Attached files
| file | filename |
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| EXCEL - IDEA: XBRL DOCUMENT - GlyEco, Inc. | Financial_Report.xls |
| EX-32.1 - GlyEco, Inc. | ex32-1.htm |
| EX-32.2 - GlyEco, Inc. | ex32-2.htm |
| EX-31.2 - GlyEco, Inc. | ex31-2.htm |
| EX-31.1 - GlyEco, Inc. | ex31-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2012
¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 000-30396
GLYECO, INC.
(Exact name of registrant as specified in its charter)
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Nevada
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45-4030261
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(State or other jurisdiction of incorporation)
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(IRS Employer Identification No.)
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4802 East Ray Road, Suite 23-196
Phoenix, Arizona
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85044
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(Address of principal executive offices)
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(Zip Code)
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(866) 960-1539
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), 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 Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 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, 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 ct. (Check one):
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Large accelerated filer ¨
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Accelerated filer ¨
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Non-accelerated filer ¨ (Do not check if a smaller reporting company)
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Smaller reporting company x
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Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes ¨ No x
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PROCEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 after the distribution of securities subsequent to the distribution of securities under a plan confirmed by a court. Yes □ No □
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of May 14, 2012, there were 24,451,985 shares of common stock, par value $0.0001 per share, of the Registrant issued and outstanding.
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TABLE OF CONTENTS
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Page
No:
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PART I — FINANCIAL INFORMATION
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Item 1.
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3 | |
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Item 2.
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11 | |
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Item 3.
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18 | |
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Item 4.
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19 | |
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PART II – OTHER INFORMATION:
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Item 1.
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20 | |
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Item 1A.
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20 | |
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Item 2.
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20 | |
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Item 3.
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Item 5.
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Item 6.
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21 | |
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PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
GLYECO, INC. and Subsidiaries
Consolidated Balance Sheets
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ASSETS
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March 31,
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December 31,
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2012
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2011
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(unaudited)
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(audited)
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Current assets
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Cash
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$ | 453,405 | $ | 577,127 | ||||
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Accounts receivable, net
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330,981 | 35,098 | ||||||
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Prepaid expenses
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615 | - | ||||||
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Inventories
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13,104 | - | ||||||
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Total current assets
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$ | 798,105 | $ | 612,225 | ||||
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Equipment
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Equipment
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404,015 | - | ||||||
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Accumulated depreciation
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(14,466 | ) | - | |||||
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Total equipment, net
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389,549 | - | ||||||
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Other assets
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Goodwill
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78,044 | - | ||||||
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Other intangible assets
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10,000 | - | ||||||
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Total other assets
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88,044 | - | ||||||
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Total assets
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$ | 1,275,698 | $ | 612,225 | ||||
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LIABILITIES AND STOCKHOLDERS' DEFICIT
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Current liabilities
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Accounts payable and accrued expenses
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$ | 368,121 | $ | 212,749 | ||||
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Due to related parties
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477,510 | 568,603 | ||||||
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Interest payable
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474,040 | 431,692 | ||||||
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Convertible note payable
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1,000,000 | 1,000,000 | ||||||
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Total liabilities
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2,319,671 | 2,213,044 | ||||||
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Stockholders' deficit
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Preferred stock; $0.0001 par value; 10,000,000 shares authorized
and zero shares issued and outstanding as of March 31, 2012 |
- | - | ||||||
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Common stock, $.0001 par value; 23,801,985 and 22,858,235
shares issued and outstanding as of March 31, 2012 and |
2,382 | 2,286 | ||||||
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Additional paid in capital
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6,641,580 | 5,772,924 | ||||||
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Options and warrants outstanding
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107,347 | 107,347 | ||||||
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Accumulated deficit
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(7,795,282 | ) | (7,483,376 | ) | ||||
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Total stockholders' deficit
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(1,043,973 | ) | (1,600,819 | ) | ||||
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Total liabilities and stockholders' deficit
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$ | 1,275,698 | $ | 612,225 | ||||
See accompanying notes to the financial statements
GLYECO, INC. and Subsidiaries
Consolidated Statements of Operations
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Three months ended March 31,
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2012
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2011
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(unaudited)
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(unaudited)
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Sales, net
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$ | 418,817 | $ | 179,834 | ||||
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Cost of goods sold
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368,784 | 133,068 | ||||||
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Gross profit
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50,033 | 46,766 | ||||||
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Operating expenses
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Consulting fees
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130,662 | 90,230 | ||||||
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Salaries and wages
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51,540 | - | ||||||
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Legal and professional
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61,158 | 6,904 | ||||||
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General and administrative
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75,896 | 17,831 | ||||||
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Total operating expenses
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319,256 | 114,965 | ||||||
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Loss from operations
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(269,223 | ) | (68,199 | ) | ||||
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Other income and expenses
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Interest income
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(50 | ) | (82 | ) | ||||
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Interest expense
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42,734 | 33,832 | ||||||
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Total other income and expenses
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42,684 | 33,750 | ||||||
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Loss before provision for income taxes
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(311,907 | ) | (101,949 | ) | ||||
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Provision for income taxes
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- | - | ||||||
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Net loss
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$ | (311,907 | ) | $ | (101,949 | ) | ||
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Weighted average number of common shares outstanding
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23,531,284 | 11,361,952 | ||||||
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Primary and fully diluted loss per share
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$ | (0.01 | ) | $ | (0.01 | ) | ||
See accompanying notes to the financial statements
GLYECO, INC. and Subsidiaries
Consolidated Statements of Cash Flows
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Three months ended March 31,
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2012
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2011
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(unaudited)
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(unaudited)
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Net cash flow from operating activities
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Net loss
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$ | (311,907 | ) | $ | (101,949 | ) | ||
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Adjustments to reconcile net loss to net cash used by operating activities
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Depreciation
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14,466 | - | ||||||
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(Increase) decrease in assets:
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Accounts receivable
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(241,877 | ) | (30,818 | ) | ||||
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Prepaid expenses
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(615 | ) | - | |||||
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Inventories
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(13,104 | ) | - | |||||
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Increase (decrease) in liabilities:
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Accounts payable and accrued expenses
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155,372 | 9,417 | ||||||
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Related party payable
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(91,093 | ) | (14,000 | ) | ||||
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Accrued interest
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42,350 | 33,757 | ||||||
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Net cash used in operating activities
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(446,408 | ) | (103,593 | ) | ||||
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Cash flows from investing activities
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Purchase of equipment
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(2,315 | ) | - | |||||
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Net cash used in investing activities
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(2,315 | ) | - | |||||
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Cash flows from financing activities
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Proceeds from the sale of common stock
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325,000 | 325,200 | ||||||
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Net cash provided by financing activities
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325,000 | 325,200 | ||||||
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Increase (decrease) in cash
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(123,723 | ) | 221,607 | |||||
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Cash at the beginning of the period
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577,127 | 5,103 | ||||||
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Cash at end of the period
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$ | 453,405 | $ | 226,710 | ||||
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Supplemental disclosure of cash flow information
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Interest paid during period
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$ | - | $ | - | ||||
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Taxes paid during period
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$ | - | $ | - | ||||
NOTE 1 – Organization and Nature of Business
GlyEco, Inc. (the “Company”) was formed in the State of Nevada on October 21, 2011. On October 21, 2011, the Company became a wholly-owned subsidiary of Environmental Credits, Inc. (“ECVL”). On November 21, 2011, ECVL merged itself into its wholly-owned subsidiary, GlyEco, Inc. (the “Reincorporation”). Upon the consummation of the Reincorporation, the Company was the surviving corporation and the Articles of Incorporation and Bylaws of the Company replaced the Certificate of Incorporation and Bylaws of ECVL.
