flows Reporting

 

The Company adopted paragraph 230-10-45-24 of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (the “Indirect Method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments

 

Segment Information

 

The Company follows Topic 280 of the FASB Accounting Standards Codification for segment reporting. Pursuant to Paragraph 280-10-50-1 an operating segment is a component of a public entity that has all of the following characteristics: (a). It engages in business activities from which it may earn revenues and incur expenses (including revenues and expenses relating to transactions with other components of the same public entity). (b). Its operating results are regularly reviewed by the public entity’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. (c). Its discrete financial information is available. In accordance with Paragraph 280-10-50-5 the term chief operating decision maker identifies a function, not necessarily a manager with a specific title. That function is to allocate resources to and assess the performance of the segments of a public entity. Often the chief operating decision maker of a public entity is its chief executive officer or chief operating officer, but it may be a group consisting of, for example, the public entity’s president, executive vice presidents, and others. Pursuant to Paragraph 280-10-50-10 a public entity shall report separately information about each operating segment that meets both of the following criteria: (a). Has been identified in accordance with paragraphs 280-10-50-1 and 280-10-50-3 through 50-9 or results from aggregating two or more of those segments in accordance with the following paragraph; and (b). Exceeds the quantitative thresholds in paragraph 280-10-50-12. In accordance with Paragraph 280-10-50-12 a public entity shall report separately information about an operating segment that meets any of the following quantitative thresholds: (a). Its reported revenue, including both sales to external customers and intersegment sales or transfers, is 10 percent or more of the combined revenue, internal and external, of all operating segments. (b). The absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of either: 1. The combined reported profit of all operating segments that did not report a loss, or 2. The combined reported loss of all operating segments that did report a loss. (c). Its assets are 10 percent or more of the combined assets of all operating segments. Pursuant to Paragraphs 280-10-50-22 and 280-10-50-29, a public entity shall report a measure of profit or loss and total assets for each reportable segment and provide an explanation of the measurements of segment profit or loss and segment assets for each reportable segment. At a minimum, a public entity shall disclose all of the following: (a). The basis of accounting for any transactions between reportable segments. (b). The nature of any differences between the measurements of the reportable segments’ profits or losses and the public entity’s consolidated income (loss) before income tax provision, extraordinary items, and discontinued operations (if not apparent from the reconciliations described in paragraphs 280-10-50-30 through 50-31). (c). The nature of any differences between the measurements of the reportable segments’ assets and the public entity’s consolidated assets (if not apparent from the reconciliations described in paragraphs 280-10-50-30 through 50-31). (d). The nature of any changes from prior periods in the measurement methods used to determine reported segment profit or loss and the effect, if any, of those changes on the measure of segment profit or loss. (e). The nature and effect of any asymmetrical allocations to reportable segments.

 

 

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification, the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through filing them on EDGAR.

 

Recently Issued Accounting Pronouncements

 

In January 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-01, which amends the guidance in U.S. GAAP on the classification and measurement of financial instruments. Changes to the current guidance primarily affect the accounting for equity investments, financial liabilities under the fair value option, and the presentation and disclosure requirements for financial instruments. In addition, the ASU clarifies guidance related to the valuation allowance assessment when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities. The new standard is effective for fiscal years and interim periods beginning after December 15, 2017, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted except for the provision to record fair value changes for financial liabilities under the fair value option resulting from instrument-specific credit risk in other comprehensive income. The Company is currently evaluating the impact of adopting this guidance.

 

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) 2016-02, which amends the guidance in U.S. GAAP on accounting for operating leases, a lessee will be required to recognize assets and liabilities for operating leases with lease terms of more than 12 months on the balance sheet. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is not permitted. The Company is currently evaluating the impact of adopting this guidance.

 

In March 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) “ASU 2016 – 09 Improvements to Employee Share-Based Payment Accounting” which is intended to improve the accounting for employee share-based payments. The ASU simplifies several aspects of the accounting for share-based payment award transactions, including; the income tax consequences, classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The new standard is effective for fiscal years and interim periods beginning after December 15, 2016, and upon adoption, an entity should apply the amendments by means of a cumulative-effect adjustment to the balance sheet at the beginning of the first reporting period in which the guidance is effective. Early adoption is permitted. The Company is currently evaluating the impact of adopting this guidance.

 

 

In April 2016, the Financial Accounting Standards Board (FASB) issued an Accounting Standards Update (ASU) “ASU 2016 – 10 Revenue from Contract with Customers: identifying Performance Obligations and Licensing”. The amendments in this Update clarify the two following aspects (a) contracts with customers to transfer goods and services in exchange for consideration and (b) determining whether an entity’s promise to grant a license provides a customer with either a right to use the entity’s intellectual property (which is satisfied at a point in time) or a right to access the entity’s intellectual property (which is satisfied over time). The amendments in this Update are intended to reduce the degree of judgement necessary to comply with Topic 606. This guidance has no effective date as yet. The Company is currently evaluating the impact of adopting this guidance.

 

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU No. 2016-15, “Classification of Certain Cash Receipts and Cash Payments” (“ASU 2016-15”). ASU 2016-15 provides guidance regarding the classification of certain items within the statements of cash flows. ASU 2016-15 is effective for annual periods beginning after December 15, 2017 with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance.

 

In October 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-16 - Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory. ASU 2016-16 will require the tax effects of intercompany transactions, other than sales of inventory, to be recognized currently, eliminating an exception under current GAAP in which the tax effects of intra-entity asset transfers are deferred until the transferred asset is sold to a third party or otherwise recovered through use. The guidance will be effective for the first interim period of our 2019 fiscal year, with early adoption permitted. The Company is currently evaluating the impact of adopting this guidance.

 

Management does not believe that any recently issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated financial statements.

 

Reclassification

 

Certain reclassifications have been made to the prior year financial statement numbers to conform to the current presentation of the financial statements. These reclassifications had no impact on the reported results.

 

Note 3 – Going Concern

 

The Company elected to adopt early application of Accounting Standards Update No. 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”) .

 

The Company’s unaudited condensed consolidated financial statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business.

 

As reflected in the unaudited condensed financial statements, the Company had an accumulated deficit of $6,793,042 at September 30, 2016, a net loss of $2,499,858 and net cash of $2,139,575 used in operating activities for the nine months ended September 30, 2016. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

The Company is continuing operations and hopes to generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations. While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way of a public or private offering.

