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.
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 Act.
The aggregate market value of the voting
and non-voting stock held by non-affiliates of the registrant, as of June 30, 2015, was approximately $5,293,885. All executive
officers and directors of the registrant have been deemed, solely for the purpose of the foregoing calculation, to be “affiliates”
of the registrant.
As of March 22, 2016, there
were 33,086,782 shares outstanding of the registrant’s common stock.
PART I
Forward-Looking Statements
This report contains various forward-looking
statements regarding our business, financial condition, results of operations and future plans and projects. Forward-looking statements
discuss matters that are not historical facts and can be identified by the use of words such as “believes,” “expects,”
“anticipates,” “intends,” “estimates,” “projects,” “can,” “could,”
“may,” “will,” “would” or similar expressions. In this report, for example, we make forward-looking
statements regarding, among other things, our expectations about the rate of revenue growth in specific business segments and the
reasons for that growth and our profitability, our expectations regarding an increase in sales, strategic traction and sales and
marketing spending, uncertainties relating to our ability to compete, uncertainties relating to our ability to increase our market
share, changes in coverage and reimbursement policies of third-party payers and the effect on our ability to sell our products
and services, the existence and likelihood of strategic acquisitions and our ability to timely develop new products or services
that will be accepted by the market.
Although these forward-looking statements
reflect the good faith judgment of our management, such statements can only be based upon facts and factors currently known to
us. Forward-looking statements are inherently subject to risks and uncertainties, many of which are beyond our control. As a result,
our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors,
including those set forth below under the caption “Risk Factors.” You should not unduly rely on these forward-looking
statements, which speak only as of the date on which they were made. They give our expectations regarding the future but are not
guarantees. We undertake no obligation to update publicly or revise any forward-looking statements, whether as a result of new
information, future events or otherwise, unless required by law.
Item 1. Business.
Organization
Progressive Green Solutions, Inc. (the
“Company” or “PGSC”) (formerly known as MarketingMobileText, Inc.) was incorporated under the laws of the
State of Nevada on August 31, 2011. Unless the context requires otherwise, in this report the terms “we,” “us”
and “our” refer to Progressive Green Solutions, Inc.
Share Exchange Transaction with Green
Remanufacturing Solutions LLC
On March 7, 2014, the Company, then called
“MarketingMobileText, Inc.”, entered into and consummated an Agreement and Plan of Share Exchange (the “Exchange
Agreement”) among the Company, Slimko Holdings LLC, the principal stockholder of the Company (the “Majority Shareholder”),
Green Remanufacturing Solutions LLC, a Delaware limited liability company (“GRS”), and the members of GRS (the “Exchange”).
Upon consummation of the Exchange, the Company acquired all of the outstanding membership interests of GRS in exchange for the
issuance of an aggregate 23,000,000 post-split shares (the “Exchange Shares”) of the Company’s common stock,
par value $0.001 per share (the “Common Stock”). As a result of the Exchange, GRS became a wholly-owned subsidiary
of the Company and adopted the business plan of GRS.
Also on March 7, 2014, the Company authorized
an amendment to its Articles of Incorporation (the “Amendment”) to (i) change the name of the Company to “Progressive
Green Solutions, Inc.”; (ii) increase the number of its authorized shares of capital stock from 300,000,000 shares to 310,000,000
shares, of which 300,000,000 shares were designated as common stock, par value $0.001 per share, and 10,000,000 shares were designated
as “blank check” preferred stock, par value $0.001 per share (the “Preferred Stock”); and (iii) to effect
a forward split such that ten (10) shares of Common Stock were issued for every one (1) share of Common Stock issued and outstanding
immediately prior to the Amendment (the “Split”).
Company Overview
The Company is the parent corporation of
(i) Green Remanufacturing Solutions LLC (www.greenrsus.com), a full service returns management solution provider that specializes
in the reverse logistics and asset recovery space, and (ii) Speyside Holdings LLC (www.speysideholdingsllc.com), a management company
that is presently managing the operation of a quarry in Highland Mills, New York.
Green Remanufacturing Solutions LLC
Green Remanufacturing Solutions LLC is
a full service returns management solution provider that develops turnkey returns solutions that streamline the returns experience
and increases its clients’ ability to recapture revenues through environmentally sensible asset recovery. Key to Green Remanufacturing
Solution LLC’s service offerings are as follows:
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Remanufacturing / refurbishment –
Green Remanufacturing Solution LLC’s technicians are capable of fully disassembling a wide array of consumer returns to component
form. Green Remanufacturing Solutions LLC’s technicians test and restore each component to the original equipment manufacturer’s
mechanical specifications and to a like new condition for the cosmetic components. As part of this process, Green Remanufacturing
Solutions LLC’s technicians put each component through a rigorous performance test to ensure each component meets the original
equipment manufacturer’s reconditioned specifications. Clients that utilize Green Remanufacturing Solution LLC’s in
house recovery processes are able to achieve substantial recovery rates.
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Dedicated external quality assurance program
– integral to Green Remanufacturing Solution LLC’s returns management solutions is Green Remanufacturing Solution LLC’s
engineering and quality assurance component. Green Remanufacturing Solution LLC’s highly skilled team of product engineers,
inspect, evaluate, and collect all data as it relates to product defects as part of its returns intake procedure. As part of this
process, Green Remanufacturing Solution LLC’s engineers inspect returned merchandise for serial defects, manufacturing defects,
shipping damage, customer abuse, and buyer remorse. The data collected is then used to assist Green Remanufacturing Solution LLC’s
clients in determining the root causes of a defect or to establish trends about certain defects, which in turn enables Green Remanufacturing
Solution LLC or its client to proactively manage and correct defects as well as to aid in the location of defective products at
various levels within the supply chain. This value added service helps reduce the corrective action cycle time between the time
of manufacture and ultimate distribution, saving Green Remanufacturing Solution LLC’s clients’ most valuable asset
– its brand name.
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Warranty program management – Green
Remanufacturing Solution LLC’s has solutions to manage the entire reverse logistics process by simplifying the returns process
through customized return center programs. Once a return is received at Green Remanufacturing Solution LLC’s return center,
Green Remanufacturing Solution LLC provides the client with a detailed receiving report that contains the customer name, customer
location, return authorization number, model number, serial number and condition of product received. Clients that utilize our
return center eliminate costly handoffs, double handling, credit reconciliation errors, and shrinkage, which in turn leads to increase
in value recovery.
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Green Remanufacturing Solution LLC’s
target customers are manufacturers and retailers in the consumer products space which have traditionally been subject to either
‘destroy-in-field’ programs or ‘remit to landfill’ programs. The consumer product categories that Green
Remanufacturing Solution LLC return management solutions are well suited for are as follows:
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Major Appliances
: refrigerators,
ovens, dishwashers, washers, dryers, freezers, wine coolers, beverage coolers and over the counter microwaves;
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Small Appliances
: counter top microwaves,
compact refrigerators, portable washers, coffee makers, espresso/cappuccino makers, toaster ovens, blenders and food processors;
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Floor Care Products
: Vacuums, steam
cleaners and robotic vacuums;
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Air Conditioning/Filtration Products
:
window air conditioners, thru-wall air conditioners, portable air conditioners, dehumidifiers, air purification systems, space
heaters and split HVAC units;
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Outdoor Power Equipment
: pressure
washers, compressors, generators, chain saws and lawn mowers; and
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Power Tools
: electric and battery
operated drills, circular saws, chop saws, bench grinders and belt sanders.
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As of December 31, 2015, Green Remanufacturing
Solutions LLC had 18 full-time employees. Training is performed in-house at Green Remanufacturing Solution LLC’s facility
by selected management and operational teams. The Company also regularly invites manufacturers to assist and participate in product,
process and procedure training. The number of employees fluctuates depending on the number and size of projects ongoing at any
particular time, which may be impacted by variations in consumer return cycle.
Speyside Holdings LLC
On April 30, 2015, Speyside Holdings
LLC concurrently entered into a management / purchase agreement with Highland Sand & Gravel, Inc. Highland Sand &
Gravel, Inc. is the owner of a quarry in Highland Mills, New York. Per the management / purchase agreement, Speyside Holdings
LLC has 12 months from April 30, 2015, plus one 6 month extension, to close on the acquisition. The negotiated purchase
price is $5.5M, of which Speyside Holdings LLC has put down $200k in earnest money, $50K in key money, and has negotiated
$4M in seller financing. During the pendency of the management agreement, Speyside Holdings LLC is assuming all
operational responsibilities of the quarry, including all costs and expenses, and is charged with taking in all receipts from
sales. In exchange for this arrangement, Speyside Holdings LLC pays a royalty to Highland Sand & Gravel, Inc. consisting
of $1 per ton of material sold from the Highland Mills quarry. Upon Speyside Holdings LLC closing on the purchase agreement,
the royalty to Highland Sand & Gravel, Inc. will terminate.