On November 28, 2011, the Company consummated a reverse triangular merger (the “Merger” or “Transaction”) as a tax-free reorganization within the meaning of Section 368 of the United States Internal Revenue Code of 1986, as amended, pursuant to an Agreement and Plan of Merger, dated November 21, 2011 (the “Merger Agreement”), with GRT Acquisition, Inc., a Nevada corporation and wholly-owned subsidiary of the Company, and Global Recycling Technologies, Ltd., a Delaware corporation and privately-held operating subsidiary (“Global Recycling”). Global Recycling was incorporated in Delaware on July 11, 2007.
GRT Acquisition, Inc. was incorporated in the State of Nevada on November 7, 2011 for the purpose of the consummating the Merger. Pursuant to the Merger Agreement, GRT Acquisition, Inc. merged with and into Global Recycling, with Global Recycling being the surviving corporation and which resulted in Global Recycling becoming a wholly-owned subsidiary of the Company.
The Company has principal offices in Phoenix, Arizona, and was formed to acquire the assets of companies in the business of recycling and processing waste ethylene glycol, and to apply a newly developed proprietary technology to produce ASTM E1177 Type I virgin grade recycled ethylene glycol to end users throughout North America.
On December 30, 2011, Global’s wholly-owned subsidiary, Global Acquisition Corp. #6 (“Acquisition #6”), a Delaware corporation, was dissolved. Acquisition #6 ceased operations on December 31, 2009, when the assets (including rights to additive formula and goodwill) were sold in an exchange for the common shares of Global Recycling. Prior to its sale, Acquisition #6 operated as a chemical company selling additives used in producing antifreeze and heat transfer fluid from recycled ethylene glycol. Sales of additives were discontinued upon the sale of the assets effective December 31, 2009.
On January 9, 2012, GlyEco, Inc., a Nevada corporation (the “Company”), and its wholly-owned subsidiary, Global Recycling Technologies, Ltd., a Delaware corporation (“Global Recycling”), consummated a merger pursuant to which Global Recycling merged with and into the Company (the “Global Merger”), with the Company being the surviving entity.
The 11,591,958 shares of common stock of Global Recycling (constituting 100% of the issued and outstanding shares of Global Recycling on the effective date of the Global Merger) held by the Company pursuant to the reverse merger consummated on November 28, 2011, as previously disclosed by the Company on a Form 8-K filed with the Securities and Exchange Commission on November 28, 2011, were cancelled upon the consummation of the Merger.
The Merger was consummated pursuant to an Agreement and Plan of Merger, dated December 30, 2011 (the “Merger Agreement”), between the Company and Global Recycling. The Company filed Articles of Merger, dated December 30, 2011, with the Secretary of State of Nevada on January 3, 2012, and Global Recycling filed a Certificate of Merger, dated December 30, 2011, with the Secretary of State of Delaware on January 9, 2012. The foregoing documents are filed as exhibits to this Form 8-K and are incorporated by reference herein. The Merger became effective on January 9, 2012 pursuant to Section 8 of the Merger Agreement.
NOTE 2 – Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Form 10-K for the year ended December 31, 2011. In the opinion of management, all adjustments considered necessary for the fair presentation consisting solely of normal recurring adjustments, have been made. Operating results for the three months ended March 31, 2012 are not necessarily indicative of the results that may be expected for the year ended December 31, 2012.
Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of GlyEco, Inc., and its wholly-owned subsidiaries. All intercompany accounting transactions have been eliminated.
Summary of Significant Accounting Policies
Use of Estimates
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 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 in the financial reporting process, actual results may differ significantly from those estimates.
Going Concern
The Company’s consolidated financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.
As of March 31, 2012, the Company had an accumulated deficit of $7,795,282. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.
Management’s plans to address these matters include, raising additional financing through offering its shares of capital stock in private and/or public offerings of its securities and through debt financing if available and needed. The Company plans to become profitable by upgrading the capacity and capabilities at its existing operating facility, continuing to implement its patent-pending technology in international markets, and acquiring profitable glycol recycling companies, which are looking to take advantage of the Company’s public company status and improve their profitability through a combined synergy. The Company intends to expand customer and supplier bases once operational capacity and capabilities have been upgraded.
Cash and Cash Equivalents
As of March 31, 2012, the Company maintained cash balances in a non-interest bearing account that currently does exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of March 31, 2012.
Recently Issued Accounting Pronouncements
In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning July 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, result of operations or cash flows.
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.
NOTE 3 – Accounts Receivable
As of March 31, 2012 and December 31, 2011, the Company’s net accounts receivable was $330,981 and $35,098, respectively.
NOTE 4 – Equipment
As of March 31, 2012, the Company’s equipment, net of accumulated depreciation, was $389,949. As of December 31, 2011, the equipment is reflected as zero net of accumulated depreciation.