 

The unaudited condensed financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

 

Note 4 – Property, Equipment, Leasehold Improvement, Software and Hardware, and Management Agreement

 

Fixed Assets consisted of the following:

 

		Estimated Useful Life (Years)		September 30, 2016				December 31, 2015
Property and Equipment at Cost		5		$	1,669,170			$	395,138
Less Accumulated Depreciation					(133,491	)			(40,112	)
Property and Equipment, net					1,535,679				355,026
Software and Computer Equipment at Cost		3-5			207,081				207,081
Less Accumulated Depreciation					(118,373	)			(85,677	)
Software and Computer Equipment, net					88,708				121,404
Vehicles		7			27,500				-
Less Accumulated Depreciation					(1,637	)			-
Vehicles, net					25,863				-
Leasehold improvement		6			750,162				698,213
Less Accumulated Depreciation					(421,223	)			(338,016	)
Leasehold improvement, net					328,939				360,197
Total Fixed Assets				$	1,979,189			$	836,627

 

 

Intangible Assets (Management Agreement):

 

						September 30, 2016				December 31, 2015
Management Agreement			1.5			$	50,000			$	50,000
Less Accumulated Amortization							(47,778	)			(22,778	)
Net, Management Agreement						$	2,222			$	27,222

 

Depreciation and Amortization Expense

 

Depreciation and amortization expense were $210,919 and $119,280 for the nine months ended September 30, 2016 and September 30, 2015.

 

Amortization of intangible asset related to the management agreement amounted to $25,000 and $14,445 for the nine months ended September 30, 2016 and 2015, respectively.

 

Note 5 – Related Party Transactions

 

Related parties

 

Related parties with whom the Company had transactions are:

 

Related Parties		Relationship
Eugene Fernandez		President, interim CFO, Board of Directors, and significant stockholder of the Company.
Anthony Williams		Chairman of the Board of Directors of the Company and significant stockholder of the Company.
Michael Christopher Cox		COO, Board of Directors, and significant stockholder of the Company.
DGS Group LLC		An entity owned and controlled by a significant stockholder of the Company.
Stonehenge Holdings LLC		An entity owned and controlled by a significant stockholder of the Company.
FLS 3, Inc.		An entity owned and controlled by a significant stockholder of the Company.
Canyon Bound LLC		An entity owned and controlled by a significant stockholder of the Company.

 

Screening Plant Purchase Agreement

 

On June 19, 2015, Speyside Holdings LLC purchased a screening plant from FLS 3, Inc. FLS 3, Inc. is an entity solely owned by Eugene Fernandez, a major shareholder, President and acting CFO of the Company. The screening plant was sold by FLS 3, Inc. to Speyside Holdings LLC for $160,000. FLS 3, Inc. delivered the screening plant and a bill of sale to Speyside Holdings LLC and Speyside Holdings LLC tendered $41,000 and a promissory note for $119,000 to FLS 3, Inc. The promissory note bears an interest rate of 5% per annum and is due on demand.

 

Debt Conversion Agreements

 

On July 8, 2016, the Company entered into a Debt Conversion Agreement effective June 30, 2016 (the “DC Agreement I”) whereby the Company and Stonehenge Holdings, LLC (“Stonehenge”) agreed to convert $125,000 of previously advanced debt plus accrued interest (the “SH Advances I”) into 1,426,089 shares of the Progressive Green Solutions, Inc.’s common stock. The conversion price of the SH Advances I was $0.09 per share, which represents the market price of the Company’s stock on June 30, 2016. Anthony Williams, a member of the Company’s Board of Directors, holds voting and dispositive control over Stonehenge. Mr. Williams abstained from the vote on this matter.

 

On September 26, 2016, Progressive Green Solutions, Inc. entered into a Debt Conversion Agreement effective September 26, 2016 (the “DC Agreement II”) whereby the Company and DGS Group LLC (“DGS”) agreed to convert $600,000.00 of previously advanced principal debt (the “DGS Advances I”) into 12,000,000 shares of the Progressive Green Solutions, Inc.’s common stock. The conversion price of the DGS Advances I was $0.05 per share, which represents the market price of the common stock on September 26, 2016. Eugene Fernandez, a member of the Company’s Board of Directors, holds voting and dispositive control over DGS. Mr. Fernandez abstained from the vote on this matter. Also on September 26, 2016, the Progressive Green Solutions, Inc. entered into a Debt Conversion Agreement effective September 26, 2016 (the “DC Agreement III”) whereby the Company and Stonehenge agreed to convert $94,399.00 of previously advanced principal debt (the “SH Advances II”) into 1,887,980 shares of Progressive Green Solutions, Inc.’s common stock. The conversion price of the SH Advances II was $0.05 per share, which represents the market price of the common stock on September 26, 2016. Anthony Williams, a member of the Company’s Board of Directors, holds voting and dispositive control over Stonehenge. Mr. Williams abstained from the vote on this matter.

 

Speyside Holdings LLC, Speyside Holdings II LLC, and CEM III LLC

 

On September 12, 2016, the Company, Speyside Holdings LLC, and CEM III LLC determined that it is advisable and in the best interests of the Company, Speyside Holdings LLC, and CEM III LLC to increase the limited liability company interests of Eugene Fernandez, Stonehenge Holdings LLC, and Canyon Bound LLC in Speyside Holdings LLC and CEM III LLC to remunerate Eugene Fernandez, Stonehenge Holdings LLC, and Canyon Bound LLC for their providing of loans to the Company, Speyside Holdings LLC, and CEM III LLC, for personally guaranteeing loans for Speyside Holdings LLC and CEM III LLC, for their service, to incentivize continued future performance, to encourage retention of their services, and to align their interests with those of the Speyside Holdings LLC, and CEM III LLC. As a result of the aforementioned, on September 12, 2016, the Company directly owns 60 Class A Units in Speyside Holdings LLC and indirectly own 36 Class A Units in CEM III LLC

 