As of December 31, 2015, Speyside Holdings
LLC had 13 full-time employees. The number of employees fluctuates depending on the number and size of projects ongoing at any
particular time, which may be impacted by variations in weather conditions throughout the year.
Additional Information
Progressive Green Solutions, Inc. is required
to file annual, quarterly and special reports, proxy statements and other information with the Securities and Exchange Commission
(“SEC”). Investors may read and copy any document that Progressive Green Solutions, Inc. files, including this Annual
Report on Form 10-K, at the SEC’s Public Reference Room at 450 F Street, N.W., Washington, DC 20549. Investors may obtain
information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains
an Internet site at
http://www.sec.gov
that contains reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC, from which investors can electronically access the Company’s SEC filings.
Item 1A. Risk Factors.
Risk Factors Related to Our Business
We have inadequate capital and need
for additional financing to accomplish our business and strategic plans.
We have very limited funds, and such funds
are not adequate to develop our current business plan. Our ultimate success may depend on our ability to raise additional capital.
In the absence of additional financing or significant revenues and profits, the Company will have to approach its business plan
from a much different and much more restricted direction, attempting to secure additional funding sources to fund its growth, borrowing
money from lenders or elsewhere or to take other actions to attempt to provide funding. We cannot guarantee that we will be able
to obtain sufficient additional funds when needed, or that such funds, if available, will be obtainable on terms satisfactory to
us.
Our limited operating history does
not afford investors a sufficient history on which to base an investment decision.
We are currently in the early stages of
developing our business. Our operations are subject to all the risks inherent in the establishment of a new business enterprise.
The likelihood of success must be considered in light of the problems, expenses, difficulties, complications and delays that are
frequently encountered in a newly-formed company. There can be no assurance that at this time that we will operate profitably or
will have adequate working capital to meet our obligations as they become due.
Investors must consider the risks and difficulties
frequently encountered by early stage companies, particularly in rapidly evolving markets. Such risks include the following:
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ability to anticipate and adapt to a competitive market;
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ability to effectively manage expanding operations; amount and timing
of operating costs and capital expenditures relating to expansion of our business, operations, and infrastructure; and
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dependence upon key personnel to market and sell our services and
the loss of one of our key managers may adversely affect the marketing of our services.
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We cannot be certain that our business strategy will be successful
or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects,
financial condition, and results of operations could be materially and adversely affected and we may not have the resources to
continue or expand our business operations.
We may not be able to continue as
a going concern.
We had an accumulated deficit of $4,602,913 at December 31,
2015, a net loss of $2,399,155 and net cash used in operating activities of $970,245 for the year then ended. These factors raise
substantial doubt in the minds of our auditors about the Company’s ability to continue as a going concern. Our financial
statements do not include any adjustments that might result from the outcome of the uncertainty regarding our ability to continue
as a going concern. If the Company cannot continue as a going concern, its stockholders may lose their entire investment.
We continue to rely on major customers
for most of our revenues; the loss of either customer could adversely affect our business.
Approximately 66%
of our revenues
are derived from a management agreement that has a finite term. We expect to be dependent on this management agreement until such
time as the Company has raised the appropriate funds to close on the acquisition of Highland Sand & Gravel, Inc. by Speyside
Holdings LLC, or until the termination of the management agreement, whichever occurs first. Speyside Holding LLC’s management
agreement expires on October 30, 2016, and there is no guarantee that the management agreement will be renewed or that Speyside
Holdings LLC will continue to engage in business after such date. Termination of the management agreement could adversely affect
our business, operating results and financial condition.
Recent worldwide and domestic economic
trends and financial market conditions could adversely impact our financial performance.
The worldwide and domestic economies have
experienced adverse conditions and may be subject to further deterioration for the foreseeable future. We are subject to risks
associated with these adverse conditions, including economic slowdown and the disruption, volatility and tightening of credit and
capital markets. This global economic situation could adversely impact our major suppliers, distributors, customers, municipalities,
government, and retailers. The inability of suppliers, distributors, customers, municipalities, government, or retailers to conduct
business or to access liquidity could impact our ability to sell our products and/or services.
There can be no assurance that market conditions
will improve in the near future. A prolonged downturn, further worsening or broadening of the adverse conditions in the worldwide
and domestic economies could affect spending patterns and purchases of our products and/or services, and create or exacerbate credit
issues, cash flow issues and other financial hardships for us and for our suppliers, distributors, customers, municipalities, government,
retailers and consumers. Depending upon their severity and duration, these conditions could have a material adverse impact on our
business, liquidity, financial condition and results of operations. We are unable to predict the likely duration and severity of
the current disruption in the financial markets and the adverse economic conditions in the U.S. and other markets.
We must maintain a relatively large
inventory of our products to support customer delivery requirements, and if this inventory is lost due to theft, fire or other
damage or becomes obsolete, our results of operations would be negatively impacted.
We must maintain relatively large inventories
to meet customer delivery requirements for our products. We are always at risk of loss of that inventory due to theft, fire or
other damage, and any such loss, whether insured against or not, could cause us to fail to meet our orders and harm our sales and
operating results. Also, our inventory may become obsolete as we introduce new products, cease to produce old products or modify
the design of our products’ packaging, which would increase our operating losses and negatively impact our results of operations.
Either our or our strategic partners’
failure to protect our trade secrets could compromise our competitive position and decrease the value of our brand portfolio.
We rely on trade secrets and proprietary
know-how, concepts and formulas. Our methods of protecting this information may not be adequate. Moreover, we may face claims of
misappropriation or infringement of third parties’ rights that could interfere with our use of this information. Defending
these claims may be costly and, if unsuccessful, may prevent us from continuing to use this proprietary information in the future
and result in a judgment or monetary damages being levied against us. We do not maintain non-competition agreements with all of
our key personnel or with some of our key suppliers. If competitors independently develop or otherwise obtain access to our or
our strategic partners’ trade secrets, proprietary know-how or recipes, the appeal, and thus the value, of our brand portfolio
could be reduced, negatively impacting our sales and growth potential.
We
may face competition and pricing
pressures from larger, well-financed and more recognized companies, including the manufacturers of the returned products, and we
may not be able to effectively compete with such companies.
Given the size of the market and the minimal
barriers to entry in our business, larger, well-financed and more recognized companies may compete with us. The manufacturers themselves
may also compete with us, and could have a material adverse effect on our business, operating results, and financial condition.
The manufacturers may have an advantage over the business in their ability to reverse engineer a product, and would likely have
internal synergies with respect to labor, parts, and supplies that could render us unable to effectively compete within the marketplace.
We estimate that there are numerous companies
engaged in the business of managing returns for the same types of products as us. Several of these entities have greater financial
resources than us and as a result, we may not be able to invest comparable levels of funding into its business. There can be no
assurance that we will be successful in establishing the creditability of the products and services and financial position necessary
to successfully compete against the large, well-established competitors. A failure to do so could mean that we will perform substantially
below its expectations and investors could lose some or all of their investment. Furthermore, existing competitors may grow their
business, and new competition may enter the market over time, all of which may increase competition and our success.
We operate in highly competitive
industries, and competitive pressures could have a material adverse effect on our business.
We operate in a highly competitive environment,
and its outlook depends on a forecast of our share of sales based on its ability to compete with others in the marketplace. We
compete on the basis of price, quality, product performance, volume, and customer service. There can be no assurance that our products
and/or services will be able to compete successfully with other companies’ products and/or services. Thus, our share of industry
sales could be reduced due to aggressive pricing or product strategies pursued by competitors, unanticipated raw material shortages,
reconditioning difficulties, quarrying difficulties, etc. Our failure to price our products and/or services competitively, our
failure to produce products and/or services at a competitive cost or an unexpected buildup in inventories, leading to severe downward
pressure product prices. Changes in market acceptance of prices, changes in market requirements for price discounts or changes
in competitors’ behavior could have an adverse impact on our business, results of operations and financial condition. Failure
to maintain and enhance the Company’s competitive position could materially and adversely affect the Company’s business
and prospects for business.
