Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K/A - GlyEco, Inc. | s105877_8ka.htm |
| EX-99.3 - EXHIBIT 99.3 - GlyEco, Inc. | s105877_ex99-3.htm |
| EX-99.2 - EXHIBIT 99.2 - GlyEco, Inc. | s105877_ex99-2.htm |
| EX-23.1 - EXHIBIT 23.1 - GlyEco, Inc. | s105877_ex23-1.htm |
EXHIBIT 99.4
UNAUDITED PROFORMA FINANCIAL INFORMATION
On December 27, 2016, (the “Closing Date”) GlyEco, Inc. (the “Company”) closed its acquisition of WEBA Technology Corp. (“WEBA”) pursuant to a Stock Purchase Agreement (the “WEBA SPA”) by and among the Company, WEBA, and the holders of all of the common stock (the “WEBA Shares”) of WEBA (the “WEBA Sellers”), dated the Closing Date. Pursuant to the WEBA SPA, the Company acquired all of the WEBA Shares from the WEBA Sellers for $150,000 in cash and $2.65 million in 8% Promissory Notes (the “Seller Notes”, and the transaction, the “WEBA Acquisition”). 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. Following the WEBA Acquisition, WEBA became a wholly owned subsidiary of the Company.
The total fair value of consideration to be transferred for the acquisition is $5,107,523, consisting of the $150,000 payment in cash, $562,500 in Company Common Stock, $2.65 million in Seller Notes and contingent earn-out payments described above with a deemed value of $1,745,023, with contingent payments extending over a period of three years following the WEBA Acquisition. The Company also recorded an income tax benefit of $1.03 million associated with the WEBA Acquisition.
The following unaudited pro forma condensed combined balance sheet as of September 30, 2016 includes the unaudited historical balance sheet of the Company as of September 30, 2016 and the unaudited historical balance sheet of WEBA as of September 30, 2016, giving effect to the acquisition as if it had been consummated on September 30, 2016. The following unaudited pro forma condensed combined statement of operations for the nine months ended September 30, 2016 includes the unaudited historical statement of operations of the Company and unaudited historical statement of income of WEBA for the nine months ended September 30, 2016. The following unaudited pro forma condensed combined statement of operations for the year ended December 31, 2015 combines the audited historical consolidated statement of operations of the Company for the year ended December 31, 2015 and the audited historical statement of income of WEBA for the year ended December 31, 2015. The unaudited pro forma statements of operations give effect to the acquisition as if it had been consummated at the beginning of the periods presented.
Unaudited pro forma condensed combined financial information is presented for information purposes only and is not necessarily indicative of the results that actually would have been realized had the acquisition been completed on the date indicated or which may be expected to occur in the future.
The unaudited pro forma condensed combined financial information should be read in conjunction with the audited historical financial statements and related notes of the Company which are incorporated by reference into this Form 8-K/A and the audited historical financial statements and related notes of WEBA, which are included as an exhibit in this Form 8-K/A.
The unaudited pro forma condensed combined financial information excludes costs associated with the integration and consolidation of the companies.
GLYECO, INC. & WEBA TECHNOLOGY CORP.