On October 12, 2016, the operating agreements of Speyside Holdings LLC and CEM III LLC were amended and restated to account for the proportion dilution of the addition of a new member. As a result of the amended and restated operating agreements, the Company directly owns 51 Class A Units in Speyside Holdings LLC and indirectly own 26 Class A Units in CEM III LLC. Additionally, per the BCM Loan I agreement, Bradden Capital Management LLC through its assign, BCM Speyside, LLC, elected to acquire 15 Class B Units in Speyside Holdings LLC. As part of BCM Speyside, LLC becoming a Class B Unit member in Speyside Holdings LLC, BCM Speyside, LLC and Speyside Holdings II LLC became tenants in common on a parcel of real property in Highland Mills, New York. As part of the aforementioned, Speyside Holdings LLC and BCM Speyside, LLC respectively have a call / put provision whereby a respective party can call / put BCM Speyside, LLC’s tenant in common interest in the parcel of real property that BCM Speyside, LLC is tenants in common with Speyside Holdings II LLC in Highland Mills, New York in exchange for BCM Speyside, LLC contributing its tenancy in common interest into Speyside Holdings II LLC and Speyside Holdings LLC thereby converting BCM Speyside, LLC’s 15 Class B Units in Speyside Holdings LLC to 15 Class A Units in Speyside Holdings LLC along with the a corresponding adjustment to BCM Speyside, LLC’s capital account in Speyside Holdings LLC.

 

 

Advances from Stockholders

 

From time to time, the stockholders of the Company advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on demand.

 

Notes Payable - due to related parties

 

Notes payable - Stockholders consisted of the following:

 

		September 30, 2016				December 31, 2015
On January 30, 2015 the Company issued a promissory note to a stockholder to memorialize (i) the receipt of the funds in the amount of $9,800 and (ii) the terms of note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand. The note was converted to equity on September 26, 2016.		$	-			$	9,800
On various dates between the months of January and June 2015, the Company issued 17 promissory notes to the same stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $128,150 and (ii) the terms of the notes. Pursuant to their terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. All of these notes with one exception were converted to equity on September 26, 2016.			10,000				73,900
On April 3,2015 the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $50,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.			50,000				50,000
On May 11, 2015, the Company issued a note to a stockholder to memorialize (i) the availability of funds in the amount of $500,000 or the amount disbursed to the company and (ii) the terms of the note. As of September 30, 2015, $500,000 has been disbursed to the Company. Pursuant to the terms and conditions, the note accrues interest at the rate of LIBOR (90 day) plus the Margin (4%) per annum and interest payments are due monthly. The original due date of the note, May 8, 2016, has been extended to 2017.			500,000				500,000
On June 19, 2015, the Company issued a note to a stockholder to acknowledge (i) the loan balance of $140,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues compound interest at 5% per annum and is due on demand. On various dates in November, payments were made to the shareholder totaling $43,000. The current balance due on this note is $76,000			76,000				76,000
On July 10, 2015, the Company issued a note to, memorialize (i) the receipt of funds in the amount of $10,000 and (ii) the terms of note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand. The note was converted to equity on September 26, 2016.			-				5,000
On August 21, 2015, the Company issued a grid note to a stockholder to memorialize (i) the receipt of funds in the amount of $19,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.			19,000				19,000

 

 

On August 26, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $10,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand. The note was converted to equity on September 26, 2016.			-				10,000
On September 1, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $10,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand. The note was converted to equity on September 26, 2016.			-				10,000
On September 4, 2015, the Company modified the grid note dated August 21, 2015 to a stockholder to memorialize (i) the receipt of funds in the amount of $7,500 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.			7,500				7,500
On September 11, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $4,000 and (ii) the terms of the note. This note has been repaid.			-				4,000
On September 14, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $30,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.			30,000				30,000
On September 23, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $60,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand. The note was converted to equity on September 26, 2016.			-				60,000
On October 5, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $25,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.			25,000				25,000
On November 3, 2015, Speyside Holdings LLC issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $8,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.			8,000				8,000
On November 4, 2015, the Speyside Holdings LLC issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $1,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.			1,000				1,000
On November 5, 2015, the Speyside Holdings LLC issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $2,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.			2,000				2,000
On November 6, 2015, the Speyside Holdings LLC issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $25,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.			25,000				25,000

 

 

On November 25, 2015, the Company issued a note to memorialize (i) the receipt of funds in the amount of $10,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand. This note is no longer outstanding.			-				10,000
On December 17, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $125,000 and (ii) the terms of the note. The note was converted to equity on June 30, 2016.			-				125,000
On various dates of December 2015, the Company issued 5 promissory notes to the same stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $59,301 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. $55,000 of the total has been paid and $4,301 remains outstanding.			24,301				59,301
On December 31, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $13,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.			13,000				13,000
On various dates of January, February and March 2016, Speyside Holdings LLC issued 29 promissory notes to the same stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $264,000 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. 24 of these notes remain outstanding. $58,000 was paid in cash in May and July 2016.			206,000				-
On various dates of January, February and March 2016, the Company issued 7 promissory notes to the same stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $27,500 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. Six of these notes were converted to equity on September 26th and $2,000 remains outstanding.			2,000				-
On various dates of January, February and March 2016, the Company issued 9 promissory notes to the same stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $118,500 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. All of these notes remain outstanding.			118,500				-
On April 1, 2016 Speyside Holdings LLC issued a promissory note to a stockholder to memorialize (i) the receipt of the funds in the amount of $10,000 and (ii) the terms of the notes. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum until the notes are fully repaid. The note is due on demand.			10,000				-
On various dates of April, May and June 2016, the Company issued 6 promissory notes to the same stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $110,000 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. All of these notes remain outstanding.			110,000				-
On various dates of April, May and June 2016, the Speyside Holdings LLC issued 44 promissory notes to the same stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $679,000 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. All of these notes remain outstanding.			679,000				-
On September 1, 2016 the Green Remanufacturing Solutions LLC issued a promissory note to a stockholder to memorialize (i) the receipt of the funds in the amount of $3,000 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. This note remains outstanding.			3,000				-
During the months of July and September 2016, Speyside Holdings LLC issued promissory notes to a stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $93,800 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. This note remain outstanding.			93,800				-
On various dates in July and August 2016, the Company issued promissory notes to a stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $71,000 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. These notes remain outstanding.			71,000				-
			2,084,101				1,123,501
Value of the shares issued in excess of the value of the loan			(188,555	)			-
		$	1,895,546			$	1,123,501