We may face quality problems from
operational failures that could have a material adverse effect on our business, reputation, financial position and results of operations,
and we are dependent on market acceptance of new product introductions and product innovations for continued revenue growth.
There can be no assurance that our customers
will not experience operational process failures that could result in potential product, safety, regulatory or environmental risks.
Such operational failures or quality issues could have a material adverse effect on our business, reputation, financial position
and results of operations.
Significant raw material shortages,
supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could increase
our operating costs and adversely impact the competitive positions of our products.
Our reliance on third-party suppliers,
manufacturers, and service providers to secure raw materials and equipment exposes us to volatility in the prices and availability
of these materials and equipment. A disruption in deliveries from third-party suppliers, manufacturers or service providers, capacity
constraints, production disruptions, price increases, or decreased availability of raw materials or commodities, could have an
adverse effect on our ability to meet its commitments to customers or could increase its operating costs. Quality and sourcing
issues experienced by third-party providers and manufacturers can also adversely affect the quality and effectiveness of our products
and services and result in liability and reputational harm.
Our business is subject to the sourcing
practices of its secondary market dealers.
We sell finished products through an independent
dealer network and directly to end users. Our independent dealer network carries inventory of finished products as part of ongoing
operations and adjusts those inventories based on their assessments of future needs. Such adjustments can impact our results either
positively or negatively. In particular, some of our secondary market dealers have the capability in the future to refurbish or
remanufacture their own products. We cannot assure that these customers will continue to purchase product from us in the future.
Our products are subject to recall
for performance or safety-related issues.
Our products may be subject to recall for
performance or safety-related issues. Product recalls subject us to harm to its reputation, loss of current and future customers,
reduced revenue and product recall costs. Product recall costs are incurred when we decide, either voluntarily or involuntarily,
to recall a product through a formal campaign to solicit the return of specific products due to a known or suspected performance
issue. Any significant product recalls could have a material adverse effect on our results of operations, financial condition and
cash flows.
We rely on highly skilled personnel
and, if we are unable to retain or motivate key personnel or hire additional qualified personnel, it may not be able to grow effectively.
Our performance is largely dependent on
the talents and efforts of highly skilled individuals. Our future success depends on our continuing ability to identify, hire,
develop, motivate, and retain highly skilled personnel for all areas of our organization. Our continued ability to compete effectively
depends on its ability to retain and motivate existing employees. Due to our reliance upon its skilled laborers, the failure to
attract, integrate, motivate, and retain current and/or additional key employees could have a material adverse effect on our business,
operating results and financial condition. We do not maintain key person life insurance for any of its laborers.
If we fail to manage growth effectively
or prepare for product scalability, it could have an adversely effect on our employee efficiency, product quality, working capital
levels and results of operations
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Any significant growth in the market for
our products or our entry into new markets may require an expansion of our employee base for managerial, operational, financial,
and other purposes. During any period of growth, we may face problems related to our operational and financial systems and controls,
including quality control and delivery and service capacities. We would also need to continue to expand, train and manage our employee
base. Continued future growth will impose significant added responsibilities upon the members of management to identify, recruit,
maintain, integrate, and motivate new employees.
Aside from increased difficulties in the
management of human resources, we may also encounter working capital issues, as we will need increased liquidity to finance the
development of new products, and the hiring of additional employees. For effective growth management, we will be required to continue
improving our operations, management, and financial systems and controls. Our failure to manage growth effectively may lead to
operational and financial inefficiencies that will have a negative effect on our profitability. We cannot assure investors that
we will be able to timely and effectively meet that demand and maintain the quality standards required by our existing and potential
customers.
Our management team may not be able
to successfully implement our business strategies.
If our management team is unable to execute
on its business strategies, then our development, including the establishment of revenues and our sales and marketing activities
would be materially and adversely affected. In addition, we may encounter difficulties in effectively managing the budgeting, forecasting
and other process control issues presented by any future growth. We may seek to augment or replace members of our management team
or we may lose key members of our management team, and we may not be able to attract new management talent with sufficient skill
and experience.
If we are unable to retain key executives
and other key affiliates, our growth could be significantly inhibited and our business harmed with a material adverse effect on
our business, financial condition and results of operations.
Our success is, to a certain extent, attributable
to the management, sales and marketing, and operational and technical expertise of certain key personnel. Eugene Fernandez, our
President, Vice President of Business Development and Interim Chief Financial Officer and Michael Cox, our Chief Operating Officer,
perform key functions in the operation of our business. The loss of any of these could have a material adverse effect upon our
business, financial condition, and results of operations. We do maintain key-person insurance for Michael Cox. If we lose the services
of any senior management, we may not be able to locate suitable or qualified replacements, and may incur additional expenses to
recruit and train new personnel, which could severely disrupt our business and prospects.
Our success in the future may depend
on our ability to establish and maintain strategic alliances, and any failure on our part to establish and maintain such relationships
would adversely affect our market penetration and revenue growth.
We may be required to establish strategic
relationships with third parties. Our ability to establish strategic relationships will depend on a number of factors, many of
which are outside our control, such as the competitive position of our product and marketing plan relative to our competitors.
We may not be able to establish other strategic relationships in the future. In addition, any strategic alliances that we establish
may subject us to a number of risks, including risks associated with sharing proprietary information, loss of control of operations
that are material to developed business and profit-sharing arrangements. Moreover, strategic alliances may be expensive to implement
and subject us to the risk that the third party will not perform its obligations under the relationship, which may subject us to
losses over which we have no control or expensive termination arrangements. As a result, even if our strategic alliances with third
parties are successful, our business may be adversely affected by a number of factors that are outside of our control.
Our financial results may not meet
the expectations of investors and may fluctuate because of many factors and, as a result, investors should not rely on our revenue
and/or financial projections as indicative of future results.
Fluctuations in operating results or the
failure of operating results to meet the expectations investors may negatively impact the value of our securities. Operating results
may fluctuate due to a variety of factors that could affect revenues or expenses in any particular quarter. Fluctuations in operating
results could cause the value of our securities to decline. Investors should not rely on revenue or financial projections or comparisons
of results of operations as an indication of future performance. As a result of the factors listed below, it is possible that in
future periods results of operations may be below the expectations of investors. This could cause the market price of our securities
to decline.
Factors that may affect our quarterly results
include:
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delays in sales resulting from potential customer sales cycles;
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variations or inconsistencies in return on investment models and results;
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delays in demonstrating product performance or installations;
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changes in competition; and
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changes or threats of significant changes in legislation or rules
or standards that would change the drivers for product adoption.
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Our strategy may include acquiring
companies which may result in unsuitable acquisitions or failure to successfully integrate acquired companies, which could lead
to reduced profitability.
We may embark on a growth strategy through
acquisitions of companies or operations that complement existing product lines, customers, or other capabilities. We may be unsuccessful
in identifying suitable acquisition candidates, or may be unable to consummate desired acquisitions. To the extent any future acquisitions
are completed, we may be unsuccessful in integrating acquired companies or their operations, or if integration is more difficult
than anticipated, we may experience disruptions that could have a material adverse impact on future profitability. Some of the
risks that may affect our ability to integrate, or realize any anticipated benefits from, acquisitions include:
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unexpected losses of key employees or customers of the acquired company;
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difficulties integrating the acquired company’s standards, processes,
procedures and controls;
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difficulties coordinating new product and process development;
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difficulties hiring additional management and other critical personnel;
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difficulties increasing the scope, geographic diversity and complexity
of our operations;
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difficulties consolidating facilities, transferring processes and
know-how;
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difficulties reducing costs of the acquired company’s business;
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diversion of management’s attention from our management; and
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adverse impacts on retaining existing business relationships with
customers.
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There are risks related to our internal
growth and operating strategy.
Our ability to generate internal growth
will be affected by, among other factors, our ability to:
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differentiate ourselves in a competitive market by emphasizing new product development and value
added services;
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hire and retain employees; and
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reduce operating and overhead expenses.
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Our inability to achieve internal growth
could materially and adversely affect our business, financial condition, results of operations, liquidity, and cash flows. One
key component of our operating strategy is to operate our businesses on a decentralized basis, with local or regional management
retaining responsibility for day-to-day operations, profitability, and the internal growth of the individual business. If we do
not implement and maintain proper overall business controls, this decentralized operating strategy could result in inconsistent
operating and financial practices and our overall profitability could be adversely affected.
Our operating results
may vary significantly from one reporting period to another and may be adversely affected by the cyclical nature of the markets
we serve.
