Green Remanufacturing Solutions LLC

 

December 31, 2013 and 2012

 

Index to the Financial Statement

 

Contents	Page(s)
Report of Independent Registered Public Accounting Firm	F-2
Balance Sheets at December 31, 2013 and 2012	F-3
Statements of Operations for the Year Ended December 31, 2013 and 2012	F-4
Statement of Members’ Equity (Deficit) for the Year Ended December 31, 2013 and 2012	F-5
Statement of Cash Flows for the Year Ended December 31, 2013 and 2012	F-6
Notes to the Financial Statement	F-7

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Members of

Green Remanufacturing Solutions LLC

 

We have audited the accompanying balance sheets of Green Remanufacturing Solutions LLC (the “Company”) as of December 31, 2013 and 2012, and the related statements of operations, members’ equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amount and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2013 and 2012, the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company had an accumulated deficit at December 31, 2013, a net loss and net cash used in operating activities for the year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/Li and Company, PC

Li and Company, PC

 

Skillman, New Jersey

March 13, 2014

 

 

 GREEN REMANUFACTURING SOLUTIONS LLC 

 BALANCE SHEETS

               

		December 31, 2013				December 31, 2012
ASSETS
CURRENT ASSETS:
Cash		$	75,114			$	19,351
Accounts receivable			277,603				127,116
Inventories			548,275				806,445
Advance on purchases			1				141,992
Prepayments and other current assets			47,180				-
Total Current Assets			948,173				1,094,904
PROPERTY AND EQUIPMENT
Property and equipment			40,562				27,452
Accumulated depreciation			(2,976	)			(702	)
PROPERTY AND EQUIPMENT, net			37,587				26,750
SOFTWARE AND HARDWARE
Software and hardware			121,092				-
Accumulated amortization			(13,408	)			-
SOFTWARE AND HARDWARE, net			107,684				-
LEASEHOLD IMPROVEMENTS
Leasehold improvements			539,623				501,042
Accumulated amortization			(144,493	)			(58,345	)
LEASEHOLD IMPROVEMENTS, net			395,130				442,697
OTHER ASSETS			34,693				84,693
Total Assets		$	1,523,266			$	1,649,044
LIABILITIES AND STOCKHOLDERS'/MEMBERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses		$	858,633			$	246,333
Notes payable - members			226,674				-
Advances from members			563,137				321,600
Total Current Liabilities			1,651,443				567,933
Total Liabilities			1,651,443				567,933
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS'/MEMBERS' EQUITY:
Common stock no par: 1,000 shares authorized;
0 and 300 shares issued and outstanding, respectively			-				3,000
Members' capital			2,330,392				2,327,392
Accumulated deficit			(2,455,569	)			(1,249,281	)
Total Stockholders'/Members' Equity			(128,177	)			1,081,111
Total Liabilities and Members' Equity		$	1,523,266			$	1,649,044

  

See accompanying notes to the financial statements.

 

 

 GREEN REMANUFACTURING SOLUTIONS LLC 

 STATEMENTS OF OPERATIONS

                                       

		For the Year				For the Year
		Ended				Ended
		December 31, 2013				December 31, 2012
NET REVENUES		$	3,245,547			$	1,648,173
COST OF GOODS SOLD			2,572,704				1,616,597
GROSS MARGIN			672,842				31,576
OPERATING EXPENSES:
Salary and wages			627,790				518,448
Professional fees			418,174				62,635
Rent			265,964				180,894
Depreciation & amortization			101,829				52,047
General and administrative			423,109				175,717
Total operating expenses			1,836,867				989,741
LOSS FROM OPERATIONS			(1,164,025	)			(958,165	)
OTHER (INCOME) EXPENSE:
Interest expense			1,674				-
Other (income) expense			40,590				(403	)
Other (income) expense, net			42,264				(403	)
NET LOSS		$	(1,206,288	)		$	(957,762	)

 

 See accompany notes to the  financial statements 

 

 

GREEN REMANUFACTURING SOLUTIONS LLC

 