 

 

Notes Payable third parties - long term

 

On August 16, 2016 Speyside Holdings LLC closed on a $1,000,000 loan from Bradden Capital Management LLC (the “BCM Loan I”) to be used in connection with the acquisition of equipment for Speyside Holdings LLC as well as for operations. The BCM Loan I has an effective date August 12, 2016. The BCM Loan I is interest only a bears an initial rate of 5% per annum and has an initial maturity date of December 31, 2017. As an inducement for Bradden Capital Management LLC to extend the BCM Loan I to Speyside Holdings LLC, Bradden Capital Management LLC was given the option to acquire a 15% membership interest in Speyside Holdings LLC for $2,000,000. In the event that Bradden Capital Management LLC does not acquire a 15% membership interest in Speyside Holdings LLC prior to December 31, 2016 or upon written notice from Bradden Capital Management LLC to Speyside Holdings LLC advising of the same, the interest rate of the BCM Loan I will automatically increase from 5% per annum to 8% per annum. In addition, Speyside Holdings LLC has the option to extend the maturity date of the BCM Loan I to December 31, 2018. During the aforementioned extension period, the BCM Loan I will bear an interest rate of 9% per annum. The BCM Loan I is secured by the personal guarantees of Anthony Williams, Eugene Fernandez, Michael Cox as well as their direct and indirect membership interests in Speyside Holdings LLC and their direct and indirect ownership of Progressive Green Solutions, Inc.’s common stock.

 

Note 6 – Equipment Loan / Leaser

 

On November 25, 2015 Speyside Holdings LLC purchased an excavator for $108,300. $15,600 was paid in cash and financing of $92,700 was acquired. The loan has forty-eight payments of $2,089 per month, commencing December 2015 and expiring in November 2019 with an annual interest rate of 3.9%. The members of the Board of Directors of Progressive Green Solutions, Inc. (Eugene Fernandez, Anthony Williams, and Michael Cox) personally guaranteed this loan.

   

On September 1, 2016, Speyside Holdings LLC leased processing equipment for $654,882 of which $200,000 was paid in cash and $454,882 was financed. The lease has sixty payments of $9,310.69 a month (with the exception of the first month which included stub interest and which the payment was $10,260.69), commencing on October 1, 2016 and expiring on September 1, 2021. At the conclusion of the lease, title is to transfer to Speyside Holdings LLC. The members of the Board of Directors of Progressive Green Solutions, Inc. (Eugene Fernandez, Anthony Williams, and Michael Cox) personally guaranteed this equipment lease.

 

Equipment loan consisted of the following:

 

		September 30, 2016				December 31, 2015
Equipment Loan - Excavator		$	529,442			$	90,912
Less current maturities			(98,975	)			(21,911	)
Total capital lease obligations, net of current maturities		$	430,467			$	69,001

 

Note 7 – Equity

 

On July 8, 2016, the Company entered into a Debt Conversion Agreement effective June 30, 2016 (the “DC Agreement I”) whereby the Company and Stonehenge Holdings, LLC (“Stonehenge”) agreed to convert $125,000 of previously advanced debt plus accrued interest (the “SH Advances I”) into 1,388,889 shares of the Progressive Green Solutions, Inc.’s common stock. The conversion price of the SH Advances I was $0.09 per share, which represents the market price of the Company on June 30, 2016. Anthony Williams, a member of the Company’s Board of Directors, holds voting and dispositive control over Stonehenge. Mr. Williams abstained from the vote on this matter.

 

On September 26, 2016, Progressive Green Solutions, Inc. entered into a Debt Conversion Agreement effective September 26, 2016 (the “DC Agreement II”) whereby the Company and DGS Group LLC (“DGS”) agreed to convert $600,000.00 of previously advanced principal debt (the “DGS Advances I”) into 12,000,000 shares of the Progressive Green Solutions, Inc.’s common stock. The conversion price of the DGS Advances I was $0.05 per share, which represents the market price of the common stock on September 26, 2016. Eugene Fernandez, a member of the Company’s Board of Directors, holds voting and dispositive control over DGS. Mr. Fernandez abstained from the vote on this matter. Also on September 26, 2016, the Progressive Green Solutions, Inc. entered into a Debt Conversion Agreement effective September 26, 2016 (the “DC Agreement III”) whereby the Company and Stonehenge agreed to convert $94,399.00 of previously advanced principal debt (the “SH Advances II”) into 1,887,980 shares of Progressive Green Solutions, Inc.’s common stock. The conversion price of the SH Advances II was $0.05 per share, which represents the market price of the common stock on September 26, 2016. Anthony Williams, a member of the Company’s Board of Directors, holds voting and dispositive control over Stonehenge. Mr. Williams abstained from the vote on this matter.

 

 

Note 8 – Concentrations

 

During the nine months ended September 30, 2016, Customer “A”, accounted for 21% of total sales; no other customer individually accounted for more than 10% of total sales. This large customer did not account for any sales made in 2015. Customer “A” represented a total of 7% of accounts receivable during the nine months quarter ending 2016. No other customer account exceeded 10% of total accounts receivable.

 

During the nine months ended September 30, 2015 Customer “A” accounted for 10% of total sales and represented a total of 7% of accounts receivable.

 

Vendor Concentrations

 

Vendor purchase concentrations and accounts payable concentration as follows:

 

		Net Purchases								Accounts Payable
		Nine Months Ended								as of
		September 30, 2016				September 30, 2015				September 30, 2016				December 31, 2015
Vendor A			12	%			9	%			5	%			10	%
Vendor B			9	%			9	%			1	%			11	%
Vendor C			5	%			2	%			-	%			0	%
			26				20	%			6	%			21	%

 

Note 9 – Segment Reporting

 

Reportable segments are components of an enterprise about which separate financial information is available and that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. The Company’s reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company. The accounting policies of the segments are the same as the accounting policies of the Company as a whole.

 

The Company operates in the following business segments:

 

i.

Parent: the Company is responsible for the overall management of its returns management segment and quarry operations segment. Parent costs include certain services, such as compensation, professional fees, corporate purchasing, corporate legal, business development, and other corporate-related general and administrative expenses. The parent does not generate any revenues, nor does it incur any direct cost of revenue.