The relative demand for our products is
a function of the highly cyclical construction and consumer returns industries. As a result, our revenue may be adversely affected
by declines in the construction industry and/or volume of consumer returns generally and in our regional markets. Our results also
may be materially affected by:
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the level of commercial and residential construction in our regional markets;
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the availability of funds for public or infrastructure construction from local, state and federal
sources;
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unexpected events that delay or adversely affect our ability to deliver crushed aggregate according
to our customers’ requirements;
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changes in interest rates and lending standards;
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changes in the mix of our customers;
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the timing and cost of acquisitions and difficulties or costs encountered when integrating acquisitions;
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the budgetary spending patterns of customers;
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increases in construction and design costs;
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power outages and other unexpected delays;
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our ability to control costs and maintain quality;
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regional or general economic conditions.
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As a result, our operating results in any
particular quarter may not be indicative of the results that you can expect for any other quarter or for the entire year. Furthermore,
negative trends in the crushed aggregate industry or the consumer products markets could have material adverse effects on our business,
financial condition, results of operations, liquidity, and cash flows.
Our net revenue attributable to infrastructure
projects could be negatively impacted by a decrease or delay in governmental spending.
Our business depends, in part, on the level
of governmental spending on infrastructure projects in our markets. Reduced levels of governmental funding for public works projects
or delays in that funding could adversely affect our business, financial condition, results of operations, liquidity, and cash
flows.
Our business is seasonal and subject
to adverse weather.
Since a segment of our business is conducted
outdoors, erratic weather patterns, seasonal changes and other weather-related conditions affect our business. Adverse weather
conditions, including hurricanes and tropical storms, cold weather, snow, and heavy or sustained rainfall, reduce construction
activity, restrict the demand for our products, and impede our ability to efficiently produce crushed aggregates. Adverse weather
conditions could also increase our costs and reduce our production output as a result of power loss, needed plant and equipment
repairs, delays in obtaining permits, time required to remove water from flooded operations, and similar events. In addition, severe
drought conditions can restrict available water supplies and restrict production. Consequently, these events could adversely affect
our business, financial condition, results of operations, liquidity, and cash flows.
Our overall profitability is sensitive
to price changes and minor variations in sales volumes.
Generally, our customers are price-sensitive.
Prices for our products and services are subject to changes in response to relatively minor fluctuations in supply and demand,
general economic conditions and market conditions, all of which are beyond our control. Because of the fixed-cost nature of our
business, our overall profitability is sensitive to price changes and minor variations in sales volumes.
Governmental regulations, including
environmental regulations, may result in increases in our operating costs and capital expenditures and decreases in our earnings.
A wide range of federal, state and local
laws, ordinances and regulations apply to our operations, including the following matters:
|
|
•
|
street and highway usage;
|
|
|
•
|
health, safety and environmental matters.
|
In many instances, we must have various
certificates, permits or licenses in order to conduct our business. Our failure to maintain required certificates, permits or licenses
or to comply with applicable governmental requirements could result in substantial fines or possible revocation of our authority
to conduct some of our operations. Delays in obtaining approvals for the transfer or grant of certificates, permits or licenses,
or failure to obtain new certificates, permits or licenses, could impede the implementation of any acquisitions.
Governmental requirements that impact our
operations include those relating to air quality, reclamation, mining, land use, and water quality. These requirements are complex
and subject to change. Our compliance with amended, new or more stringent requirements, stricter interpretations of existing requirements,
or the future discovery of environmental conditions may require us to make unanticipated material expenditures. In addition, we
may fail to identify, or obtain indemnification for, environmental liabilities of acquired businesses. We generally do not maintain
insurance to cover environmental liabilities.
Our operations are subject to various
hazards that may cause personal injury or property damage and increase our operating costs.
Operating heavy equipment, particularly
in a quarry environment, exposes our operators and others to many hazards. Operating hazards can cause personal injury and loss
of life, damage to or destruction of property, plant and equipment and environmental damage. Although we conduct training programs
designed to reduce these risks, we cannot eliminate these risks. We maintain insurance coverage in amounts we believe are consistent
with industry practice; however, this insurance may not be adequate to cover all losses or liabilities we may incur in our operations,
and we may not be able to maintain insurance of the types or at levels we deem necessary or adequate, or at rates we consider reasonable.
A partially or completely uninsured claim, if successful and of sufficient magnitude, could have a material adverse effect on us.
The insurance policies we maintain are
subject to varying levels of deductibles. If we were to experience insurance claims above our coverage, our business, financial
condition, results of operations, liquidity, and cash flows might be materially and adversely affected.
We may not be able to generate sufficient
cash flows to meet our debt service obligations and may be forced to take other actions to satisfy our obligations under our indebtedness,
which may not be successful.
Our ability to make payments on and to
refinance our indebtedness and to fund planned capital expenditures will depend on our ability to generate cash from our operations
in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other
factors that are beyond our control.
Our business may not generate sufficient
cash flow from operations and future sources of capital may not be available to us in an amount sufficient to enable us to pay
our indebtedness or to fund our other liquidity needs. If we complete an acquisition, our debt service requirements could increase.
We may need to refinance or restructure all or a portion of our indebtedness on or before maturity. We may not be able to refinance
any of our indebtedness, including the, on commercially reasonable terms, or at all. If we cannot service our indebtedness, we
may have to take actions such as selling assets, seeking additional equity, reducing or delaying capital expenditures, strategic
acquisitions, investments and alliances or restructuring or refinancing our indebtedness. We may not be able to effect such actions,
if necessary, on commercially reasonable terms, or at all.
Risks Related to Our Securities
Our Executive Officers and certain
stockholders possess the majority of our voting power, and through this ownership, control our Company and our corporate actions.
Our current executive officers and certain
large shareholders of the Company, hold approximately 47.2% of the voting power of the outstanding shares immediately after the
share exchange. These officers have a controlling influence in determining the outcome of any corporate transaction or other matters
submitted to our stockholders for approval, including mergers, consolidations and the sale of all or substantially all of our assets,
election of directors, and other significant corporate actions. As such our executive officers have the power to prevent or cause
a change in control; therefore, without the aforementioned consent we could be prevented from entering into transactions that could
be beneficial to us. The interests of our executive officers may give rise to a conflict of interest with the Company and the Company’s
shareholders. For additional details concerning voting power please refer to the section below entitled “Description of Securities.”
There is a substantial lack of liquidity
of our common stock and volatility risks.
Our common stock is quoted on the OTC Markets
OTCQB platform under the symbol “PGSC.” The liquidity of our common stock may be very limited and affected by our limited
trading market. The OTC Markets OTCQB quotation platform is an inter-dealer market much less regulated than the major exchanges,
and is subject to abuses, volatilities and shorting. There is currently no broadly followed and established trading market for
our common stock. An established trading market may never develop or be maintained. Active trading markets generally result in
lower price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity
of the shares traded.
The trading volume of our common stock
may be limited and sporadic. This situation is attributable to a number of factors, including the fact that we are a small company
which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that
generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and
would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time
as we became more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in
our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity
that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a
broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels
will be sustained. As a result of such trading activity, the quoted price for our common stock on the OTCQB may not necessarily
be a reliable indicator of our fair market value. In addition, if our shares of common stock cease to be quoted, holders would
find it more difficult to dispose of or to obtain accurate quotation as to the market value of, our common stock and as a result,
the market value of our common stock likely would decline.
The market price for our stock may be volatile
and subject to fluctuations in response to factors, including the following:
|
|
·
|
the increased concentration of the ownership
of our shares by a limited number of affiliated stockholders following the share exchange may limit interest in our securities;
|
|
|
·
|
variations in quarterly operating results
from the expectations of securities analysts or investors;
|
|
|
·
|
revisions in securities analysts’
estimates or reductions in security analysts’ coverage;
|
|
|
·
|
announcements of new attractions or services
by us or our competitors;
|
|
|
·
|
reductions in the market share of our
services;
|
|
|
·
|
announcements by us or our competitors
of significant acquisitions, strategic partnerships, joint ventures or capital commitments;
|
|
|
·
|
general technological, market or economic
trends;
|
|
|
·
|
investor perception of our industry or
prospects;
|
|
|
·
|
insider selling or buying;
|
|
|
·
|
investors entering into short sale contracts;
|
|
|
·
|
regulatory developments affecting our
industry; and
|
|
|
·
|
additions or departures of key personnel.
|
Many of these factors are beyond our control
and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions
or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common
stock will sustain current market prices, or as to what effect that the sale of shares or the availability of common stock for
sale at any time will have on the prevailing market price.