NOTE 5 – Major Customers and Suppliers
For the three months ended March 31, 2012, one customer accounted for approximately 76% of the Company’s consolidated net revenues. With the acquisition of Recycool, the Company no longer relies on one customer for 100% of its consolidated net revenues.
For the three months ended March 31, 2011, one customer accounted for 100% of the Company’s net revenues.
NOTE 6 – Convertible Note Payable
On April 3, 2012, the Company entered into a Note Conversion Agreement (the "Conversion Agreement") with the note holder. The terms of the Conversion Agreement extend the maturity date for the Convertible Note to December 31, 2013. Interest will continue to accrue at a rate of 12.5% compounding semi-annually. Any and all claims of demand arising from or related to a default on the Convertible Note prior to the Conversion Agreement were waived by the note holder. The Conversion Agreement further states that the note holder will convert all money owed into a combination of Common and Preferred Stock on the date that the Company has received an aggregate of $5,000,000 in equity investment following the date of the Conversion Agreement. Four thousand seven hundred dollars ($470,000) of the debt will be converted into common stock at $1.00 per share or the price offered to any investor subsequent to the Agreement, if lower. The remainder will be converted into Series AA preferred stock at $1.00 per share or the price offered to any investor subsequent to the Agreement, if lower. The Series AA preferred stock shall in all features be the same as common stock, with two primary exceptions: (i) the Series AA preferred stock shall accrue a dividend of 12.5% per year, compounded semi-annually; and (ii) the Series AA preferred stock shall have priority in payment upon liquidation over common stock.
NOTE 7–Stockholders’ Equity
Preferred Stock
As of March 31, 2012, the Company has no preferred shares outstanding. The Company's articles of incorporation authorize the Company to issue up to 10,000,000 shares of $0.0001 par, preferred shares having preferences to be determined by the board of directors for dividends, and liquidation of the Company's assets.
Common Stock
As of March 31, 2012, the Company has 300,000,000, $0.0001 par value shares of common stock authorized. The common shareholders 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 after payment of dividends on any preferred shares having preference in payment of dividends.
On January 4, 2012, the Company issued an aggregate of 543,750 shares of Common Stock to the three Selling Principals of Recycool, Inc., a Minnesota corporation (“Recycool”), pursuant to an Asset Purchase Agreement, dated December 16, 2011, as amended (the “Recycool Agreement”), by and among the Company, Recycool, the Selling Principals, and GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of the Company (“Acquisition Sub”) in consideration for business, properties and substantially of the assets of Recycool.
On January 17, 2012, the Company issued an aggregate of 30,000 shares of Common Stock to two investors at a price of $0.50 per share.
On February 3, 2012, the Company issued an aggregate of 20,000 shares of Common Stock to a current investor at a price of $0.50 per share.
On March 30, 2012, the Company issued an aggregate of 250,000 shares of Common Stock to one investor at a price of $1.00 per share.
Share-Based Compensation
For the three months ended March 31, 2012, the Company did not issue any of its common shares for stock based compensation.
NOTE 8 – Related Party Transactions
The Company uses consultants to provide a variety of services, including legal, computer, accounting, marketing, strategic planning, and engineering. Mr. John Lorenz, the Company's CEO, provided management consulting services to the Company through Barcid Investment Group (Barcid), a corporation solely owned by Mr. Lorenz. As of February 1, 2012, Mr. Lorenz became an employee of the Company.
For the three months ended March 31, 2012, Barcid was paid $12,500 for consulting services, and was owed $242,300 at March 31, 2012.
For the three months ended March 31, 2012 CyberSecurity, Inc., a corporation owned by Janet Lorenz, wife of John Lorenz, was paid $15,000 for consulting services. As of March 31, 2012, CyberSecurity was owed $0.
NOTE 9 – Commitments and Contingencies
Rental Agreements
During the three months ended March 31, 2012, the Company rented office space on a monthly basis under a written rental agreement. The monthly rent under this agreement is approximately $1,250. The term of the agreement is for two years with the end date set to January 31, 2014. The monthly rate under the agreement will change to approximately $1,344 beginning February 1, 2013.
During the three months ended March 31, 2012, the Company’s subsidiary leased office/warehouse space on a monthly basis under a written rental agreement for $1,719 per month. The agreement was assumed in the acquisition of Recycool, Inc. and will terminate on April 30, 2013.
NOTE 10 – Concentration of Credit Risk
As of March 31, 2012
The Company maintained cash deposits at financial institutions in excess of the federally insured limits.
The Company owed $1,000,000 on a convertible note plus accrued interest.
NOTE 11 – Acquisitions
Acquisition of Recycool, Inc.
On December 16, 2011, the Company entered into that certain Asset Purchase Agreement (the “Recycool Agreement”) with Recycool, Inc., a Minnesota corporation (“Recycool”), Marty Rosauer, Kurt Rosauer and Dennis Scott (collectively, the “Selling Principals”), and GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of the Company (the “Acquisition Sub” and together with the Company, Recycool and the Selling Principals, the “Parties”).
Recycool operates a business located in Minneapolis, Minnesota, relating to processing used glycol streams, primarily used antifreeze, and selling glycol as remanufactured product, including the collection and distribution businesses relating thereto.
Pursuant to the Recycool Agreement and with the exception of the Excluded Assets (as defined in the Recycool Agreement), Recycool had agreed to sell to Acquisition Sub the business and all of the assets and properties of Recycool in consideration for an aggregate purchase price of $525,000 (the “Purchase Price”) consisting of (subject to adjustment as provided in the Agreement) an aggregate of 525,000 shares of Common Stock of the Company (the “Acquisition”).
On December 27, 2011, the Parties entered into Amendment No. 1 to the Recycool Agreement pursuant to which the Company agreed to issue, on a pro rata basis, 8,153 additional shares of restricted Common Stock to the Selling Principals under the terms of the Recycool Agreement in consideration for Recycool’s payment of $8,153 for financial statement audit related fees.