 

ii.

Returns management: through the Company’s wholly owned subsidiary, Green Remanufacturing Solutions LLC, this segment engages in reverse logistics, remanufacturing, repair and recovery, engineering/quality assurance, warehousing and fulfillment, secondary market sales and e-commerce for retailers and manufacturers of consumer goods.

  

iii.

Quarry operations: through a company that the Company is a majority owner of, Speyside Holdings LLC, this segment engages in the production and sale of crushed stone and aggregates to the New York City metro area.

 

iv.

Operating segments not reportable individually are included in "Other". Other includes the Company’s other smaller business Applianceplace.com and CEM III LLC which has minimal activity.

 

 

The Company measures the segment profit or loss and segment assets for each reportable segment as follows:

 

a.

The basis of accounting for any transactions between reportable segments: The Company allows reportable segments to freely negotiate the terms and conditions of and carries out, on an arm’s-length basis, any transactions between reportable segments;

 

b.

The nature of any differences between the measurements of the reportable segments’ profits or losses and the public entity’s consolidated income before income taxes, extraordinary items, and discontinued operations: There are no material differences between the measurements of the reportable segments’ profits or losses and the public entity’s consolidated income (loss) as the Company presently allocates minimal centrally incurred costs to the parent;

 

c.

The nature of any differences between the measurements of the reportable segments’ assets and the public entity’s consolidated assets: There were no difference between the measurements of the reportable segments’ assets and the public entity’s consolidated assets as the Company does not have any jointly used assets;

 

d.

The nature of any changes from prior periods in the measurement methods used to determine reported segment profit or loss and the effect, if any, of those changes on the measure of segment profit or loss: this is the first period that the Company is engaging in segment reporting;

 

e.

The nature and effect of any asymmetrical allocations to reportable segments: There were no asymmetrical allocations to reportable segments as the Company does not allocate depreciation expense to a reportable segment without allocating the related depreciable assets to that reportable segment.

 

 

Progressive Green Solutions, Inc.

Assets by Segments 

  

September 30, 2016
ASSETS		Parent				Returns				Quarry Operations				Other				Total
TOTAL CURRENT ASSETS
		$	29,302			$	115,343			$	910,504			$	145			$	1,055,294
PROPERTY, PLANT & EQUIPMENT
			-				305,848				1,673,341				-				1,979,189
INTANGIBLE
			-				-				2,222				-				2,222
TOTAL OTHER ASSETS
			-				34,693				200,000				25,000				259,693
TOTAL ASSETS
		$	29,302			$	455,884			$	2,786,067			$	25,145			$	3,296,398

 

 

 

Progressive Green Solutions, Inc.

Operations by Segment

 

For the Nine Months Ended

September 30, 2016

 

		Parent				Returns Management				Quarry Operations				Other				Total
NET REVENUE		$	-			$	867,834			$	2,200,974			$	-			$	3,068,808
LOSS FROM OPERATIONS		$	(477,210	)		$	(351,144	)		$	(1,592,880	)		$	(662	)		$	(2,421,896	)

 

For the Three Months Ended

September 30, 2016

 

		Parent				Returns Management				Quarry Operations				Other				Total
NET REVENUE		$	-			$	302,933			$	489,282			$	-			$	792,215
LOSS FROM OPERATIONS		$	(137,839	)		$	(131,118	)		$	(583,188	)		$	(164	)		$	(852,309	)

 

Note 10 – Subsequent Events

 

The Company has evaluated all events that occur after the balance sheet date through the date when the unaudited condensed financial statements were issued to determine if they must be reported. The Management of the Company determined that the following reportable subsequent event was required to be disclosed:

 

During the months of October 2016 through the date of this filing, the Company issued 23 notes to stockholders to memorialize (i) the receipt of funds totaling $194,204 and (ii) the terms of the notes. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and are due on demand.

 

On October 6, 2016, Speyside Holdings LLC received an additional $1,000,000 loan from Braden Capital Management LLC. To memorialize this additional $1,000,000 loan, Speyside Holdings LLC and Bradden Capital Management LLC amended and restated the BCM Loan I to reflect the aforementioned.

 

On October 6, 2016, CEM III LLC acquired +/- 30 acres of real property in Highland Mills, New York from the Grace E. Wolf Family Limited Partnership. In connection with the Grace E. Wolf Family Limited Partnership real property acquisition, CEM III LLC obtained a purchase money mortgage from the Grace E. Wolf Family Limited Partnership for $750,000.

 

 

On October 12, 2016, the operating agreements of Speyside Holdings LLC and CEM III LLC were amended and restated. As a result of the amended and restated operating agreements, the Company directly owns 51 Class A Units in Speyside Holdings LLC and indirectly own 26 Class A Units in CEM III LLC. Additionally, per the BCM Loan I agreement, Bradden Capital Management LLC through its assign, BCM Speyside, LLC, elected to acquire 15 Class B Units in Speyside Holdings LLC. As part of BCM Speyside, LLC becoming a Class B Unit member in Speyside Holdings LLC, BCM Speyside, LLC and Speyside Holdings II LLC became tenants in common on a parcel of real property in Highland Mills, New York. As part of the aforementioned, Speyside Holdings LLC and BCM Speyside, LLC respectively have a call / put provision whereby a respective party can call / put BCM Speyside, LLC’s tenant in common interest in the parcel of real property that BCM Speyside, LLC is tenants in common with Speyside Holdings II LLC in Highland Mills, New York in exchange for BCM Speyside, LLC contributing its tenancy in common interest into Speyside Holdings II LLC and Speyside Holdings LLC thereby converting BCM Speyside, LLC’s 15 Class B Units in Speyside Holdings LLC to 15 Class A Units in Speyside Holdings LLC along with the a corresponding adjustment to BCM Speyside, LLC’s capital account in Speyside Holdings LLC.

 

On October 12, 2016, Speyside Holdings, Speyside Holdings II LLC, and BCM Speyside, LLC acquired the assets of Highland Sand & Gravel, Inc. pursuant to a certain purchase and sale agreement with Highland Sand & Gravel, Inc. In connection with the Highland Sand & Gravel, Inc. asset acquisition, Speyside Holdings LLC, Speyside Holdings II LLC, and BCM Speyside, LLC obtained a purchase money mortgage from Highland Sand & Gravel, Inc. for $4,000,000.