PRO FORMA CONDENSED COMBINED - BALANCE SHEETS
as of September 30, 2016
(Unaudited)
| WEBA | Pro Forma | |||||||||||||||
| GlyEco, Inc. | Technology Corp. | Adjustments | Combined | |||||||||||||
| ASSETS | ||||||||||||||||
| Current assets | ||||||||||||||||
| Cash | $ | 1,710,273 | 65,663 | (150,000 | )(a) | $ | 1,625,936 | |||||||||
| Cash - restricted | 100,000 | - | - | 100,000 | ||||||||||||
| Accounts receivable, net | 657,827 | 402,285 | - | 1,060,112 | ||||||||||||
| Due from GlyEco, Inc. | - | 37,665 | (37,665 | )(b) | - | |||||||||||
| Loan to related party | - | 500,000 | - | 500,000 | ||||||||||||
| Prepaid expenses and other current assets | 85,916 | - | - | 85,916 | ||||||||||||
| Inventory | 235,990 | - | - | 235,990 | ||||||||||||
| Total current assets | 2,790,006 | 1,005,613 | (187,665 | ) | 3,607,954 | |||||||||||
| Deposits | 32,035 | - | - | 32,035 | ||||||||||||
| Intangible assets | 243,911 | - | 2,575,000 | (c) | 2,818,911 | |||||||||||
| Goodwill | 885,295 | - | 2,729,229 | (d) | 3,614,524 | |||||||||||
| Property, plant and equipment, net | 1,787,737 | 7,132 | - | 1,794,869 | ||||||||||||
| TOTAL ASSETS | $ | 5,738,984 | 1,012,745 | 5,116,564 | $ | 11,868,293 | ||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
| Current liabilities | ||||||||||||||||
| Accounts payable and accrued expenses | $ | 870,199 | $ | 90,956 | $ | - | $ | 961,155 | ||||||||
| Contingent acquisition obligation | 100,000 | - | 1,745,023 | (e) | 1,845,023 | |||||||||||
| Notes payable – current portion | 110,794 | - | - | 110,794 | ||||||||||||
| Loan from shareholders | - | 450,000 | (450,000 | )(i) | - | |||||||||||
| Capital lease obligations – current portion | 6,243 | - | - | 6,243 | ||||||||||||
| Due to WEBA Technology Corp. | 37,665 | - | (37,665 | )(b) | - | |||||||||||
| Total current liabilities | 1,124,901 | 540,956 | 1,257,358 | 2,923,215 | ||||||||||||
| Notes payable – non-current portion | 186,298 | - | 2,650,000 | (j) | 2,836,298 | |||||||||||
| Capital lease obligations – non current portion | 4,769 | - | - | 4,769 | ||||||||||||
| TOTAL LIABILITIES | 1,315,968 | 540,956 | 3,907,358 | 5,764,282 | ||||||||||||
| TOTAL SHAREHOLDERS’ EQUITY | 4,423,016 | 471,789 | 1,209,206 | (f) | 6,104,011 | |||||||||||
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 5,738,984 | $ | 1,012,745 | $ | 5,116,564 | $ | 11,868,293 | ||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements
GLYECO, INC. & WEBA TECHNOLOGY CORP.
PRO FORMA CONDENSED COMBINED - STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2016
(Unaudited)
| WEBA | Pro Forma | |||||||||||||||
| GlyEco, Inc. | Technology Corp. | Adjustments | Combined | |||||||||||||
| Net sales | $ | 4,145,741 | $ | 1,860,028 | $ | (295,499 | )(g) | $ | 5,710,270 | |||||||
| Cost of goods sold | 3,968,501 | 1,202,402 | (295,499 | )(g) | 4,875,404 | |||||||||||
| Gross profit (loss) | 177,240 | 657,626 | - | 834,866 | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Selling, general and administrative | 2,716,773 | 544,590 | 320,247 | (h) | 3,581,610 | |||||||||||
| Income (loss) from operations | (2,539,533 | ) | 113,036 | (320,247 | ) | (2,746,744 | ) | |||||||||
| Other expenses, net | 2,413 | - | 159,000 | (k) | 161,413 | |||||||||||
| (Loss) income before provision for income taxes | (2,541,946 | ) | 113,036 | (479,247 | ) | (2,908,157 | ) | |||||||||
| Provision for income taxes | 6,031 | - | (1,030,000 | )(l) | (1,023,969 | ) | ||||||||||
| Net income (loss) | $ | (2,547,977 | ) | $ | 113,036 | $ | (550,753 | ) | $ | (1,884,188 | ) | |||||
| Net loss per share of common stock, basic and diluted | $ | (0.02 | ) | $ | (0.02 | ) | ||||||||||
| Weighted average number of shares of common stock outstanding, basic and diluted | 106,102,370 | 5,625,000 | (i) | 111,727,370 | ||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements
GLYECO, INC. & WEBA TECHNOLOGY CORP.