Statement of Stockholders'/Members' Equity (Deficit)

For the Year Ended December 31, 2013

 

																		Total
		Common Stock, No Par																Stockholders'/Members'
		Number of Shares				Amount				Members' Capital				Accumulated Deficit				Equity (Deficit)
Balance, December 31, 2011			300			$	3,000			$	-			$	(291,519	)		$	(288,519	)
Advances from stockholders' converted
to members' capital											1,193,622								1,193,622
Members' capital contribution											1,133,770								1,133,770
Net loss															(957,762	)			(957,762	)
Balance, December 31, 2012			300				3,000				2,327,392				(1,249,281	)			1,081,111
Retirement of common stock			(300	)			(3,000	)			3,000								-
Net loss															(1,206,288	)			(1,206,288	)
Balance, December 31, 2013			-			$	-			$	2,327,392			$	(2,455,569	)		$	(128,177	)

 

See accompanying notes to the financial statements.

 

 

 GREEN REMANUFACTURING SOLUTIONS LLC 

 STATEMENTS OF CASH FLOWS 

                                                     

		For the Year				For the Year
		Ended				Ended
		December 31, 2013				December 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(1,206,288	)		$	(957,762	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization expense			101,829				52,047
Changes in operating assets and liabilities:
Accounts receivable			(150,487	)			(123,696	)
Inventories			258,170				(549,778	)
Advance on purchases			141,992				(141,992	)
Prepayments and other current assets			(47,180	)			22,955
Other assets			50,000				(32,083	)
Accounts payable and accrued expenses			612,300				194,014
NET CASH USED IN OPERATING ACTIVITIES			(239,664	)			(1,536,295	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment			(13,110	)			140,548
Purchase of software and hardware			(121,092	)			-
Purchase of leasehold improvements			(38,581	)			(501,042	)
NET CASH USED IN INVESTING ACTIVITIES			(172,783	)			(360,494	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Advances from (repayment to) stockholders'/members			241,537				(411,252	)
Notes payable to members			226,674				-
Advances from stockholders converted to members' capital			-				1,345,222
Members' capital contribution			-				982,170
NET CASH PROVIDED BY FINANCING ACTIVITIES			468,211				1,916,140
NET CHANGE IN CASH			55,763				19,351
Cash at beginning of the year			19,351				-
Cash at end of the year		$	75,114			$	19,351
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Interest paid		$	1,674			$	-
Income tax paid		$	-			$	-

 

See accompanying notes to the financial statements.

 

 

GREEN REMANUFACTURING SOLUTIONS LLC

December 31, 2013 and 2012

Notes to the Financial Statements

 

Note 1 – Organization and Operations

 

Green Remanufacturing Solutions, Inc.

 

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

 

Green Remanufacturing Solutions LLC

 

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

 

Note 2 – Significant and Critical Accounting Policies and Practices

 

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

 

Basis of Presentation

 

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

Use of Estimates and Assumptions and Critical Accounting Estimates and Assumptions

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date(s) of the financial statements and the reported amounts of revenues and expenses during the reporting period(s).

 

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

 

(i)

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

(ii)

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

(iii)

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

 

 

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

 

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

 

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

 

Actual results could differ from those estimates.

 

Fair Value of Financial Instruments

 

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

 

Level 1		Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2		Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3		Pricing inputs that are generally observable inputs and not corroborated by market data.

 

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

 

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

 

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

 

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

 

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

 

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

 

Carrying Value, Recoverability and Impairment of Long-Lived Assets

 

The Company has adopted paragraph 360-10-35-17 of the FASB Accounting Standards Codification for its long-lived assets. The Company’s long-lived assets, which include property, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

 

 

The Company assesses the recoverability of its long-lived assets by comparing the projected undiscounted net cash flows associated with the related long-lived asset or group of long-lived assets over their remaining estimated useful lives against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of those assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. When long-lived assets are determined to be recoverable, but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived assets are depreciated over the newly determined remaining estimated useful lives.