 

 

Item 2.

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

 

THE FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS.

  

Results of Operations

 

For the Nine Months Ended September 30, 2016, Compared to the Nine Months Ended September 30, 2015

 

Revenue

 

For the nine months ended September 30, 2016, consolidated revenue from operations was $ $3,068,808 compared to $ $3,337,757 for the nine months ended September 30, 2015, a reduction of $268,949 or 8%. This decrease is due to the business model change at Green Remanufacturing Solutions as well as plant shutdowns and equipment failures at Speyside Holdings LLC.

 

Cost of Goods Sold

 

Our consolidated cost of goods sold (“COGS”) for the nine months ended September 30, 2016, was $ $3,573,913 compared to $3,023,027 for the nine months ended September 30, 2015, an increase of $550,887 or 18%. This increase is due to the high cost of equipment repairs at Speyside Holdings LLC.

 

Gross Margin

 

For the nine months ended September 30, 2016, there was a negative gross margin of $505,106 compared to a positive margin $314,730 for the nine months ended September 30, 2015, a decrease of $819,836 or 260%. The decrease in gross profit is related to equipment failures at Speyside Holdings LLC which led to impaired production.

 

Operating Expenses

 

Total operating expenses for the nine months ended September 30, 2016 were $1,916,789, resulting in a loss from operations of $2,421,895, compared to total operating expenses of $1,726,152 for the nine months ended September 30, 2015, which resulted in a loss from operations of $1,411,422, an increase of $190,637 or 11%. The increase in expenses was related to additional SG&A from Speyside Holdings LLC (there was limited SG&A for Speyside Holdings LLC a year ago as it did not commence operations until April 2015 as well as a bad debt expense of $97,852).

 

Net Loss

 

For the period ended September 30, 2016, the Company had a net loss of $2,499,858, or $(0.07) per share. The net loss is attributable to several factors:

  

1.

Accounting charges for bad debt write-offs. The value of these amounts is approximately $143,875.

 

2.

A pivot in Green Remanufacturing Solutions LLC’s business model from exclusively purchasing returns for its own account for resale to including servicing consumer returns for a fee – during the pivot in GRS’ business model, there will continue to be a slowdown in revenues due to the business development cycle as such the company will have to spread its overhead over less customers until the business development cycle catches up with the pivot. The purpose of the pivot is to hybridize Green Remanufacturing Solutions LLC’s financial approaches to managing consumer returns with the goal of building a robust and sustainable business model.

  

 

3.

Royalty expenses that are associated with Speyside Holdings LLC’s management agreement and which are scheduled to cease upon Speyside Holding LLC closing on the Highland Sand & Gravel, Inc. asset purchase agreement; – the royalty that Speyside Holdings LLC pays to Highland Sand & Gravel, Inc. is for aggregate that Speyside Holdings LLC that it extracts and sells from the Highland Mills quarry during the term of the management agreement. Once the management agreement terminates (which occurred on October 12, 2016) Speyside Holdings LLC will not incur this charge and its margins will increase.

 

4.

Extraordinary repairs and maintenance undertaken at Speyside Holdings LLC’s operations;

 

5.

Production inefficiencies at Speyside Holdings LLC due to aging equipment that required extraordinary repairs and maintenance; and

 

6.

Equipment rental fees for equipment used in the operations of Speyside Holdings LLC.

 

For the Three Months Ended September 30, 2016, Compared to the Three Months Ended September 30, 2015

 

Revenue

 

For the three months ended September 30, 2016, consolidated revenue from operations was $792,214 compared to $1,902,958 for the three months ended September 30, 2015, a decrease of $1,110,743 or 58%. This decrease is due to the business model change at Green Remanufacturing Solutions as well as plant shutdowns and equipment failures at Speyside Holdings LLC.

 

Cost of Goods Sold

 

Our consolidated cost of goods sold (“COGS”) for the three months ended September 30, 2016, was $1,038,778 compared to $1,748,140 for the three months ended September 30, 2015, a decrease of $709,362 or 41%.

 

Gross Margin

 

For the three months ended September 30, 2016, there was a negative gross margin of $246,563, compared to a positive gross margin of $154,818 for the three months ended September 30, 2015. The decrease in gross profit of 259% is related to equipment failures at Speyside Holdings LLC which led to impaired production, reduced sales and higher per unit costs at Speyside Holding LLC.

 

Operating Expenses

 

Total operating expenses for the three months ended September 30, 2016 were $605,745, resulting in a loss from operations of $852,309 compared to total operating expenses of $787,690 for the three months ended September 30, 2015, which resulted in a loss from operations of $632,872. The reduction in overhead of $181,944 or 23% is related to rent and staff reductions at GRS.

 

Net Loss

 

For the quarter ended September 30, 2016, the Company had a net loss of $872,206, or $(0.02) per share. The net loss is attributable to:

 

1.         A pivot in Green Remanufacturing Solutions LLC’s business model from exclusively purchasing returns for its own account for resale to including servicing consumer returns for a fee – during the pivot in GRS’ business model, there will continue to be a slowdown in revenues due to the business development cycle as such the company will have to spread its overhead over less customers until the business development cycle catches up with the pivot. The purpose of the pivot is to hybridize Green Remanufacturing Solutions LLC’s financial approaches to managing consumer returns with the goal of building a robust and sustainable business model.

 

2.         Royalty expenses that are associated with Speyside Holdings LLC’s management agreement and which are scheduled to cease upon Speyside Holding LLC closing on the Highland Sand & Gravel, Inc. asset purchase agreement; – the royalty that Speyside Holdings LLC pays to Highland Sand & Gravel, Inc. is for aggregate that Speyside Holdings LLC that it extracts and sells from the Highland Mills quarry during the term of the management agreement. Once the management agreement terminates (which occurred on October 12, 2016) Speyside Holdings LLC will not incur this charge and its margins will increase.

