Exhibit 99.3

 

WEBA Technology Corp.

Unaudited Financial Statements

Nine Months ended September 30, 2016 and 2015

 

	Page
Balance Sheets	2
Statements of Income	3
Statements of Cash Flows	4
Notes to Financial Statements	5

 

 

WEBA Technology Corp.

Balance Sheets

 

		September 30,				December 31,
		2016				2015
		(Unaudited)
ASSETS
Current Assets
Cash		$	65,663			$	158,863
Accounts receivable			439,950				327,436
Loan to related party			500,000				500,000
Total current assets			1,005,613				986,299
Furniture and equipment, net			7,132				-
Total assets		$	1,012,745			$	986,299
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable and accrued expenses		$	90,956			$	147,546
Loan from shareholders			450,000				450,000
Total current liabilities			540,956				597,546
Commitments and Contingencies
Shareholders’ Equity
Common stock: 1,000 shares authorized; No par value; 1,000 shares issued and outstanding as of September 30, 2016 and December 31, 2015			-				-
Retained earnings			471,789				388,753
Total shareholders’ equity			471,789				388,753
Total liabilities and shareholders’ equity		$	1,012,745			$	986,299

 

See accompanying notes to the financial statements.

 

 

WEBA Technology Corp.

Statements of Income

(Unaudited)

 

		Nine Months Ended September 30,
		2016				2015
Net sales		$	1,860,028			$	1,868,228
Cost of goods sold			1,202,402				1,219,923
Gross profit			657,626				648,305
Operating expenses:
Selling, general and administrative			544,590				523,263
Net income		$	113,036			$	125,042

 

See accompanying notes to the financial statements.

 

 

WEBA Technology Corp.

Statements of Cash Flows

(Unaudited)

 

		Nine Months Ended September 30,
		2016				2015
Net cash flows from operating activities
Net income		$	113,036			$	125,042
Change in operating assets and liabilities:
Accounts receivable			(112,514	)			933
Prepaid expenses			-				(138	)
Accounts payable and accrued expenses			(56,590	)			59,067
Net cash (used in) provided by operating activities			(56,068	)			184,904
Cash flows from investing activities
Purchases of furniture and equipment			(7,132	)			(6,328	)
Net cash used in investing activities			(7,132	)			(6,328	)
Cash flows from financing activities
Distribution to shareholders			(30,000	)			-
Net cash used in financing activities			(30,000	)			-
Net change in cash			(93,200	)			178,576
Cash at beginning of the period			158,863				24,310
Cash at end of the period		$	65,663			$	202,886
Supplemental disclosure of cash flow information
Interest paid during period		$	-				-
Income taxes paid during period		$	-				-

 

See accompanying notes to the financial statements.

 

 

WEBA Technology Corp.

Notes to Unaudited Financial Statements

September 30, 2016 and 2015

 

NOTE 1 – Organization and Nature of Business

 

WEBA Technology Corp. (“WEBA”, the “Company”, “we”, or “our”), a Wisconsin corporation, develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries.

 

NOTE 2 – Basis of Presentation and Summary of Significant Accounting Policies

 

Basis of Presentation

 

The accompanying financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”).

 

In the opinion of management, the accompanying unaudited interim condensed financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation on an interim basis. The operating results for the nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the full year ended December 31, 2016.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however, management believes that the disclosures are adequate to make the information presented not misleading. For further information, refer to the Company’s audited financial statements and footnotes thereto included in this Current Report on Form 8-K/A for the years ended December 31, 2015 and 2014.

 

Operating Segments

 

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing the performance of the segment. Operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics, among other criteria. The Company operated as one segment.

 

Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent within the financial reporting process, actual results may differ significantly from those estimates.  Significant estimates include, but are not limited to, items such as, the allowance for doubtful accounts. Due to the uncertainties inherent in the formulation of accounting estimates, it is reasonable to expect that these estimates could be materially revised within the next year.

   

Revenue Recognition

 

The Company recognizes revenue when (1) delivery of product has occurred or services have been rendered, (2) there is persuasive evidence of a sale arrangement, (3) selling prices are fixed or determinable, and (4) collectability from the customer (individual customers and distributors) is reasonably assured. Revenue consists primarily of revenue generated from the sale of the Company’s products. This generally occurs when the Company’s products are shipped as title has passed. Revenue is recorded net of estimated cash discounts. The Company estimates and accrues an allowance for sales returns at the time the product is sold. To date, sales returns have not been material. Shipping costs passed to the customer are included in net sales. 

 

Costs

 

Cost of goods sold includes all direct material and labor costs and those indirect costs of bringing raw materials to sale condition, including shipping and handling costs. Selling, general, and administrative costs are charged to operating expenses as incurred. Research and development costs are expensed as incurred, and included in operating expenses and were insignificant in 2016 and 2015. Advertising costs are expensed as incurred.

 

 

Accounts Receivable

 

Accounts receivable are recognized and carried at the original invoice amount less an allowance for expected uncollectible amounts. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates including, among others, the customer’s willingness or ability to pay, the Company’s compliance with customer invoicing requirements, the effect of general economic conditions and the ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are considered past due. We do not charge interest on past due balances. The Company writes off trade receivables when all reasonable collection efforts have been exhausted. Bad debt expense is reflected as a component of general and administrative expenses in the statements of income. The allowance for doubtful accounts totaled $0 as of September 30, 2016 and December 31, 2015.