 

The Company considers the following to be some examples of important indicators that may trigger an impairment review: (i) significant under-performance or losses of assets relative to expected historical or projected future operating results; (ii) significant changes in the manner or use of assets or in the Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall business strategy; (iii) significant negative industry or economic trends; (iv) increased competitive pressures; and (v) regulatory changes. The Company evaluates acquired assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.

 

The key assumptions used in management’s estimates of projected cash flow deal largely with forecasts of sales levels, gross margins, and operating costs. These forecasts are typically based on historical trends and take into account recent developments as well as management’s plans and intentions. Any difficulty in sourcing raw materials on a cost effective basis would significantly impact the projected future cash flows of the Company’s manufacturing facilities and potentially lead to an impairment charge for long-lived assets. Other factors, such as increased competition or a decrease in the desirability of the Company’s products, could lead to lower projected sales levels, which would adversely impact cash flows. A significant change in cash flows in the future could result in an impairment of long lived assets.

 

The impairment charges, if any, is included in operating expenses in the accompanying statements of income and comprehensive income (loss).

 

Cash Equivalents

 

The Company considers all highly liquid investments with maturities of three months or less at the time of purchase to be cash equivalents.

 

Accounts Receivable and Allowance for Doubtful Accounts

 

Accounts receivable are recorded at the invoiced amount, net of an allowance for doubtful accounts. The Company follows paragraph 310-10-50-9 of the FASB Accounting Standards Codification to estimate the allowance for doubtful accounts. The Company performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions.

 

Pursuant to paragraph 310-10-50-2 of the FASB Accounting Standards Codification account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. The Company has adopted paragraph 310-10-50-6 of the FASB Accounting Standards Codification and determine when receivables are past due or delinquent based on how recently payments have been received.

 

Outstanding account balances are reviewed individually for collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Bad debt expense is included in general and administrative expenses, if any.

 

The Company does not have any off-balance-sheet credit exposure to its customers.

 

Advance on Purchases

 

Advance on purchases primarily represent amounts paid to vendors for future delivery of products ranging from three (3) months to nine (9) months, all of which were fully or partially refundable depending upon the terms and conditions of the purchase agreements. There is one such arrangement in place.

 

Inventories

 

Inventory Valuation

 

The Company values inventories, consisting of raw materials, consumables, packaging material, finished goods, and purchased merchandise for resale, at the lower of cost or market. Cost is determined on the first-in and first-out (“FIFO”) method for raw materials and packaging materials and the weighted average cost method for finished goods. Cost of finished goods comprises direct labor, direct materials, direct production cost and an allocated portion of production overhead. The Company reduces inventories for the diminution of value, resulting from product obsolescence, damage or other issues affecting marketability, equal to the difference between the cost of the inventory and its estimated market value.  Factors utilized in the determination of estimated market value include (i) current sales data and historical return rates, (ii) estimates of future demand, (iii) competitive pricing pressures, (iv) new product introductions, (v) product expiration dates, and (vi) component and packaging obsolescence.

 

 

Inventory Obsolescence and Markdowns

 

The Company evaluates its current level of inventories considering historical sales and other factors and, based on this evaluation, classify inventory markdowns in the income statement as a component of cost of goods sold pursuant to Paragraph 420-10-S99 of the FASB Accounting Standards Codification to adjust inventories to net realizable value. These markdowns are estimates, which could vary significantly from actual requirements if future economic conditions, customer demand or competition differ from expectations. Other significant estimates include the allocation of variable and fixed production overheads. While variable production overheads are allocated to each unit of production on the basis of actual use of production facilities, the allocation of fixed production overhead to the costs of conversion is based on the normal capacity of the Company’s production facilities, and recognizes abnormal idle facility expenses as current period charges. Certain costs, including categories of indirect materials, indirect labor and other indirect manufacturing costs which are included in the overhead pools are estimated. The management of the Company determines its normal capacity based upon the amount of operating hours of the manufacturing machinery and equipment in a reporting period.