On January 1, 2012, the Parties entered into Amendment No. 2 to the Recycool Agreement pursuant to which the Purchase Price payable by the Company to the Selling Principals was increased from $525,000 to $543,750. The $18,750 increase in the Purchase Price consists of: (i) 8,878 additional shares of Common Stock due to the fact that the Net Working Capital (as defined in the Recycool Agreement) of Recycool was calculated to be $63,878 (an increase of $8,878 from $55,000 under the Recycool Agreement); (ii) 8,153 additional restricted shares of Common Stock under Amendment No. 1; and (iii) 1,719 additional restricted shares of Common Stock in consideration for Recycool’s payment of $1,719 in month rent pursuant to its Office/Warehouse Lease, dated September 1, 2000, as amended, by and between Recycool and Bolger Building Partnership, L.L.P. (and Bolger Family Limited Partnership).
NOTE 12 – Subsequent Events
On April 9, 2012, the Company issued an aggregate of 300,000 shares of Common Stock to one investor at a price of $1.00 per share.
On April 27, 2012, the Company issued an aggregate of 250,000 shares of Common Stock to one investor at a price of $1.00 per share.
On April 30, 2012, the Company issued an aggregate of 50,000 shares of Common Stock for the exercise of 100,000 warrants at an exercise price of $.50 per share.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on information currently available to management as well as management’s assumptions and beliefs. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements identified by the words “may,” “will,” “should,” “plan,” “predict,” “anticipate,” “believe,” “intend,” “estimate” and “expect” and similar expressions. Such statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions; however, such statements are subject to certain risks and uncertainties. In addition to the specific uncertainties discussed elsewhere in this Quarterly Report on Form 10-Q, the risk factors set forth in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011 may affect our performance and results of operations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those in the forward-looking statements. We disclaim any intention or obligation to update or review any forward-looking statements or information, whether as a result of new information, future events or otherwise.
Unless otherwise noted herein, terms such as the “Company,” “GlyEco,” “we,” “us,” “our” and similar terms refer to GlyEco, Inc., a Nevada corporation, and its subsidiaries.
The following discussion should be read in conjunction with the information contained in the consolidated financial statements of the Company and the notes which form an integral part of the financial statements which are attached hereto.
Overview
We are a green chemistry company formed to roll-out our proprietary and patent pending glycol recycling technology that transforms waste glycols, a hazardous material, into profitable green products. Our technology, branded GlyEco Technology™, is a breakthrough patent pending processing system and green chemistry solution that enables businesses to handle the removal of their hazardous waste glycol in a responsible and environmentally safe manner. Our unique technology transforms hazardous materials into profitable green products.
Our GlyEco Technology™ can recycle waste glycol from all five industries to the ASTM E1177 Type I standard, a purity level equivalent to refinery-grade glycol (i.e. virgin grade) (“Type I”). Competitors generally recycle waste glycols from only one or two of the five industries and most competitors can recycle waste glycol at best to an ASTM E1177 Type II standard (“Type II”), a standard allowing more impurities than Type I—which is unacceptable to many customers and industries. Additionally, ultra-pure GlyEco Certified®, our recycled glycol material, can be produced at a cost advantage ranging between 20-50% lower than commonly used recycling methods.
World-wide consumption for refinery produced ethylene glycol is over 5 billion gallons per year, with growth expected to exceed 350 million gallons every year for the next decade (Source: ICIS Chemical Business). Demand in China exceeds supply and currently tops 2.1 billion gallons each year. The United States consumes over 700 million gallons of ethylene glycol each year. Demand continues to exceed supply for ethylene glycol, largely because of explosive growth in poly fiber manufacturing to make clothing, plastic containers and plastic beverage bottles. This growth trend is expected to continue well into the future.
GlyEco Technology™ ensures consistently clean, uniform quality recycled glycols with independent lab testing to document results. Our recycled materials are proven to meet or exceed ASTM (www.astm.org) purity standards. The process cleans the five major types of hazardous waste glycols to a superior level of purity, and allows our customers to utilize recycled glycols as a more sustainable resource. Since most polluted glycol is disposed of in our surface waters - which can have devastating results for aquatic life - the GlyEco Technology™ solution gives our customers a way to reduce waste while caring for the environment at no additional cost to them.
The Company has assembled a group of accomplished managers each of whom has more than 20 years’ experience in their field of expertise. This talented team includes business owners and C-level managers from the solid waste, chemical engineering and glycol recycling industries. They provide disposal clients with documented compliance with EPA Hazardous Waste Manifest System and all State and Local regulations, protecting both our environment and their business partners.
Corporate History
We were originally incorporated in the State of Delaware on April 21, 1997 under the name Wagg Corp. In January 1998, Wagg Corp. changed its name to Alternative Entertainment, Inc. In December 1998, Alternative Entertainment, Inc. changed its name to BoysToys.com, Inc. On December 29, 1998, BoysToys.com changed its name to Environmental Credits, Ltd. (“Environmental Credits”). On November 21, 2011, Environmental Credits reincorporated in the state of Nevada under the name GlyEco, Inc.
Reverse Triangular Merger
On November 21, 2011, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with GRT Acquisition, Inc., a Nevada corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and Global Recycling Technologies, Ltd., a Delaware corporation and privately-held operating subsidiary (“Global Recycling”), pursuant to which we effected a reverse triangular merger (the “Merger”) intended to constitute a tax-free reorganization within the meaning of Section 368 of the United States Internal Revenue Code of 1986, as amended.
The Merger was effective on November 28, 2011 upon the filing of a Certificate of Merger with the Secretary of State of Delaware. Upon the consummation of the Merger, Merger Sub merged with and into Global Recycling, with Global Recycling being the surviving corporation and which resulted in Global Recycling becoming a wholly-owned subsidiary of the Company. Upon the consummation of the Merger, the Company’s then current management and Board of Directors resigned and John Lorenz (who was the Chief Executive Officer, President and Chairman of Global Recycling) was appointed as the Company’s Chief Executive Officer, President and Chairman of Board of Directors; James Flach, Michael Jaap, and William Miller were each elected as members of the Company’s Board of Directors; and Kevin Conner and Richard Geib were appointed as the Chief Financial Officer and the Chief Technical Officer, respectively.
Prior to the Merger, the Company was a “shell” company (as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended). Upon the consummation of the Merger, the Company ceased being a shell company and the business and operations of Global Recycling became the primary business of the Company. On January 9, 2012, GlyEco and Global Recycling consummated a merger pursuant to which Global Recycling merged with and into the Company, with the Company being the surviving entity.