Our common stock may never be listed
on a major stock exchange.
We currently do not satisfy the initial
listing standards and cannot ensure that we will be able to satisfy such listing standards or that our common stock will be accepted
for listing on any such exchange. Should we fail to satisfy the initial listing standards of such exchanges, or our common stock
is otherwise rejected for listing, the trading price of our common stock could suffer, the trading market for our common stock
may be less liquid, and our common stock price may be subject to increased volatility.
A decline in the price of our common
stock could affect our ability to raise working capital and adversely impact our ability to continue operations.
A prolonged decline in the price of our
common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital.
A decline in the price of our common stock could be especially detrimental to our liquidity and our operations. Such reductions
may force us to reallocate funds from other planned uses and may have a significant negative effect on our business plan and operations,
including our ability to develop new services and continue our current operations. If our common stock price declines, we can offer
no assurance that we will be able to raise additional capital or generate funds from operations sufficient to meet our obligations.
If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.
Concentrated ownership of our common
stock creates a risk of sudden changes in our common stock price.
The sale by any shareholder of a significant
portion of their holdings could have a material adverse effect on the market price of our common stock.
Sales of our currently issued and
outstanding stock may become freely tradable pursuant to Rule 144 and may dilute the market for your shares and have a depressive
effect on the price of the shares of our common stock.
A substantial majority of the outstanding
shares of common stock are “restricted securities” within the meaning of Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”) (“Rule 144”). As restricted shares, these shares may be resold only pursuant
to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under
the Securities Act and as required under applicable state securities laws. Rule 144 provides in essence that a non-affiliate who
has held restricted securities for a period of at least six months may sell their shares of common stock. Under Rule 144, affiliates
who have held restricted securities for a period of at least six months may, under certain conditions, sell every three months,
in brokerage transactions, a number of shares that does not exceed the greater of 1% of a company’s outstanding shares of
common stock or the average weekly trading volume during the four calendar weeks prior to the sale (the four calendar week rule
does not apply to companies quoted on the OTCQB). A sale under Rule 144 or under any other exemption from the Securities Act, if
available, or pursuant to subsequent registrations of our shares of common stock, may have a depressive effect upon the price of
our shares of common stock in any active market that may develop.
If we issue additional shares or
derivative securities in the future, it will result in the dilution of our existing stockholders
.
Our Articles of Incorporation
authorizes the issuance of up to 300,000,000 shares of common stock, $0.001 par value per share, and 10,000,000 shares are
designated as “blank check” preferred stock, par value $0.001 per share (the “Preferred Stock”); and
(iii) to effect a forward split such that ten (10) shares of Common Stock were issued for every one (1) share of Common Stock
issued and outstanding immediately prior to the Amendment (the “Split”).
Our board of directors may choose to issue
some or all of such shares, or derivative securities to purchase some or all of such shares, to provide additional financing in
the future.
We do not plan to declare or pay
any dividends to our stockholders in the near future.
We have not declared any dividends in the
past, and we do not intend to distribute dividends in the near future. The declaration, payment and amount of any future dividends
will be made at the discretion of the board of directors and will depend upon, among other things, the results of operations, cash
flows and financial condition, operating and capital requirements, and other factors as the board of directors considers relevant.
There is no assurance that future dividends will be paid, and if dividends are paid, there is no assurance with respect to the
amount of any such dividend.
The requirements of being a public
company may strain our resources and distract management.
As a public company, we are subject to
the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”). These requirements are extensive. The Exchange Act requires that we file annual,
quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires that we maintain
effective disclosure controls and procedures and internal controls over financial reporting.
We may incur significant costs associated
with our public company reporting requirements and costs associated with applicable corporate governance requirements. We expect
all of these applicable rules and regulations to significantly increase our legal and financial compliance costs and to make some
activities more time consuming and costly. This may divert management’s attention from other business concerns, which could
have a material adverse effect on our business, financial condition and results of operations. We also expect that these applicable
rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and
we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar
coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors
or as executive officers. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict
or estimate the amount of additional costs we may incur or the timing of such costs.
Persons associated with securities offerings, including
consultants, may be deemed to be broker dealers.
In the event that any of our securities
are offered without engaging a registered broker-dealer, we may face claims for rescission and other remedies. If any claims or
actions were to be brought against us relating to our lack of compliance with the broker-dealer requirements, we could be subject
to penalties, required to pay fines, make damages payments or settlement payments, or repurchase such securities. In addition,
any claims or actions could force us to expend significant financial resources to defend our company, could divert the attention
of our management from our core business and could harm our reputation.
Future changes in financial accounting
standards or practices may cause adverse unexpected financial reporting fluctuations and affect reported results of operations.
A change in accounting standards or practices
can have a significant effect on our reported results and may even affect our reporting of transactions completed before the change
is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur
in the future. Changes to existing rules or the questioning of current practices may adversely affect our reported financial results
or the way we conduct business.
“Penny Stock” rules may
make buying or selling our common stock difficult.
Trading in our common stock is subject
to the “penny stock” rules. The SEC has adopted regulations that generally define a penny stock to be any equity security
that has a market price of less than $5.00 per share, subject to certain exceptions. These rules require that any broker-dealer
that recommends our common stock to persons other than prior customers and accredited investors, must, prior to the sale, make
a special written suitability determination for the purchaser and receive the purchaser’s written agreement to execute the
transaction. Unless an exception is available, the regulations require the delivery, prior to any transaction involving a penny
stock, of a disclosure schedule explaining the penny stock market and the risks associated with trading in the penny stock market.
In addition, broker-dealers must disclose commissions payable to both the broker-dealer and the registered representative and current
quotations for the securities they offer. The additional burdens imposed upon broker-dealers by such requirements may discourage
broker-dealers from effecting transactions in our common stock, which could severely limit the market price and liquidity of our
common stock.
Item 1B.
Unresolved Staff Comments.
None.
Item 2.
Properties.
Green Remanufacturing Solutions LLC is
currently a party to a lease agreement for an approximately 41,533 square foot facility located at 445 County Road 101, Yaphank,
New York 11980, which is set to expire on March 31, 2017. The current base rent is approximately $21,607 per month and escalates
to approximately $22,351 in the final year of the lease.
Item 3.
Legal Proceedings.
We are currently not involved in any litigation
that we believe could have a materially adverse effect on our financial condition or results of operations. There is no action,
suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization
or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or
affecting our company, our common stock, any of our subsidiaries or of our company’s or our company’s subsidiaries’
officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4.
Mine Safety Disclosure
The information concerning mine safety
violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection
Act and Item 104 of Regulation S-K is included in Exhibit 95 to this annual report.
Progressive Green Solutions, Inc.