 

Property and Equipment

 

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

 

		Estimated Useful Life (Years)
Leasehold improvement (*)		6
Property and equipment		7-15
Software		3

 

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

 

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

 

Leases

 

Lease agreements are evaluated to determine whether they are capital leases or operating leases in accordance with paragraph 840-10-25-1 of the FASB Accounting Standards Codification (“Paragraph 840-10-25-1”). Pursuant to Paragraph 840-10-25-1 A lessee and a lessor shall consider whether a lease meets any of the following four criteria as part of classifying the lease at its inception under the guidance in the Lessees Subsection of this Section (for the lessee) and the Lessors Subsection of this Section (for the lessor): a. Transfer of ownership. The lease transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of a nominal fee, for example, the minimum required by statutory regulation to transfer title. b. Bargain purchase option. The lease contains a bargain purchase option. c. Lease term. The lease term is equal to 75 percent or more of the estimated economic life of the leased property. d. Minimum lease payments. The present value at the beginning of the lease term of the minimum lease payments, excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor. In accordance with paragraphs 840-10-25-29 and 840-10-25-30, if at its inception a lease meets any of the four lease classification criteria in Paragraph 840-10-25-1, the lease shall be classified by the lessee as a capital lease; and if none of the four criteria in Paragraph 840-10-25-1 are met, the lease shall be classified by the lessee as an operating lease. Pursuant to Paragraph 840-10-25-31 a lessee shall compute the present value of the minimum lease payments using the lessee's incremental borrowing rate unless both of the following conditions are met, in which circumstance the lessee shall use the implicit rate: a. It is practicable for the lessee to learn the implicit rate computed by the lessor. b. The implicit rate computed by the lessor is less than the lessee's incremental borrowing rate. Capital lease assets are depreciated on a straight line method, over the capital lease assets estimated useful lives consistent with the Company’s normal depreciation policy for tangible fixed assets. Interest charges are expensed over the period of the lease in relation to the carrying value of the capital lease obligation.

 

 

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

 

Related Parties

 

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

 

Pursuant to Section 850-10-20 the related parties include a. affiliates of the Company; b. entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c. trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d. principal owners of the Company; e. management of the Company; f. other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g. other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.

 

The financial statements shall include disclosures of material related party transactions, other than compensation arrangements, expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated in the preparation of consolidated or financial statements is not required in those statements. The disclosures shall include: a. the nature of the relationship(s) involved; b. a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; c. the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and d. amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

Commitment and Contingencies

 

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

 

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

 

Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would be disclosed. Management does not believe, based upon information available at this time, that these matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business, financial position, and results of operations or cash flows.

 

Revenue Recognition

 

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

 

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

 

 

Net sales of products represent the invoiced value of goods, net of sales taxes. The Company is not subject to charge sales tax as the Company sells to wholesale distributors and is thereby exempt from charging sales tax. Sales or Output sales tax is borne by customers in addition to the invoiced value of sales and Purchase or Input sales tax is borne by the Company in addition to the invoiced value of purchases to the extent not exempt due to the purpose of the acquisition. As the Company is a remanufacturer of consumer returns and a seller to wholesalers, all goods purchased for the use in the remanufacturing process are exempt of input sales tax.

 

Shipping and Handling Costs

 

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

 

Income Tax Provision

 

The Company is a limited liability company treated as a partnership for income tax purposes and as such, is a pass-through entity and is not liable for income tax in the jurisdictions in which it operates. As a result, no provision for income taxes has been made in the financial statements.

 

Cash Flows Reporting

 

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

 

Subsequent Events

 

The Company follows the guidance in Section 855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent events through the date when the financial statements are issued.

 

Recently Issued Accounting Pronouncements

 

In February 2013, the FASB issued ASU No. 2013-02, "Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income." The ASU adds new disclosure requirements for items reclassified out of accumulated other comprehensive income by component and their corresponding effect on net income. The ASU is effective for public entities for fiscal years beginning after December 15, 2013.