Current Business Strategy
In July 2009, Global Recycling entered into an agreement (“West Virginia Agreement”) with DTC Services, Inc. (“DTC”) to recycle glycol at its facility in West Virginia (“West Virginia Facility”). Currently, we process approximately 40,000 to 80,000 gallons of Type II glycol per month through the West Virginia Facility owner, and to date, we have processed approximately 2 million gallons of waste glycol. The West Virginia Agreement provides that the West Virginia Facility owner will process glycol sourced by us to agreed upon specifications, delivery terms, scheduling, and pricing. The West Virginia Agreement automatically extends for successive one year periods, unless it is terminated by either party upon at least 60 days’ notice given prior to the end of that one-year term. On July 28, 2010, the West Virginia Agreement was amended to extend the term until September 30, 2010. In the fourth quarter of 2010, C&C Environmental Services (“C&C”) acquired the West Virginia Facility from DTC. We continue to source waste glycol for processing by C&C at the West Virginia Facility without a formal written agreement under the same terms as the original West Virginia Agreement. If this arrangement was terminated by C&C or any future owner of the West Virginia Facility, we believe other facilities would be available to us to process waste glycol, depending on negotiations, availability, and other variables. We cannot make any assurances, however, that we would not experience a delay from stopping operations at the West Virginia Facility and starting operations at a new facility, and this could limit or eliminate our ability to process glycol at our current processing rate.
During our time processing glycol, we have received waste glycol from a variety of sources—including MEGlobal (a joint venture established in 2004 between Dow Chemical and Petrochemical Industries Company of Kuwait), MEGlobal Canada, DAK Americas, and Performance Fibers. The price of waste glycol depends on the quality of its chemical composition. At times, we pay a de minimis amount per gallon. We do not have any contracts with suppliers and each order is placed on a case-by-case basis. The West Virginia Facility is located next to a railroad line, and the vast majority of feedstock is delivered by rail car, although some feedstock is delivered by truck.
Our immediate business strategy is to continue operations at the West Virginia Facility while constructing or retrofitting a Type I facility capable of implementing our GlyEco Technology™ Patent technology. We are considering several sites for the Type I facility, including the West Virginia Facility and a facility located in Elizabeth, New Jersey (the “New Jersey Facility”), as discussed below, and others. We believe construction of a Type I facility will cost approximately $4,000,000. The cost for a retrofit to an existing facility depends on the real property and equipment already in place. Depending on the site selected for the Type I facility, we expect to be completed and operational on or before the first quarter of 2013. Upon completion of construction or the retrofit, we anticipate to quickly ramp up our volumes and project to produce 6.5 million gallons in Year 1 of operations and 14 million gallons in Year 5 of operations.
Current Acquisition and International Strategy
In addition to the Type I facility, we are in the process of acquiring and creating strategic alliances with companies controlling waste glycol. In the United States, we enter into non-binding letters of intent with companies to acquire their glycol recycling businesses, and we are in discussions with several companies to acquire their glycol recycling businesses. As discussed below, to date, we have entered into preliminary binding agreements to acquire three processing facilities. Internationally, we are in varying stages of development with waste collectors and polyester companies. We have a non-binding letter of intent with a large European waste collector to recycle all of its waste glycol. Additionally, we are in discussions with three other waste collection companies in Europe and two large polyester manufacturing companies in China and Mexico to recycle their waste glycol. We have made additional inroads with sources of waste glycol in the Eurozone, Brazil, Argentina, India, Vietnam, Thailand, and the Philippines. Final definitive terms have not been established as of yet on any of the aforementioned letters of intent and there can be no assurances that any will be reached or that any transaction will be consummated.
Acquisition of Recycool, Inc.
As previously reported by Company on a Current Report on Form 8-K filed with the Securities and Exchange Commission (the “Commission”) on December 21, 2011, as amended on January 10, 2012 and March 16, 2012, on January 4, 2012, the Company acquired the business and the assets of Recycool, Inc., a Minnesota corporation (“Recycool”), pursuant to that certain Asset Purchase Agreement (the “Recycool Agreement”) with Recycool, the Selling Principals of Recycool, and GlyEco Acquisition Corp. #1, an Arizona corporation and wholly-owned subsidiary of the Company, in consideration for $543,750 consisting of 543,750 shares of Common Stock of the Company. Recycool operates a business located in Minneapolis, Minnesota, relating to processing used glycol streams, primarily used antifreeze, and selling glycol as remanufactured product, including the collection and distribution businesses relating thereto.
Pursuant to the Recycool Agreement, the Company, through Acquisition Sub, acquired the business and all of the assets, with the exception of the Excluded Assets as defined in the Agreement, and properties of Recycool, including, without limitation, Recycool’s personal property, inventory, intangible property, contractual rights, books and records, intellectual property, accounts receivable, goodwill and any and all other assets, properties, rights, or other interests of Recycool, tangible or intangible, used in connection with the assets or the business. Acquisition Sub did not assume any of the liabilities of Recycool other than that certain lease agreement, dated September 1, 2000, and amendments thereto, by and between Recycool and Bolger Building Partnership, L.L.P. (as the Lessor) pursuant to which Recycool leases warehouse space in Minneapolis, MN. The monthly rent under the lease is $1,719 and the lease terminates on April 30, 2013.
Preliminary Agreement to Acquire Full Circe Manufacturing, Inc. – New Jersey Facility
As previously disclosed by the Company on a Current Report on Form 8-K filed by the Company with the Commission on March 22, 2012, on March 16, 2012, the Company entered into a preliminary agreement (the “FCM Preliminary Agreement”) with Full Circle Manufacturing, Inc., a New Jersey corporation (“FCM”), pursuant to which the Company has agreed to purchase from FCM all of its assets, including FCM’s equipment and processing agreements, and associated goodwill in consideration for an aggregate purchase price of $6 million ($6,000,000) consisting of 2 million (2,000,000) shares of the Company’s unregistered Common Stock (valued at $1.00 per share) and $4 million ($4,000,000) in cash.
Pursuant to the FCM Preliminary Agreement, the Company also agreed to lease an approximately 174,000 square foot property (the “Property”) currently owned and occupied by FCM for a period of 10 years at a monthly rent ranging from $39,555 to $43,950, depending upon the fair market rental value of the Property and the Company’s tank storage needs. The Property is located in Elizabeth, New Jersey and the Company intends to use the Property as a production facility for the processing of glycol.