Consolidated Balance Sheets
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
521
|
|
|
$
|
62,337
|
|
|
Accounts receivable, net
|
|
|
1,007,099
|
|
|
|
255,779
|
|
|
Inventories, net
|
|
|
-
|
|
|
|
603,155
|
|
|
Prepayments and other current assets
|
|
|
34,851
|
|
|
|
49,150
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
1,042,471
|
|
|
|
970,421
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
395,138
|
|
|
|
102,580
|
|
|
Accumulated depreciation
|
|
|
(40,112
|
)
|
|
|
(10,793
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
355,026
|
|
|
|
91,787
|
|
|
|
|
|
|
|
|
|
|
|
|
SOFTWARE AND HARDWARE
|
|
|
|
|
|
|
|
|
|
Software and hardware
|
|
|
207,081
|
|
|
|
190,731
|
|
|
Accumulated amortization
|
|
|
(85,677
|
)
|
|
|
(45,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Software and hardware, net
|
|
|
121,404
|
|
|
|
145,593
|
|
|
|
|
|
|
|
|
|
|
|
|
LEASEHOLD IMPROVEMENTS
|
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
|
698,213
|
|
|
|
563,267
|
|
|
Accumulated amortization
|
|
|
(338,016
|
)
|
|
|
(239,925
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvements, net
|
|
|
360,197
|
|
|
|
323,342
|
|
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT AGREEMENT
|
|
|
|
|
|
|
|
|
|
Management agreement
|
|
|
50,000
|
|
|
|
-
|
|
|
Accumulated amortization
|
|
|
(22,778
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Management agreement, net
|
|
|
27,222
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
Security deposits
|
|
|
34,693
|
|
|
|
34,693
|
|
|
Deposit on potential purchases
|
|
|
225,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
259,693
|
|
|
|
34,693
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
2,166,013
|
|
|
$
|
1,565,836
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
$
|
2,180,370
|
|
|
$
|
448,980
|
|
|
Factor Advance
|
|
|
192,710
|
|
|
|
-
|
|
|
Customer deposits
|
|
|
-
|
|
|
|
239,660
|
|
|
Notes payable -related parties
|
|
|
1,123,501
|
|
|
|
-
|
|
|
Advances from stockholders
|
|
|
32,339
|
|
|
|
500
|
|
|
Advances from third party
|
|
|
117,264
|
|
|
|
-
|
|
|
Deferred rent, current portion
|
|
|
46,252
|
|
|
|
40,379
|
|
|
Equipment loan, current portion
|
|
|
21,911
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
3,714,347
|
|
|
|
729,519
|
|
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT LIABILITIES
|
|
|
|
|
|
|
|
|
|
Deferred rent, net of current portion
|
|
|
14,265
|
|
|
|
68,764
|
|
|
Equipment loan, net of current portion
|
|
|
69,001
|
|
|
|
-
|
|
|
Total non-current liabilities
|
|
|
83,266
|
|
|
|
68,764
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
3,797,613
|
|
|
|
798,283
|
|
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
|
|
Preferred stock par value $0.001: 10,000,000 shares authorized; none issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
|
Common stock par value $0.001: 300,000,000 shares authorized; 33,086,782 shares issued and outstanding
|
|
|
33,087
|
|
|
|
33,087
|
|
|
Additional paid-in capital
|
|
|
2,999,636
|
|
|
|
2,999,636
|
|
|
Accumulated deficit
|
|
|
(4,602,912
|
)
|
|
|
(2,265,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Progressive Green Solutions, Inc. stockholders' equity (deficit)
|
|
|
(1,570,189
|
)
|
|
|
767,553
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interest
|
|
|
(61,411
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity (deficit)
|
|
|
(1,631,600
|
)
|
|
|
767,553
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and equity (deficit)
|
|
$
|
2,166,013
|
|
|
$
|
1,565,836
|
|
See accompanying notes to the consolidated
financial statements.
Progressive Green Solutions, Inc.
Consolidated Statements of Operations
|
|
|
For the Year
|
|
|
For the Year
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
NET REVENUE
|
|
$
|
4,848,534
|
|
|
$
|
2,773,196
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
4,668,438
|
|
|
|
2,360,368
|
|
|
Inventory obsolescence and markdowns
|
|
|
174,517
|
|
|
|
276,694
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
|
4,842,955
|
|
|
|
2,637,062
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS MARGIN
|
|
|
5,579
|
|
|
|
136,134
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
Salaries and wages
|
|
|
674,943
|
|
|
|
781,190
|
|
|
Professional fees
|
|
|
341,245
|
|
|
|
488,259
|
|
|
Rent and occupancy
|
|
|
516,803
|
|
|
|
628,153
|
|
|
Selling, general and administrative
|
|
|
721,165
|
|
|
|
475,134
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
2,254,156
|
|
|
|
2,372,736
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(2,248,577
|
)
|
|
|
(2,236,602
|
)
|
|
|
|
|
|
|
|
|
|
|
|
OTHER (INCOME) EXPENSE:
|
|
|
|
|
|
|
|
|
|
Other (income) expense
|
|
|
40,441
|
|
|
|
(1,674
|
)
|
|
Interest expense
|
|
|
28,070
|
|
|
|
-
|
|
|
Bad debt expense
|
|
|
82,065
|
|
|
|
113,659
|
|
|
|
|
|
|
|
|
|
|
|
|
Other (income) expense, net
|
|
|
150,576
|
|
|
|
111,985
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS BEFORE INCOME TAX PROVISION
|
|
|
(2,399,153
|
)
|
|
|
(2,348,587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
INCOME TAX PROVISION
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
NET LOSS
|
|
|
(2,399,153
|
)
|
|
|
(2,348,587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to non-controlling interest
|
|
|
(61,411
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to PGS Inc. stockholders
|
|
$
|
(2,337,742
|
)
|
|
$
|
(2,348,587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - Basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.08
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - Basic and diluted
|
|
|
33,086,782
|
|
|
|
29,720,405
|
|
See accompanying notes to the consolidated
financial statements.
Progressive Green Solutions, Inc.
Consolidated Statement of Changes in
Equity (Deficit)
For the Year Ended December 31, 2014 and
2015
|
|
|
|
|
|
|
|
|
|
|
|
Progressive Green
|
|
|
|
|
|
|
|
|
|
|
Common Stock Par Value $0.001
|
|
|
Additional
|
|
|
|
|
|
Stockholders'
|
|
|
Non-controlling
|
|
|
Total
|
|
|
|
|
Number of
Shares
|
|
|
Amount
|
|
|
Paid-in capital
|
|
|
Accumulated Deficit
|
|
|
Equity (Deficit)
|
|
|
Interest
|
|
|
Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2013
|
|
|
23,000,000
|
|
|
$
|
23,000
|
|
|
$
|
2,304,392
|
|
|
$
|
(2,455,569
|
)
|
|
$
|
(128,177
|
)
|
|
$
|
-
|
|
|
$
|
(128,177
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period from January 1,
2014 through March 7, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(83,417
|
)
|
|
|
(83,417
|
)
|
|
|
|
|
|
|
(83,417
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of undistributed
retained earnings as of March 7, 2014 to additional paid-in capital
|
|
|
|
|
|
|
|
|
|
|
(2,538,986
|
)
|
|
|
2,538,986
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reverse acquisition adjustment
|
|
|
4,560,000
|
|
|
|
4,560
|
|
|
|
(6,273
|
)
|
|
|
|
|
|
|
(1,713
|
)
|
|
|
|
|
|
|
(1,713
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares
for cash at $0.75 per share, net of issuance cost
|
|
|
5,024,348
|
|
|
|
5,024
|
|
|
|
3,636,601
|
|
|
|
|
|
|
|
3,641,625
|
|
|
|
|
|
|
|
3,641,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares
to placement agent plus fees
|
|
|
502,434
|
|
|
|
503
|
|
|
|
(396,098
|
)
|
|
|
|
|
|
|
(395,595
|
)
|
|
|
|
|
|
|
(395,595
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
from March 7, 2014 through December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,265,170
|
)
|
|
|
(2,265,170
|
)
|
|
|
|
|
|
|
(2,265,170
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2014
|
|
|
33,086,782
|
|
|
|
33,087
|
|
|
|
2,999,636
|
|
|
|
(2,265,170
|
)
|
|
|
767,553
|
|
|
|
-
|
|
|
|
767,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,337,742
|
)
|
|
|
(2,337,742
|
)
|
|
|
(61,411
|
)
|
|
|
(2,399,153
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2015
|
|
|
33,086,782
|
|
|
$
|
33,087
|
|
|
$
|
2,999,636
|
|
|
$
|
(4,602,912
|
)
|
|
$
|
(1,570,189
|
)
|
|
$
|
(61,411
|
)
|
|
$
|
(1,631,600
|
)
|
See accompanying notes to the consolidated
financial statements.
Progressive Green Solutions, Inc.