 

In February 2013, the Financial Accounting Standards Board, or FASB, issued ASU No. 2013-04, "Liabilities (Topic 405): Obligations Resulting from Joint and Several Liability Arrangements for which the Total Amount of the Obligation Is Fixed at the Reporting Date." This ASU addresses the recognition, measurement, and disclosure of certain obligations resulting from joint and several arrangements including debt arrangements, other contractual obligations, and settled litigation and judicial rulings. The ASU is effective for public entities for fiscal years, and interim periods within those years, beginning after December 15, 2013.

 

In March 2013, the FASB issued ASU No. 2013-05, "Foreign Currency Matters (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity." This ASU addresses the accounting for the cumulative translation adjustment when a parent either sells a part or all of its investment in a foreign entity or no longer holds a controlling financial interest in a subsidiary or group of assets that is a nonprofit activity or a business within a foreign entity. The guidance outlines the events when cumulative translation adjustments should be released into net income and is intended by FASB to eliminate some disparity in current accounting practice. This ASU is effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2013.

 

In March 2013, the FASB issued ASU 2013-07, “Presentation of Financial Statements (Topic 205): Liquidation Basis of Accounting.” The amendments require an entity to prepare its financial statements using the liquidation basis of accounting when liquidation is imminent. Liquidation is imminent when the likelihood is remote that the entity will return from liquidation and either (a) a plan for liquidation is approved by the person or persons with the authority to make such a plan effective and the likelihood is remote that the execution of the plan will be blocked by other parties or (b) a plan for liquidation is being imposed by other forces (for example, involuntary bankruptcy). If a plan for liquidation was specified in the entity’s governing documents from the entity’s inception (for example, limited-life entities), the entity should apply the liquidation basis of accounting only if the approved plan for liquidation differs from the plan for liquidation that was specified at the entity’s inception. The amendments require financial statements prepared using the liquidation basis of accounting to present relevant information about an entity’s expected resources in liquidation by measuring and presenting assets at the amount of the expected cash proceeds from liquidation. The entity should include in its presentation of assets any items it had not previously recognized under U.S. GAAP but that it expects to either sell in liquidation or use in settling liabilities (for example, trademarks). The amendments are effective for entities that determine liquidation is imminent during annual reporting periods beginning after December 15, 2013, and interim reporting periods therein. Entities should apply the requirements prospectively from the day that liquidation becomes imminent. Early adoption is permitted.

 

 

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

 

Note 3 – Going Concern

 

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

 

As reflected in the financial statements, the Company had an accumulated deficit at December 31, 2013, a net loss and net cash used in operating activities for the year then ended. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

 

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

 

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

 

Note 4 – Inventories

 

Inventories consisted of the following:

 

		December 31, 2013				December 31, 2012
Raw materials		$	256,320			$	580,179
Finished goods			412,488				306,266
Inventory Reserve			(120,533	)			(80,000	)
		$	548,275			$	806,455

 

The Company recorded $40,533 and $80,000 inventory obsolescence adjustments for the year ended December 31, 2013 and 2012, respectively.

 

Lower of Cost or Market Adjustments

 

There was no lower of cost or market adjustments for the year ended December 31, 2013 or 2012.

 

Note 5 – Property and Equipment

 

Property and equipment, stated at cost, less accumulated depreciation consisted of the following:

 

		Estimated Useful Life (Years)		December 31, 2013				December 31, 2012
Leasehold improvements		6		$	539,623			$	501,042
Property and equipment		7 - 15			40,562				27,452
Software		5			121,092				-
					701,277				528,494
Less accumulated depreciation and amortization (i)					(160,876	)			(59,047	)
				$	540,401			$	469,447

 

(i) Depreciation and Amortization Expense

 

 

Depreciation and amortization expense was $101,829 and $52,047 for the year ended December 31, 2013 and 2012, respectively.

 

(ii) Impairment

 

The Company completed its annual impairment test of property and equipment and determined that there was no impairment as the fair value of property and equipment, substantially exceeded their carrying values at December 31, 2013.