The consummation of the acquisition of the assets and lease of the Property by the Company is subject to the Company’s completion of its due diligence investigation and audit of FCM, and upon the Company’s successful completion of a $7 million private placement or other funding on or before June 30, 2012. The FCM Preliminary Agreement is intended to create a binding obligation to purchase and sell the assets of FCM subject to the conditions stated, but the FCM Preliminary Agreement contemplates completion of a more comprehensive Purchase Agreement and that Purchase Agreement will supersede the terms of the FCM Preliminary Agreement if it is entered into by the Company and FCM. There can be no assurance that the conditions will be met, that the more comprehensive Purchase Agreement will be completed, and if not, that the FCM Preliminary Agreement would be sufficient on its own to consummate the transaction.
Preliminary Agreement to Acquire MMT Technologies, Inc.
As previously disclosed by the Company on a Current Report on Form 8-K filed by the Company with the Commission on March 27, 2012, On March 22, 2012, the Company entered into a preliminary agreement (the “MMT Preliminary Agreement”) with MMT Technologies, Inc., a Florida corporation (“MMT”). MMT is in the business of processing and recycling used anti-freeze. Pursuant to the MMT Preliminary Agreement, the Company has agreed to purchase MMT’s business and all of its assets, free and clear of any liabilities or encumbrances, upon the following transaction terms:
|
1.
|
A purchase price of $333,000 (the “Purchase Price”), consisting of $100,000 in cash and 233,000 shares of unregistered Common Stock of the Company (valued at $1.00 per share and subject to adjustment as stated below), based on the following asset values:
|
||
|
a.
|
$215,000 for MMT’s equipment, vehicle, and field assets valued at $215,000;
|
||
|
b.
|
$100,000 for MMT’s adjusted EBITDA average for 2010 and 2011 of $100,000/year;
|
||
|
c.
|
$20,000 for MMT’s accounts receivable less ninety (90) days minus accounts payable (estimated to be $20,000)
|
||
|
2.
|
MMT’s President, Otho N. Fletcher, Jr., will assume the role as General Manager of the Company’s acquisition subsidiary, serving at the discretion of the Board of Directors of the Company for an agreed upon base salary, vehicle allowance and bonus structure.
|
||
|
3.
|
The Company shall lease an approximately 6,000 square foot property currently owned and occupied by MMT and located in Lakeland, Florida, for a period of five (5) years for a monthly rent of $2,500.
|
||
|
4.
|
The number of shares of the Company’s Common Stock included in the Purchase Price shall be subject to adjustment to reduce any costs incurred by the Company in connection with an audit of MMT (approximately $25,000) and any adjustments to working capital or to EBITDA as a result of such audit.
|
||
The MMT Preliminary Agreement is intended to create a binding obligation between the Company and MMT. The MMT Preliminary Agreement contemplates the completion of a more comprehensive Asset Purchase Agreement and a closing on or before May 31, 2012. Such Asset Purchase Agreement, if any, will supersede the terms of the MMT Preliminary Agreement. There can be no assurance that the conditions will be met, that a definitive Asset Purchase Agreement will be completed, and if not, that the MMT Preliminary Agreement would be sufficient on its own to consummate the transaction.
Preliminary Agreement to Acquire Evergreen Recycling Co.
As previously disclosed by the Company on a Current Report on Form 8-K filed by the Company with the Commission on April 16, 2012, on April 11, 2012, the Company entered into a preliminary agreement (the “Evergreen Preliminary Agreement”) with Evergreen Recycling Co., Inc., an Indiana corporation engaged in the business of processing and recycling used anti-freeze (“Evergreen”).
Pursuant to the Evergreen Preliminary Agreement, the Company has agreed to purchase all of the assets and business of Evergreen, free and clear of any liabilities or encumbrances, based upon the following transaction terms:
|
1.
|
A purchase price of $80,000, consisting of 40,000 shares of unregistered Common Stock of the Company, valued at $1 per share and $40,000 in cash, based on the following asset valuations:
|
|
|
a. Evergreen’s equipment, vehicles, and field assets valued at $35,000;
|
|
|
b. Evergreen’s accounts receivable less than 90 days minus accounts payable, estimated to be $10,000;
|
|
|
c. $15,000 cash on hand in the bank at the time of closing for working capital; and
|
|
|
d. EBIT valued at $20,000.
|
2. Thomas Shiveley, the President of Evergreen, will assume the role of General Manager of the Company’s acquisition subsidiary, serving at the discretion of the Board of Directors of the Company for an agreed upon base salary and bonus structure.
3. The Company shall lease an approximately 15,000 square foot property currently occupied by Evergreen located in Indianapolis, Indiana for a period of five years at a rate to be agreed upon by the parties based upon the current fair values in the immediate vicinity for comparable properties. The Company intends to use the Property to recycle used glycols and manufacture/distribute glycol based products such as antifreeze.
The Evergreen Preliminary Agreement is intended to create a binding obligation between the Company and Evergreen. The Evergreen Preliminary Agreement contemplates the completion of a more comprehensive Asset Purchase Agreement by April 30, 2012 and a closing on or before June 30, 2012. Such Asset Purchase Agreement, if any, will supersede the terms of the Evergreen Preliminary Agreement. There can be no assurance that the conditions will be met, that a definitive Asset Purchase Agreement will be completed, and if not, that the Evergreen Preliminary Agreement would be sufficient on its own to consummate the transaction.
Trends
While the increase in the growth of demand for glycol has slowed in early 2012 as compared to 2011 overall, demand still remains high and there are ample sources of waste glycol available. The average sales price of refinery grade glycol shipped by rail or truck has averaged $4.72/gallon in early 2012 (Source: ICIS Chemical Business). Compared to an average sales price of $5.69/gallon in 2011, this 17% decrease in 2012 has been caused by lower demand during the antifreeze season due to an especially warm winter and a short-term slowdown in the growth of polyester production in Asia. On the long term, demand for glycol, especially through polyester demand in Asia, remains strong. Capacity and supply of refinery grade glycol fluctuated in a normal range in 2011 and early 2012–with planned and unplanned shutdowns of glycol plants affecting pricing on a month to month basis. Because the majority of the glycol refinery industry is controlled by five or six major producers, those producers can significantly influence the price of glycol by limiting capacity and supply. The glycol refinery industry continues to consolidate. On the long term, companies such as MEGlobal have doubts whether supply will keep up with demand (Source: MEGlobal). While the competition for waste antifreeze is increasing, the participants within the industry are small, and the four other sources of waste glycol are largely untapped. This excess volume should influence the cost of waste glycol in a positive manner.