Consolidated Statements of Cash Flows
|
|
|
For the Year
|
|
|
For the Year
|
|
|
|
|
Ended
|
|
|
Ended
|
|
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
Net loss before non-controlling interest
|
|
$
|
(2,399,153
|
)
|
|
$
|
(2,348,587
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to reconcile net loss before non-controlling interest to net cash used in operating activities
|
|
|
|
|
|
|
|
|
|
Depreciation expense
|
|
|
29,319
|
|
|
|
7,818
|
|
|
Amortization expense, software
|
|
|
40,539
|
|
|
|
31,730
|
|
|
Amortization expense, leasehold improvement
|
|
|
98,091
|
|
|
|
95,432
|
|
|
Amortization expense,management agreement
|
|
|
22,778
|
|
|
|
-
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(751,320
|
)
|
|
|
21,824
|
|
|
Inventories
|
|
|
603,155
|
|
|
|
(54,880
|
)
|
|
Prepayments and other current assets
|
|
|
14,299
|
|
|
|
(1,970
|
)
|
|
Accounts payable and accrued expenses
|
|
|
1,660,335
|
|
|
|
(409,653
|
)
|
|
Customer deposits
|
|
|
(239,660
|
)
|
|
|
239,660
|
|
|
Deferred rent
|
|
|
(48,626
|
)
|
|
|
109,143
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(970,243
|
)
|
|
|
(2,309,483
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(125,646
|
)
|
|
|
(62,018
|
)
|
|
Purchase of leasehold improvements
|
|
|
(63,891
|
)
|
|
|
(69,639
|
)
|
|
Purchase of software and hardware
|
|
|
(16,350
|
)
|
|
|
(23,644
|
)
|
|
Management agreement
|
|
|
(50,000
|
)
|
|
|
-
|
|
|
Deposit on potential purchase
|
|
|
(225,000
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(480,887
|
)
|
|
|
(155,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Advances from (repayment to) stockholders
|
|
|
31,839
|
|
|
|
(565,636
|
)
|
|
Proceeds from(repayment to) notes payable - related parties
|
|
|
1,047,501
|
|
|
|
(226,674
|
)
|
|
Advances from third party
|
|
|
117,264
|
|
|
|
|
|
|
Factor Advance
|
|
|
192,710
|
|
|
|
|
|
|
Proceeds from issuance of common stock
|
|
|
-
|
|
|
|
3,244,317
|
|
|
Net cash provided by financing activities
|
|
|
1,389,314
|
|
|
|
2,452,007
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
|
|
|
(61,816
|
)
|
|
|
(12,777
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash at beginning of the reporting period
|
|
|
62,337
|
|
|
|
75,114
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash at end of the reporting period
|
|
$
|
521
|
|
|
$
|
62,337
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
Income taxes paid
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Cash Financing and Investing Activities:
|
|
|
|
|
|
|
|
|
|
Accrued liabilities for leasehold improvements
|
|
$
|
71,055
|
|
|
$
|
-
|
|
|
Property and equipment purchased with debt
|
|
$
|
166,912
|
|
|
$
|
-
|
|
See accompanying notes to the consolidated
financial statements.
Progressive Green Solutions, Inc.
December 31, 2015 and 2014
Notes to the Consolidated Financial Statements
Note 1 - Organization and Operations
Progressive Green Solutions, Inc.
Progressive Green Solutions, Inc. (the “Company”)
was incorporated on August 26, 2011, under the laws of the State of Nevada as MarketingMobileText, Inc. which subsequently changed
its corporate name to Progressive Green Solutions, Inc.
On March 7, 2014, the Company acquired all
of the membership interests of Green Remanufacturing Solutions LLC (“GRS LLC”) in exchange for 23,000,000 newly issued
post-split shares of the Company’s common stock (the “Exchange”). In connection with the Exchange, the Company
adopted the business plan of GRS, and amended its Articles of Incorporation to change its name to Progressive Green Solutions,
Inc., effectuate a forward-split on a ten for one basis and increase its authorized capital stock to 300,000,000 shares of common
stock and 10,000,000 shares of blank check preferred stock.
As a result of the controlling financial interest
of the former members of GRS LLC, for financial statement reporting purposes, the merger between the Company and GRS LLC has been
treated as a reverse acquisition with GRS LLC deemed the accounting acquirer and the Company deemed the accounting acquiree under
the acquisition method of accounting in accordance with section 805-10-55 of the FASB Accounting Standards Codification. The reverse
acquisition is deemed a capital transaction and the net assets of GRS LLC (the accounting acquirer) are carried forward to the
Company (the legal acquirer and the reporting entity) at their carrying value before the acquisition. The acquisition
process utilizes the capital structure of the Company and the assets and liabilities of GRS LLC which are recorded at their historical
cost. The equity of the Company is the historical equity of GRS LLC retroactively restated to reflect the number of
shares issued by the Company in the transaction.
Green Remanufacturing Solutions, Inc.
Green Remanufacturing Solutions, Inc. (“GRS
Inc.”) was incorporated on June 27, 2011, under the laws of the State of New York. GRS Inc. specialized in reverse logistics,
repair and recovery, engineering/quality assurance, warehousing and fulfillment, secondary market sales and e-commerce for retailers
and manufacturers of major appliances, small appliances, floor care products, air-conditioning/filtration products, power tools
and outdoor power equipment products.
Green Remanufacturing Solutions LLC
Green Remanufacturing Solutions LLC (“GRS
LLC”) was formed on May 31, 2012, under the laws of the State of Delaware. The sole purpose of GRS LLC was to carry-on GRS
Inc.’s business in the form of a limited liability company. The assets and liabilities of GRS Inc. were carried forward to
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.
Applianceplace.com, LLC
Applianceplace.com, LLC was formed on November
29, 2012 under the laws of the State of New York and is 100% owned by the Company.
Speyside Holdings LLC
Speyside Holdings LLC was formed on March 25,
2015 under the laws of the State of Delaware and is 85% owned by the Company. On April 23, 2015, the Company acquired eighty-five
(85%) of Speyside Holdings LLC (“Speyside”).
On April 30, 2015, Speyside entered into a
Professional Management Agreement (the “Management Agreement”) with Highland Sand & Gravel, Inc. (“Highland”)
whereby Speyside would operate a sand and gravel quarry owned by Highland in consideration for a fixed fee based on the tonnage
of material sold and a minimum guaranteed payment of $12,000 per month. A one-time non-refundable fee of $50,000 was paid to Highland
upon the execution of this Management Agreement and is being amortized over the term of the Management Agreement. The term of the
Management Agreement is for twelve (12) months with Speyside’s option to extend the Management Agreement an additional six
(6) months.
Also on April 30, 2015, Speyside entered into
a Purchase and Sale Agreement with Highland to acquire all of the real and personal property of Highland.
CEM III LLC
CEM III LLC (“CEM”) was formed
on July 13, 2015 under the laws of the State of New York and is 85% owned by Speyside. On October 1, 2015, CEM entered into a Contract
for Sale of Real Estate with Grace E. Wolf Family Limited Partnership (“Wolf”) to acquire an approximately 30-acre
parcel of real property for use in connection with Speyside’s operations. CEM is currently inactive.
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 consolidated financial
statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US
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)
|
Assumption as a going concern
:
Management assumes
that the Company will continue as a going concern, which contemplates continuity of operations, realization of assets, and liquidation
of liabilities in the normal course of business
;
|
|
|
(ii)
|
Allowance for doubtful accounts
: Management’s estimate of the allowance for doubtful
accounts is based on historical sales, historical loss levels, and an analysis of the collectability of individual accounts; and
general economic conditions that may affect a client’s ability to pay. The Company evaluated the key factors and assumptions
used to develop the allowance in determining that it is reasonable in relation to the financial statements taken as a whole.
|
|
|
(iii)
|
Inventory Obsolescence and Markdowns
: The Company’s estimate of potentially excess
and slow-moving inventories is based on evaluation of inventory levels and aging, review of inventory turns and historical sales
experiences. The Company’s estimate of reserve for inventory shrinkage is based on the historical results of physical inventory
cycle counts.
|
|
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(iv)
|
Fair value of long-lived assets
: Fair value is generally determined using the asset’s
expected future discounted cash flows or market value, if readily determinable. If long-lived assets are determined to be recoverable,
but the newly determined remaining estimated useful lives are shorter than originally estimated, the net book values of the long-lived
assets are depreciated over the newly determined remaining estimated useful lives. The Company considers the following to be some
examples of important indicators that may trigger an impairment review: (A) significant under-performance or losses of assets relative
to expected historical or projected future operating results; (B) significant changes in the manner or use of assets or in the
Company’s overall strategy with respect to the manner or use of the acquired assets or changes in the Company’s overall
business strategy; (C) significant negative industry or economic trends; (D) increased competitive pressures; (E) a significant
decline in the Company’s stock price for a sustained period of time; and (F) regulatory changes. The Company evaluates acquired
assets for potential impairment indicators at least annually and more frequently upon the occurrence of such events.
|
|
|
(v)
|
Valuation allowance for deferred tax assets
:
Management
assumes that the realization of the Company’s net deferred tax assets resulting from its net operating loss (“NOL”)
carry–forwards for Federal income tax purposes that may be offset against future taxable income was not considered more likely
than not and accordingly, the potential tax benefits of the net loss carry-forwards are offset by a full valuation allowance. Management
made this assumption based on (a) the Company has incurred recurring losses, (b) general economic conditions, and (c) its ability
to raise additional funds to support its daily operations by way of a public or private offering, among other factors.
|
These significant accounting estimates or assumptions
bear the risk of change due to the fact that there are uncertainties attached to these estimates or assumptions, and certain estimates
or assumptions are difficult to measure or value.