 

Note 6 – Related Party Transactions

 

Advances from Members

 

Advances from Members consisted of the following:

 

		December 31, 2013				December 31, 2012
Advances from member		$	563,137			$	321,600
		$	563,137			$	321,600

 

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

 

Notes Payable - Member

 

Notes payable - Members consisted of the following:

 

		December 31, 2013				December 31, 2012
On October 15, 2013 the Company issued a promissory note to a member to memorialize (i) the receipt of the funds in the amount of $150,000 and (ii) the terms of note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.		$	151,116			$	-
On December 23, 2013 the Company issued a promissory note to a member to memorialize (i) the receipt of the funds in the amount of $75,000 and (ii) the terms of note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum until the note is fully repaid. The note is due on demand.			75,558				-
		$	226,674			$	-

 

Interest expense was $1,674 and $0 for the year ended December 31, 2013 and 2012, respectively.

 

Note 7 – Commitments

 

Operating Lease

 

Operating Lease - Yaphank Facility

 

On August 10, 2011, the Company entered into a non-cancelable operating lease for office space expiring on March 31, 2017. The Company has entered into a new lease with the Landlord to annex another adjacent portion of the facility at the current location to expand its storage and remanufacturing capabilities.

 

 

Future minimum payments required under this non-cancelable operating lease were as follows:

 

Year ending December 31:
2014		$	339,328
2015			414,024
2016			435,783
2017			113,277
		$	1,302,412

 

Note 8 –Members’ Equity (Deficit)

 

Members’ Capital

 

From May 31, 2012 (inception) through December 31, 2013, Members’ cash contributions aggregated $2,330,392.

 

Note 9 – Concentrations and Credit Risk

 

Customers and Credit Concentrations

 

Customer concentrations and credit concentrations are as follows:

 

										Accounts Receivable
		Net Sales								at
		For the Year Ended December 31, 2013				For the Year Ended December 31, 2012				December 31, 2013				December 31, 2012
Customer A			21	%			20	%			8	%			16	%
Customer B			8	%			0	%			44	%			0	%
Customer C			7	%			4	%			6	%			0	%
Customer D			6	%			6	%			0	%			0	%
Customer E			6	%			0	%			8	%			0	%
Customer F			5	%			1	%			0	%			6	%
Customer G			5	%			11	%			0	%			29	%
Customer H			4	%			0	%			0	%			0	%
Customer I			4	%			0	%			0	%			0	%
Customer J			2	%			18	%			0	%			4	%
Customer K			2	%			2	%			0	%			2	%
Customer L			2	%			5	%			0	%			0	%
			74	%			67	%			66	%			57	%

 

A reduction in sales from or loss of such customers would have a material adverse effect on the Company’s results of operations and financial condition.

 

Vendor Concentrations

 

Vendor purchase concentrations and accounts payable concentration as follows:

 

										Accounts Payable
		Net Purchases								At
		Year Ended December 31, 2013				Year Ended December 31, 2012				Year Ended December 31, 2013				Year Ended December 31, 2012
Vendor A			40	%			47	%			7	%			0	%
Vendor B			9	%			9	%			9	%			13	%
Vendor C			3	%			0	%			6	%			0	%
			52	%			56	%			22	%			13	%

 

 

Note 10 – Subsequent Events

 

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

 

On March 7, 2014, the Company entered into and consummated the Agreement and Plan of Share Exchange (the “Exchange Agreement”) with Slimko Holdings LLC, (the “Majority Shareholder”), the principal stockholder of Marketing Mobile Text, Inc. (“MMT”), Green Remanufacturing Solutions LLC (“GRS”) and the members of GRS (the “Exchange”), whereby MMT acquired all of the issued and outstanding membership interests of GRS in exchange for approximately 2,300,000 pre-Split shares of MMT’s Common Stock. Pursuant to the terms of the Exchange Agreement, MMT’s Majority Shareholder agreed to retire 9,944,000 of the 10,000,000 shares of Common Stock of MMT held immediately prior to the Exchange.