 

Furniture and Equipment

 

Furniture and equipment is stated at cost. The Company provides for depreciation on the cost of its equipment using the straight-line method over an estimated useful life, ranging from three to seven years, and zero salvage value. Expenditures for repairs and maintenance are charged to expense as incurred.

 

For purposes of computing depreciation, the useful lives of furniture and equipment are as follows:

 

Furniture		7 years
Equipment		3-7 years

 

Impairment of Long-Lived Assets

 

Furniture and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the balance sheet, if material.

 

Fair Value of Financial Instruments

 

The Company has adopted the framework for measuring fair value that establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).

 

The three levels of inputs that may be used to measure fair value are as follows:

 

●

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date;

 

●

Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and

 

●

Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability. Valuation is generated from model-based techniques with the unobservable assumptions reflecting our own estimate of assumptions that market participants would use in pricing the asset or liability.

 

Cash, accounts receivable, loan to related party, accounts payable and accrued expenses, and loan from shareholder are reflected in the balance sheets at their estimated fair values primarily due to their short-term nature.

  

Income Taxes

 

The Company has elected to be treated as an S corporation for federal and state income tax purposes. Consequently, federal and state income taxes are not payable by the Company. The Company’s net income or loss is passed through to the shareholders and shareholders are taxed individually on their share of the Company’s earnings. Wisconsin also requires S corporations to pay an economic development surcharge on net income apportioned to Wisconsin for companies who have gross receipts greater than $4 million.

 

 

NOTE 3 – Loan to Related Party

 

On December 4, 2015, the Company and Recovery Solutions & Technologies, Inc., an Arizona corporation, (the “Borrower”) entered into a Loan Agreement whereby the Company agreed to lend to Borrower and Borrower agreed to borrow from the Company the principal amount of $500,000 with a maturity date of March 31, 2016 and an interest rate of 0.56% per annum. The maturity date of the loan was extended several times and ultimately settled as part of the purchase of the Company on December 27, 2016 (see Note 8). The Borrower is considered a related party as one of the shareholders of WEBA is also a significant shareholder of the Borrower, a member of senior management and a board member of the Borrower.

 

Interest income for the nine months ended September 30, 2016 was not significant.

 

NOTE 4 – Loan from Shareholders

 

On December 4, 2015, the Company and its shareholders entered into loan agreements whereby the shareholders agreed to lend to the Company and the Company agreed to borrow from the shareholders the principal amount of $450,000 with a maturity date of March 31, 2016 and an interest rate of 0.56% per annum. The maturity date of the loan was extended several times and ultimately settled as part of the purchase of the Company on December 27, 2016 (see Note 8).

 

NOTE 5 – Shareholders’ Equity

 

Common Stock

 

As of September 30, 2016, the Company has 1,000 shares of common stock outstanding. The Company’s articles of incorporation authorize the Company to issue up to 1,000 shares of no par value, common stock. The holders are entitled to one vote for each share on matters submitted to a vote to shareholders, and to share pro rata in all dividends payable on common stock.

 

NOTE 6 – Commitments and Contingencies

 

Litigation

 

The Company may be party to legal proceedings in the ordinary course of business.  The Company believes that the nature of these proceedings (collection actions, etc.) are typical for a Company of its size and scope of operations. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

 

NOTE 7 – Concentration of Credit Risk and Major Customers

 

Credit risk represents the accounting loss that would be recognized at the reporting date if counter parties failed completely to perform as contracted.  Concentrations of credit risk that arise from financial instruments exist for groups of customers when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions described below.

 

•

Cash – Financial instruments that subject the Company to credit risk are cash balances maintained in excess of federal depository insurance limits.  At September 30, 2016 and December 31, 2015, the Company did not have any cash balances which were not guaranteed by the Federal Deposit Insurance Corporation.  To date, the Company has not experienced any losses in such accounts and believes the exposure is minimal.

 

•

Major customers and accounts receivable – Major customers represent any customer that accounts for more than 10% of revenues for the period. During the nine month periods ended September 30, 2016 and 2015, the Company had one customer that accounted for 16% and 14%, respectively, of revenues and whose accounts receivable balance (unsecured) accounted for 9% and 16%, respectively, of accounts receivable at September 30, 2016 and December 31, 2015.

 

NOTE 8 – Related Party Transactions

 

One of the Company’s shareholders was the Chief Technical Officer of GlyEco, Inc. (“GlyEco”) during the nine months ended September 30, 2015. During the nine months ended September 30, 2015, the Company had sales to GlyEco of $262,276. As of December 31, 2015, GlyEco owed the Company $51,087, which is included in accounts receivable in the accompanying balance sheets.

 

On December 4, 2015 the Company loaned Recovery Solutions & Technology, Inc. $500,000 (see Note 3).

 

On December 4, 2015 the Company borrowed $450,000 from its shareholders (see Note 4).

 

NOTE 9 – Subsequent Events

 

The Company has performed an evaluation of events occurring subsequent to September 30, 2016 through May 2, 2017, the date of the issuance of these financial statements. Based on our evaluation, nothing other than the events described below need to be disclosed.

 

On December 27, 2016, the Company entered into a Stock Purchase Agreement (“WEBA SPA”) with GlyEco, Inc. (“GlyEco”). Pursuant to the WEBA SPA, GlyEco acquired all of the Company’s shares for $150,000 in cash and $2.65 million in 8% Promissory Notes. In addition, the sellers may be entitled to receive earn-out payments of up to an aggregate of $2,500,000 for calendar years 2017, 2018, and 2019 based upon terms set forth in the WEBA SPA. GlyEco also issued 5,625,000 shares as repayment of $450,000 of loans from the Company’s shareholders.