Results of Operations
Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011
Net Sales
For the three month period ended March 31, 2012, Net Sales were $418,817, compared to $179,834 for the three month period ended March 31, 2011, an increase of $238,983, or 132.9%. The increase in Net Sales was due to the acquisition of Recycool and its net sales. Net Sales was earned from our existing recycling operations with one customer located in West Virginia and from the operations of the Company’s newly acquired wholly-owned subsidiary, Recycool, Inc., a Minnesota corporation (“Recycool”). For the three months ended March 31, 2012, Recycool accounted for approximately 24% of the Company’s consolidated net sales.
Cost of Goods Sold
For the three month period ended March 31, 2012, our Costs of Good Sold increased to $368,784 from $133,068 for the three month period ended March 31, 2011, representing an increase of $235,716 or 177.1%. Costs of Good Sold consist of costs to purchase, transport, store and process the raw materials.
Gross Profit
For the three month period ended March 31, 2012, we realized a gross profit of $50,033, compared to $46,766 for the three month period ended March 31, 2011, an increase of $3,267, or 7.0%. This increase is primarily due to an increase in the profit margins of Recycool, our newly acquired wholly-owned subsidiary. Our Gross Profit Margin for the three month period ended March 31, 2012 was 12%, compared to 26% for the three month period ended March 31, 2011.
Operating Expenses
For the three month period ended March 31, 2012, operating expenses increased to $319,256 from $114,965 for the three month period ended March 31, 2011, representing an increase of $204,290, or 177.7%. Operating expenses consist of Consulting Fees, Salaries and Wages, Legal and Professional Fees and General and Administrative Expenses.
Consulting Fees consist of marketing, administrative and management fees paid under consulting agreements. Consulting Fees increased to $130,662 for the three month period ended March 31, 2012 from $90,230 for the three month period ended March 31, 2011, representing an increase of $40,432, or 44.8%. The increase is primarily due to the terms of the consulting agreements.
Salaries and Wages consist of wages, and taxes paid on behalf of the employee. Salaries and Wages increased to $51,540 for the three month period ended March 31, 2012 from $0 for the three month period ended March 31, 2011, representing an increase of $51,540, or 100%. The increase is due to the addition of four employees at our subsidiary, Recycool, and the addition of John Lorenz, CEO, as an employee.
Legal and Professional Fees consist of legal, outsourced accounting services, corporate tax and SEC audit services, including SEC audit service. For the three month period ended March 31, 2012, Legal and Professional Fees increased to $61,158 from $6,904 for the three month period ended March 31, 2011, representing an increase of $54,254, or 785.8%. The increase was primarily attributable to the need for additional legal and professional services to effectuate the acquisitions.
General and Administrative (G&A) Expenses consist of general operational costs of our business. For the three month period ended March 31, 2012, G&A Expenses increased to $75,896 from $17,831 for the three month period ended March 31, 2011, representing an increase of $58,065, or 325.6%. This increase is primarily due to the acquisition of our subsidiary, Recycool, and the associated costs of building out our infrastructure to support future growth of the Company.
Other Income and Expenses
For the three month period ended March 31, 2012, Other Income and Expenses increased to $42,684 from $33,832 for the three month period ended March 31, 2011, representing an increase of $8,934, or 26.5%. Other Income and Expenses consist of Interest Income and Interest Expense.
Interest Income consists of the interest earned on the Company’s corporate bank account. Interest Income for the three month period ended March 31, 2012 decreased to $50 from $82 for the three month period ended March 31, 2011, representing a decrease of $32, or (39)%. The decrease was primarily due to a decrease in the interest rate.
Interest Expense consists of accrued and unpaid interest on the Company’s outstanding indebtedness. As of March 31, 2012, the Company's outstanding notes payable consists of accrued and unpaid interest on the convertible secured promissory note in the principal amount of $1,000,000 held by Leonid Frenkel (the “Frenkel Convertible Note”).
For the three month period ended March 31, 2012, Interest Expense increased to $42,734 from $33,832 for the three month period ended March 31, 2011, representing an increase of $8,902 or 26.3%. The increase is primarily due to the effect of compounding interest.
Liquidity & Capital Resources; Going Concern
As of March 31, 2012, we had $798,105 in current assets, consisting of $453,405 in cash, $330,981 in accounts receivable, $615 in prepaid expenses, and $13,104 in inventories. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of March 31, 2012, the Company has yet to achieve profitable operations and is dependent on its ability to raise capital from stockholders or other sources to sustain operations and to ultimately achieve viable operations. These consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Our plans to address these matters include, raising additional financing through offering its shares of capital stock in private and/or public offerings of its securities and through debt financing if available and needed. There can be no assurances, however, that the Company will be able to obtain any financings or that such financings will be sufficient to sustain its business operation or permit the Company to implement its intended business strategy. The Company plans to become profitable by upgrading the capacity and capabilities at its existing operating facility, continuing to implement its patent-pending technology in international markets, and acquiring profitable glycol recycling companies, which are looking to take advantage of the Company’s public company status and improve their profitability through a combined synergy. We have non-binding letters of intent with five companies to acquire their glycol recycling businesses, and are in +discussions with five other companies to acquire their glycol recycling businesses.
With the acquisition of Recycool during the three month period ended March 31, 2012, we expanded our customer and supplier bases and will continue to expand as we expect to upgrade our operational capacity and capabilities. For the three months ended March 31, 2012, Recycool’s net sales represented 24% of the Company’s consolidated net sales.
As of and for the years ended December 31, 2011 and 2010, our auditors have expressed substantial doubt that the Company will continue as a going concern.