PRO FORMA CONDENSED COMBINED - STATEMENT OF OPERATIONS
For the Year Ended December 31, 2015
(Unaudited)
| WEBA | Pro Forma | |||||||||||||||
| GlyEco, Inc. | Technology Corp. | Adjustments | Combined | |||||||||||||
| Net sales | $ | 7,364,452 | $ | 2,533,905 | $ | (375,362 | )(g) | $ | 9,522,995 | |||||||
| Cost of goods sold | 8,167,841 | 1,652,658 | (375,362 | )(g) | 9,445,137 | |||||||||||
| Gross profit (loss) | (803,389 | ) | 881,247 | - | 77,858 | |||||||||||
| Operating Expenses: | ||||||||||||||||
| Selling, general and administrative | 11,477,791 | 722,012 | 426,996 | (h) | 12,626,799 | |||||||||||
| Income (loss) from operations | (12,281,180 | ) | 159,235 | (426,996 | ) | (12,548,941 | ) | |||||||||
| Other expenses, net | 160,706 | - | (212,000 | )(k) | 372,706 | |||||||||||
| (Loss) income before provision for income taxes | (12,441,886 | ) | 159,235 | (638,996 | ) | (12,921,647 | ) | |||||||||
| Provision for income taxes | 10,374 | - | (1,030,000 | )(l) | (1,019,626 | ) | ||||||||||
| Net income (loss) | $ | (12,452,260 | ) | $ | 159,235 | $ | (391,004 | ) | $ | (11,902,021 | ) | |||||
| Net loss per share of common stock, basic and diluted | $ | (0.18 | ) | $ | (0.16 | ) | ||||||||||
| Weighted average number of shares of common stock outstanding, basic and diluted | 69,113,112 | 5,625,000 | (i) | 74,738,112 | ||||||||||||
See accompanying notes to unaudited pro forma condensed combined financial statements
GLYECO, INC. & WEBA TECHNOLOGY CORP.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The unaudited pro forma condensed combined balance sheet as of September 30, 2016 and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2016 and the year ended December 31, 2015, are based on GlyEco, Inc.’s (the “Company”) unaudited historical consolidated financial statements as of and for the nine months ended September 30, 2016, historical audited consolidated financial statements for the year ended December 31, 2015, and the unaudited historical financial statements of WEBA Technology Corp. (“WEBA”) as of and for the nine months ended September 30, 2016 and historical audited financial statements for the year ended December 31, 2015, after giving effect to the Company’s acquisition of WEBA on December 27, 2016 and the assumptions, reclassifications and adjustments described in the accompanying notes to the unaudited pro forma condensed combined financial statements.
The Company is required to recognize the assets acquired and, liabilities assumed, measured at their fair values as of the acquisition date. Significant assumptions and estimates have been made in determining the purchase price and the allocation of the purchase price in the unaudited pro forma condensed combined financial statements.
Accounting Periods Presented
The unaudited pro forma condensed combined balance sheet as of September 30, 2016 is presented as if the WEBA acquisition had been consummated on such date, and statements of operations for the nine months ended September 30, 2016, and for the year ended December 31, 2015 are presented as if the WEBA acquisition occurred at the beginning of the periods presented.
NOTE 2. PURCHASE PRICE ALLOCATION
On December 27, 2016, the Company entered into a Stock Purchase Agreement (“WEBA SPA”) with WEBA, a privately-owned company that develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries. Pursuant to the WEBA SPA, the Company acquired all of the WEBA shares from the WEBA sellers for $150,000 in cash and $2.65 million in 8% Promissory Notes. In addition, the WEBA 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. The Company also issued 5,625,000 shares as repayment of $450,000 of notes payable due to the WEBA sellers. The fair market value of the shares was $0.10 on the date of issuance. Following the WEBA acquisition, WEBA became a wholly owned subsidiary of the Company.