 

 

3.         Extraordinary repairs and maintenance undertaken at Speyside Holdings LLC’s operations;

 

4.         Production inefficiencies at Speyside Holdings LLC due to aging equipment that required extraordinary repairs and maintenance; and

 

5.         Equipment rental fees for equipment used in the operations of Speyside Holdings LLC.

 

Plan of Operation

 

Our plan of operations over the next twelve months includes (i) focusing our operations on Speyside Holding LLC’s quarry operations; (ii) increasing annual sales revenue to $10,000,000; (iii) securing service contracts with consumer product manufacturers, resellers, and service providers. In order to implement our plan of operation, we will need to obtain outside funding. Green Remanufacturing Solutions LLC’s strategic vision is so shift from solely purchasing consumer returns to refurbishing consumer goods for a fee or some other type of hybridized fee for service / purchasing model. The Company believes that it will need a minimum of $15,000,000 to cover its planned operations over the next 12 months.

  

While we have historically been funded by management, there can be no assurance that we will be continued to be funded by management or that such funding will be provided on terms favorable to the Company.

 

Liquidity and Capital Resources

 

We will require substantial additional financing in order to execute our business expansion and development plans and we may require additional financing in order to sustain substantial future business operations for an extended period of time. We currently do not have any firm arrangements for financing and we may not be able to obtain financing when required, in the amounts necessary to execute on our plans in full, or on terms which are economically feasible. If we are unable to obtain the necessary capital to pursue our strategic plan, we may have to reduce the planned future growth of our operations.

 

As of September 30, 2016, the Company had a cash balance of $100,010. The Company believes that such funds will not be sufficient to fund its expenses over the next twelve months. There can be no assurance that additional capital will be available to the Company. The Company currently has no agreements, arrangements or understandings with any person to obtain funds through bank loans, lines of credit or any other sources. Since the Company has no such arrangements or plans currently in effect, its inability to raise funds for the above purposes will have a severe negative impact on its ability to remain a viable company.

 

Using an annualized figure of $2,363,888 for our operating costs, costs are approximately $196,990 a month. Given the amount of cash currently on hand, we expect our current cash reserves to last for less than a month.

 

Off Balance Sheet Arrangements

 

As of September 30, 2016, there were no off balance sheet arrangements.

 

  

Basis of Presentation

 

The financial statements of the Company are presented in United States dollars and have been prepared in accordance with accounting principles generally accepted in the United States.

  

Going Concern

 

The Company has incurred losses since inception and has used $2,139,575 in cash provided by operations as of September 30, 2016. Further, the Company has a working capital deficit. The Company is dependent upon funds from private investors and the support of certain stockholders.

 

These factors raise substantial doubt about the ability of the Company to continue as a going concern. Management is planning to raise necessary additional funds through loans and additional sales of its common stock. There is no assurance that the Company will be successful in raising additional capital or in further developing its operations. 

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

 

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

 

Item 4.

Controls and Procedures.

 

(a) Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures designed to ensure that information required to be disclosed in the reports we file pursuant to the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can only provide a reasonable assurance of achieving the desired control objectives, and in reaching a reasonable level of assurance, management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Management designed the disclosure controls and procedures to provide reasonable assurance of achieving the desired control objectives.

 

We carried out an evaluation, under the supervision and with the participation of our management, including our PEO and PFO, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based upon that evaluation, the PEO and PFO concluded that the Company’s disclosure controls and procedures were ineffective.

 

There was no change in our internal control over financial reporting during the period covered by this quarterly report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings.

 

As of the end of the period reported, we were not involved in any litigation that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

 

Item 1A.

Risk Factors.

 

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

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

 

On July 8, 2016, the Company entered into a Debt Conversion Agreement effective June 30, 2016 (the “DC Agreement I”) whereby the Company and Stonehenge Holdings, LLC (“Stonehenge”) agreed to convert $125,000 of previously advanced debt plus accrued interest (the “SH Advances I”) into 1,388,889 shares of the Progressive Green Solutions, Inc.’s common stock. The conversion price of the SH Advances I was $0.09 per share, which represents the market price of the Company on June 30, 2016. Anthony Williams, a member of the Company’s Board of Directors, holds voting and dispositive control over Stonehenge. Mr. Williams abstained from the vote on this matter.

 

On September 26, 2016, Progressive Green Solutions, Inc. entered into a Debt Conversion Agreement effective September 26, 2016 (the “DC Agreement II”) whereby the Company and DGS Group LLC (“DGS”) agreed to convert $600,000.00 of previously advanced principal debt (the “DGS Advances I”) into 12,000,000 shares of the Progressive Green Solutions, Inc.’s common stock. The conversion price of the DGS Advances I was $0.05 per share, which represents the market price of the common stock on September 26, 2016. Eugene Fernandez, a member of the Company’s Board of Directors, holds voting and dispositive control over DGS. Mr. Fernandez abstained from the vote on this matter. Also on September 26, 2016, the Progressive Green Solutions, Inc. entered into a Debt Conversion Agreement effective September 26, 2016 (the “DC Agreement III”) whereby the Company and Stonehenge agreed to convert $94,399.00 of previously advanced principal debt (the “SH Advances II”) into 1,887,980 shares of Progressive Green Solutions, Inc.’s common stock. The conversion price of the SH Advances II was $0.05 per share, which represents the market price of the common stock on September 26, 2016. Anthony Williams, a member of the Company’s Board of Directors, holds voting and dispositive control over Stonehenge. Mr. Williams abstained from the vote on this matter.

 

All of the securities set forth above were issued by the Company pursuant to Section 4(2) of the Securities Act of 1933, as amended, or the provisions of Rule 504 of Regulation D promulgated under the Securities Act. All such shares issued contained a restrictive legend and the holders confirmed that they were acquiring the shares for investment and without intent to distribute the shares. All of the purchasers were friends or business associates of the Company’s management and all were experienced in making speculative investments, understood the risks associated with investments, and could afford a loss of the entire investment. The Company did not utilize an underwriter or a placement agent for any of these offerings of its securities.

 

Item 3.

Defaults Upon Senior Securities.

 

Not applicable.

 

Item 4.

Mine Safety Disclosures.

 

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this quarterly report. 

 

 

Item 5.

Other Information.