The table below sets forth certain information about the Company’s liquidity and capital resources for the three months ended March 31, 2012 and 2011:
|
For the Three Months ended
March 31,
|
||||||||
|
2012
|
2011
|
|||||||
|
Net cash (used in) operating activities
|
$
|
(446,408)
|
$
|
(103,593)
|
||||
|
Net cash (used in) investing activities
|
$
|
(2,315)
|
$
|
-
|
||||
|
Net cash provided by financing activities
|
$
|
325,000
|
$
|
325,200
|
||||
|
Net increase (decrease) in cash and cash equivalents
|
$
|
(123,723)
|
$
|
221,607
|
||||
|
Cash - beginning of period
|
$
|
577,127
|
$
|
5,103
|
||||
|
Cash - end of period
|
$
|
453,405
|
$
|
226,710
|
||||
The Company does not currently have sufficient capital to sustain its operations for the next 12 months. To date, the Company has financed its operations from the Frenkel Convertible Note (as discussed below) and private sales of its securities exempt from the registration requirements of the Securities Act of 1933, as amended. During quarter ended March 31, 2012, the Company raised an aggregate of $325,000 from private sales of its common stock.
Convertible Note Payable
As previously disclosed by the Company on a Current Report on Form 8-K filed by the Company with the Commission on April 5, 2012, on April 3, 2012, the Company entered into a Note Conversion Agreement (the "Conversion Agreement") with Mr. Leonid Frenkel in connection with that certain Secured Promissory Note issued by the Company to Mr. Frenkel in August 2008 in the principal amount of $1,000,000 (the “Convertible Note”) and two forbearance agreements entered into by the Company and Mr. Frenkel in August 2010 and May 2011 (the “Forbearance Agreements”). The terms of the Conversion Agreement extend the maturity date for the Convertible Note to December 31, 2013 and maintained the interest rate at 12.5% per annum (subject to increase to 18% upon an Event of Default under the terms of the Convertible Note and Forbearance Agreements). As of March 31, 2012, an aggregate of $1,474,040, principal and accrued interest, was outstanding under the Convertible Note.
Sales of Securities
On January 17, 2012, the Company sold an aggregate of 30,000 shares of Common Stock to two accredited investors in consideration for $15,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.
On February 3, 2012, the Company sold an aggregate of 20,000 shares of Common Stock to one current stockholder in consideration for $10,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.
On March 30, 2012, the Company sold an aggregate of 250,000 shares of Common Stock to one accredited investor in consideration for $250,000 ($1.00 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.
OFF-BALANCE SHEET ARRANGEMENTS
None
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we carried out an evaluation, under the supervision and with the participation of our current management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer), of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2012, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported, within the time periods specified in the applicable rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Changes in Internal Control Over Financial Reporting
During the quarter ended March 31, 2012, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to any material pending legal proceedings other than ordinary routine litigation incidental to our business, which we do not expect, individually or in the aggregate, to have a material adverse effect on the Company.
Item 1A. Risk Factors.
Not applicable
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On January 4, 2012, the Company issued an aggregate of 543,750 shares of Common Stock to the three Selling Principals of Recycool, Inc., a Minnesota corporation (“Recycool”), pursuant to an Asset Purchase Agreement, dated December 16, 2011, as amended (the “Recycool Agreement”), by and among the Company, Recycool, the Selling Principals, and GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of the Company (“Acquisition Sub”) in consideration for business, properties and substantially of the assets of Recycool. The shares of Common Stock issued pursuant to the Recycool Agreement are restricted under Rule 144 promulgated under the Securities Act. The Company issued theses shares pursuant to the registration exemptions of the Securities Act afforded the Company under Section 4(2) thereunder.
On January 17, 2012, the Company issued an aggregate of 30,000 shares of Common Stock to two investors at a price of $0.50 per share. The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale. The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.
On February 3, 2012, the Company issued an aggregate of 20,000 shares of Common Stock to a current investor at a price of $0.50 per share. The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because the sale did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale. The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.
On March 30, 2012, the Company issued an aggregate of 250,000 shares of Common Stock to one investor at a price of $1.00 per share. The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale. The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.
Item 3. Defaults Upon Senior Securities.
None.
Item 5. Other Information.
None.
Item 6. Exhibits.
|
No.
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Description
|
|
|
10.1(1)
|
Asset Purchase Agreement, dated December 16, 2011, by and among Recycool, Inc., a Minnesota corporation, Marty Rosauer, Kurt Rosauer, Dennis Scott, GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of GlyEco, Inc., a Nevada corporation
|
|
|
10.2(2)
|
Amendment No. 1, dated December 27, 2011, to that certain Asset Purchase Agreement, dated December 16, 2011, by and among Recycool, Inc., a Minnesota corporation, Marty Rosauer, Kurt Rosauer, Dennis Scott, GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of GlyEco, Inc., a Nevada corporation.
|
|
|
10.3(2)
|
Amendment No. 2, dated January 1, 2012, to that certain Asset Purchase Agreement, dated December 16, 2011, by and among Recycool, Inc., a Minnesota corporation, Marty Rosauer, Kurt Rosauer, Dennis Scott, GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of GlyEco, Inc., a Nevada corporation.
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|
|
31.1(3)
|
||
|
31.2(3)
|
||
|
32.1(3)
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||
|
32.2(3)
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||
|
101.INS(4)
|
XBRL Instance Document
|
|
|
101.SCH(4)
|
XBRL Taxonomy Extension Schema Document
|
|
|
101.CAL(4)
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
101.LAB(4)
|
XBRL Taxonomy Extension Labels Linkbase Document
|
|
|
101.DEF(4)
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
101.PRE(4)
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
(1)
|
Filed as an Exhibit to Form 8-K filed on December 21, 2011 and incorporated by reference herein.
|
|
(2)
|
Filed as an Exhibit to Form 8-K/A (Amendment No. 1) filed on January 10, 2012 and incorporated by reference herein.
|
|
(3)
|
Filed herewith.
|
|
(4)
|
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
|
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
GlyEco, Inc.
|
|
|
Date: May 21, 2012
|
By: /s/ John Lorenz
|
|
John Lorenz
|
|
|
President and Chief Executive Officer
|
|
|
(Principal Executive Officer)
|
|
|
Date: May 21, 2012
|
By: /s/ Kevin J. Conner
|
|
Kevin J. Conner
|
|
|
Chief Financial Officer
|
|
|
(Principal Financial and Accounting Officer)
|