We accounted for the acquisition of WEBA as required under applicable accounting guidance. Tangible assets acquired are recorded at fair value. Identifiable intangible assets that we acquired are recognized separately if they arise from contractual or other legal rights or if they are separable, and are recorded at fair value. Goodwill is recorded as the excess of the consideration transferred over the fair value of the net identifiable assets acquired. The earn-out payments liability was recorded at its estimated fair value of $1,745,023.
Although management estimates that certain of the contingent consideration will be paid, it has applied a discount rate to the contingent consideration amounts in determining fair value to represent the risk of these payments not being made. The total acquisition date fair value of the consideration transferred and to be transferred is estimated at approximately $6.1 million, as follows:
| Cash payment to the WEBA Sellers at closing | $ | 150,000 | ||
| Common Stock issuance to the WEBA Sellers | 562,500 | |||
| Promissory notes to the WEBA Sellers | 2,650,000 | |||
| Contingent cash consideration to the WEBA Sellers | 1,745,023 | |||
| Income tax benefit | 1,030,000 | |||
| Total acquisition date fair value | $ | 6,137,523 |
Allocation of Consideration Transferred
The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based on their estimated fair values as of December 27, 2016, the acquisition date. The excess of the acquisition date fair value of consideration transferred over the estimated fair value of the net tangible assets and intangible assets acquired was recorded as goodwill.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.
| Cash | $ | 172,950 | ||
| Accounts receivable | 342,151 | |||
| Loan receivable from RS&T | 500,000 | |||
| Property and equipment | 8,720 | |||
| Customer list | 470,000 | |||
| Intellectual property | 880,000 | |||
| Trade name | 390,000 | |||
| Non compete agreement | 835,000 | |||
| Total identifiable assets acquired | 3,598,821 | |||
| Accounts payable and accrued expenses | 190,527 | |||
| Total liabilities assumed | 190,527 | |||
| Total identifiable assets less liabilities assumed | 3,408,294 | |||
| Goodwill | 2,729,229 | |||
| Net assets acquired | $ | 6,137,523 |
The Company is amortizing the intangibles (excluding goodwill) over an estimated useful life of five to ten years. The Company will evaluate the fair value of the earn-out liability on a periodic basis and adjust the balance, with an offsetting adjustment to the income statement, as needed.
NOTE 3. PRO FORMA AND RECLASSIFICATION ADJUSTMENTS
Pro forma adjustments are made to reflect the estimated purchase price, to adjust amounts related to WEBA’s net tangible assets and intangible assets to the fair values of those assets and to reflect the amortization expense related to the estimated amortizable intangible assets.
The following describes the pro forma adjustments related to the WEBA Acquisition made in the accompanying unaudited pro forma condensed combined balance sheet as of September 30, 2016, and the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2016 and the year ended December 31, 2015, giving effect to the acquisition as if it had been consummated at the beginning of the periods presented:
| (a) | To reflect the cash paid to the Sellers in connection with the WEBA Acquisition ($150,000). | |
| (b) | To reflect the elimination of amounts owed by the Company to WEBA. | |
| (c) | To reflect the fair value of identifiable intangible assets acquired. | |
| (d) | To reflect the fair value of the goodwill based on the net assets acquired. | |
| (e) | To reflect the fair value of the contingent earn-out cash payments potentially owed to the Sellers in connection with the WEBA Acquisition. | |
| (f) | To reflect the elimination of WEBA’s shareholders’ equity and Company Common Stock issued as purchase consideration. | |
| (g) | To eliminate sales made by WEBA to the Company during the periods presented. | |
| (h) | To reflect estimated amortization expense of identifiable intangible assets of $320,247 and $426,996, for the nine months ended September 30, 2016 and for the year ended December 31, 2015, respectively, as if the acquisition had occurred at the beginning of the periods presented. | |
| (i) | To reflect exchange of debt for stock. | |
| (j) | To reflect promissory notes issued to the Sellers in connection with the WEBA Acquisition. | |
| (k) | To reflect interest expense on the promissory notes issued to the Sellers in connection with the WEBA Acquisition for the periods presented. | |
| (l) | To reflect the income tax benefit generated by the WEBA Acquisition. |