 

On August 16, 2016 Speyside Holdings LLC closed on a $1,000,000 loan from Bradden Capital Management LLC (the “BCM Loan I”) to be used in connection with the acquisition of equipment for Speyside Holdings LLC as well as for operations. The BCM Loan I has an effective date August 12, 2016. The BCM Loan I is interest only a bears an initial rate of 5% per annum and has an initial maturity date of December 31, 2017. As an inducement for Bradden Capital Management LLC to extend the BCM Loan I to Speyside Holdings LLC, Bradden Capital Management LLC was given the option to acquire a 15% membership interest in Speyside Holdings LLC for $2,000,000. In the event that Bradden Capital Management LLC does not acquire a 15% membership interest in Speyside Holdings LLC prior to December 31, 2016 or upon written notice from Bradden Capital Management LLC to Speyside Holdings LLC advising of the same, the interest rate of the BCM Loan I will automatically increase from 5% per annum to 8% per annum. In addition, Speyside Holdings LLC has the option to extend the maturity date of the BCM Loan I to December 31, 2018. During the aforementioned extension period, the BCM Loan I will bear an interest rate of 9% per annum. The BCM Loan I is secured by the personal guarantees of Anthony Williams, Eugene Fernandez, Michael Cox as well as their direct and indirect membership interests in Speyside Holdings LLC and their direct and indirect ownership of Progressive Green Solutions, Inc.’s common stock.

 

On September 1, 2016, Speyside Holdings LLC leased processing equipment for $654,882. $200,000 was paid in cash and $454,882 was financed. The lease has sixty payments of $9,310.69 a month (with the exception of the first month which included stub interest and which the payment was $10,260.69), commencing on October 1, 2016 and expiring on September 1, 2021. At the conclusion of the lease, title is to transfer to Speyside Holdings LLC. The members of the Board of Directors of Progressive Green Solutions, Inc. (Eugene Fernandez, Anthony Williams, and Michael Cox) personally guaranteed this equipment lease.

 

On September 12, 2016, the operating agreements of Speyside Holdings LLC and CEM III LLC were amended and restated. As a result of the amended and restated operating agreement, the Company directly owns 60 Class A Units in Speyside Holdings LLC and indirectly own 36 Class A Units in CEM III LLC.

 

On September 21, 2016, Speyside Holdings LLC formed a wholly owned subsidiary named Speyside Holdings II LLC. Speyside Holdings II LLC is a New York limited liability company whose purpose is to take title to a parcel of real property in Highland Mills, New York.

 

On October 6, 2016, Speyside Holdings LLC received an additional $1,000,000 loan from Bradden Capital Management LLC. To memorialize this additional $1,000,000 loan, Speyside Holdings LLC and Bradden Capital Management LLC amended and restated the BCM Loan I to reflect the aforementioned.

 

On October 6, 2016, CEM III LLC acquired +/- 30 acres of real property in Highland Mills, New York from the Grace E. Wolf Family Limited Partnership. In connection with the Grace E. Wolf Family Limited Partnership real property acquisition, CEM III LLC obtained a purchase money mortgage from the Grace E. Wolf Family Limited Partnership for $750,000.

 

On October 12, 2016, the operating agreements of Speyside Holdings LLC and CEM III LLC were amended and restated. As a result of the amended and restated operating agreements, the Company directly owns 51 Class A Units in Speyside Holdings LLC and indirectly own 26 Class A Units in CEM III LLC. Additionally, per the BCM Loan I agreement, Bradden Capital Management LLC through its assign, BCM Speyside, LLC, elected to acquire 15 Class B Units in Speyside Holdings LLC. As part of BCM Speyside, LLC becoming a Class B Unit member in Speyside Holdings LLC, BCM Speyside, LLC and Speyside Holdings II LLC became tenants in common on a parcel of real property in Highland Mills, New York. As part of the aforementioned, Speyside Holdings LLC and BCM Speyside, LLC respectively have a call / put provision whereby a respective party can call / put BCM Speyside, LLC’s tenant in common interest in the parcel of real property that BCM Speyside, LLC is tenants in common with Speyside Holdings II LLC in Highland Mills, New York in exchange for BCM Speyside, LLC contributing its tenancy in common interest into Speyside Holdings II LLC and Speyside Holdings LLC thereby converting BCM Speyside, LLC’s 15 Class B Units in Speyside Holdings LLC to 15 Class A Units in Speyside Holdings LLC along with the a corresponding adjustment to BCM Speyside, LLC’s capital account in Speyside Holdings LLC.

 

On October 12, 2016, Speyside Holdings, Speyside Holdings II LLC, and BCM Speyside, LLC acquired the assets of Highland Sand & Gravel, Inc. pursuant to a certain purchase and sale agreement with Highland Sand & Gravel, Inc. In connection with the Highland Sand & Gravel, Inc. asset acquisition, Speyside Holdings LLC, Speyside Holdings II LLC, and BCM Speyside, LLC obtained a purchase money mortgage from Highland Sand & Gravel, Inc. for $4,000,000.

 

On December 8, 2016, the Company was served with a Summons with Notice in the Supreme Court of the State of New York, County of Nassau.  The action, entitled Tynes v. Progressive Green Solutions, Inc., names the Company, Eugene Fernandez, its President and Chairman, and several other unrelated parties.  The Summons with Notice alleges, unspecific to which defendant, breach of agreements, breach of fiduciary duty, gross negligence and general and securities fraud. The Summons and Notice, also unspecific as to which defendant, seeks relief in an indeterminate amount not less than $500,000. The Company’s time to appear in the action has not yet passed and it intends to vigorously defend against the Action.

 

 

Item 6.

Exhibits.

 

Exhibit No.		Description
21.1		Subsidiaries of the Registrant
31.1		Certification of Principal Executive and Principal Financial and Accounting Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 302 of 2002
32.1		Certification of Principal Executive and Principal Financial and Accounting Officer, pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
95		Mine Safety Disclosures Required by the Dodd-Frank Wall Street Reform and Consumer Protection Act
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema
101.CAL		XBRL Taxonomy Extension Calculation Linkbase
101.DEF		XBRL Taxonomy Extension Definition Linkbase
101.LAB		XBRL Taxonomy Extension Label Linkbase
101.PRE		XBRL Taxonomy Extension Presentation Linkbase

 

 

SIGNATURES

 

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	PROGRESSIVE GREEN SOLUTIONS, INC.
Date: December 19, 2016	By:	/s/ Eugene Fernandez
		Name:	Eugene Fernandez
		Title:	President and Interim Chief Financial Officer (Principal Executive and Principal Financial and Accounting Officer)