Management bases its estimates on historical
experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole
under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources.
Management regularly evaluates the key factors
and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical
experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly.
Actual results could differ from those estimates.
Principles of Consolidation
The Company applies the guidance of Topic 810
“Consolidation” of the FASB Accounting Standards Codification (“ASC”) to determine whether and how to consolidate
another entity. Pursuant to ASC Paragraph 810-10-15-10 all majority-owned subsidiaries—all entities in which a parent has
a controlling financial interest—shall be consolidated except (1) when control does not rest with the parent, the majority
owner; (2) if the parent is a broker-dealer within the scope of Topic 940 and control is likely to be temporary; (3) consolidation
by an investment company within the scope of Topic 946 of a non-investment-company investee. Pursuant to ASC Paragraph 810-10-15-8
the usual condition for a controlling financial interest is ownership of a majority voting interest, and, therefore, as a general
rule ownership by one reporting entity, directly or indirectly, of more than 50 percent of the outstanding voting shares of another
entity is a condition pointing toward consolidation. The power to control may also exist with a lesser percentage of ownership,
for example, by contract, lease, agreement with other stockholders, or by court decree. The Company consolidates all less-than-majority-owned
subsidiaries, if any, in which the parent’s power to control exists.
The Company’s consolidated subsidiaries
and/or entities are as follows:
|
Name of consolidated subsidiary or entity
|
|
State or other jurisdiction of
incorporation or organization
|
|
Date of incorporation or formation
(date of acquisition, if applicable)
(date of disposition, if applicable)
|
|
Attributable
interest to
Company
|
|
|
|
|
|
|
|
|
|
|
|
Green Remanufacturing LLC
|
|
The State of Delaware
|
|
May 31, 2012
(March 7, 2014)
(N/A)
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Applianceplace.com, LLC
|
|
The State of New York
|
|
November 29, 2012
(March 7, 2014)
(N/A)
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Speyside Holdings LLC
|
|
The State of Delaware
|
|
March 25, 2015
(April 23, 2015)
(N/A)
|
|
|
85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
CEM III LLC
|
|
The State of New York
|
|
July 13, 2015
(October 1, 2015)
(N/A)
|
|
|
72.25
|
%
|
The consolidated financial statements include
all accounts of the Company and consolidated subsidiaries and/or entities as of and for the reporting periods then ended.
All inter-company balances and transactions
have been eliminated.
Fair Value of Financial Instruments
The Company follows paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37
of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial
instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements
and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques
used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted)
in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair
value hierarchy defined by Paragraph 820-10-35-37 are described below:
|
|
·
|
Level 1 – Quoted market prices available in active markets for identical assets or liabilities
as of the reporting date.
|
|
|
·
|
Level 2 – Pricing inputs other than quoted prices in active markets included in Level 1,
which are either directly or indirectly observable as of the reporting date.
|
|
|
·
|
Level 3 – Pricing inputs that are generally observable inputs and not corroborated by market
data
|
Financial assets are considered Level 3 when
their fair values are determined using pricing models, discounted cash flow methodologies or similar techniques and at least one
significant model assumption or input is unobservable.
The fair value hierarchy gives the highest
priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable
inputs. If the inputs used to measure the financial assets and liabilities fall within more than one level described above, the
categorization is based on the lowest level input that is significant to the fair value measurement of the instrument.
The carrying amounts of the Company’s
financial assets and liabilities, such as cash, accounts receivable, prepayments and other current assets, accounts payable and
accrued expenses, advances from third party and deferred rent approximate their fair values because of the short maturity of these
instruments.
The Company’s equipment loans approximate
the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the
Company for similar financial arrangements at December 31, 2015.
Transactions involving related parties cannot
be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings
may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions
were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be
substantiated.
Fair Value of Non-Financial Assets or
Liabilities Measured on a Recurring Basis
The Company’s non-financial assets include
inventories. The Company identifies potentially excess and slow-moving inventories by evaluating turn rates, inventory levels and
other factors. Excess quantities are identified through evaluation of inventory aging, review of inventory turns and historical
sales experiences. The Company provides lower of cost or market reserves for such identified excess and slow-moving inventories.
The Company establishes a reserve for inventory shrinkage, if any, based on the historical results of physical inventory cycle
counts.
Cash Equivalents
The Company considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
Accounts Receivable and Allowance for
Doubtful Accounts
Pursuant to FASB
ASC paragraph 310-10-35-47 trade receivables that management has the intent and ability to hold for the foreseeable future shall
be reported in the balance sheet at outstanding principal adjusted for any charge-offs and the allowance for doubtful accounts.
The Company follows FASB ASC paragraphs 310-10-35-7 through 310-10-35-10 to estimate the allowance for doubtful accounts.
Pursuant
to FASB ASC paragraph
310-10-
35-9 Losses from uncollectible receivables shall be accrued when
both of the following conditions are met: (a) Information available before the financial statements are issued or are available
to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset has been impaired at the date of the
financial statements, and (b) The amount of the loss can be reasonably estimated. Those conditions may be considered in relation
to individual receivables or in relation to groups of similar types of receivables. If the conditions are met, accrual shall be
made even though the particular receivables that are uncollectible may not be identifiable.
The Company reviews individually
each trade receivable for collectability and performs on-going credit evaluations of its customers and adjusts credit limits based
upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information;
and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general
economic conditions that may affect a client’s ability to pay. Bad debt expense is included in general and administrative
expenses, if any.
Pursuant to FASB
ASC paragraph 310-10-35-41 Credit losses for trade receivables (uncollectible trade receivables), which may be for all or part
of a particular trade receivable, shall be deducted from the allowance. The related trade receivable balance shall be charged off
in the period in which the trade receivables are deemed uncollectible. Recoveries of trade receivables previously charged off shall
be recorded when received. The Company charges off its trade account receivables
against the allowance after all means of
collection have been exhausted and the potential for recovery is considered remote.
The Company recorded a provision for doubtful
accounts of $85,000, which is based upon an analysis of the Company’s prior collection experience, customer creditworthiness
and current economic trends.
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 (*)
|
|
|
3-6
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
7-15
|
|
|
|
|
|
|
|
|
Software
|
|
|
3
|
|
|
|
|
|
|
|
|
Management Agreement(^)
|
|
|
1.5
|
|
(*) Amortized on a straight-line basis over
the term of the lease or the estimated useful lives, whichever is shorter.
(^) Amortized on a straight-line basis over
the term of the Management Agreement or its termination date, whichever is shorter.
Upon sale or retirement, the related cost and
accumulated depreciation are removed from the accounts and any gain or loss is reflected in the statements of operations.
Carrying Value, Recoverability and Impairment
of Long-Lived Assets
The Company has adopted Section 360-10-35 of
the FASB Accounting Standards Codification for its long-lived assets. Pursuant to ASC Paragraph 360-10-35-17 an impairment loss
shall be recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value.
The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows
expected to result from the use and eventual disposition of the asset (asset group). That assessment shall be based on the carrying
amount of the asset (asset group) at the date it is tested for recoverability. An impairment loss shall be measured as the amount
by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. Pursuant to ASC Paragraph 360-10-35-20
if an impairment loss is recognized, the adjusted carrying amount of a long-lived asset shall be its new cost basis. For a depreciable
long-lived asset, the new cost basis shall be depreciated (amortized) over the remaining useful life of that asset. Restoration
of a previously recognized impairment loss is prohibited.
Pursuant to ASC Paragraph 360-10-35-21 the
Company’s long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate
that its carrying amount may not be recoverable. The Company considers the following to be some examples of such events or changes
in circumstances that may trigger an impairment review: (a) significant decrease in the market price of a long-lived asset (asset
group); (b) A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in
its physical condition; (c) A significant adverse change in legal factors or in the business climate that could affect the value
of a long-lived asset (asset group), including an adverse action or assessment by a regulator; (d) An accumulation of costs significantly
in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group); (e) A current-period
operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates
continuing losses associated with the use of a long-lived asset (asset group); and (f) A current expectation that, more likely
than not, a long-lived asset (asset group) will be sold or otherwise disposed of significantly before the end of its previously
estimated useful life. The Company tests its long-lived assets for potential impairment indicators at least annually and more frequently
upon the occurrence of such events.
Pursuant to ASC Paragraphs 360-10-35-29 through
35-36 Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group) shall include only the
future cash flows (cash inflows less associated cash outflows) that are directly associated with and that are expected to arise
as a direct result of the use and eventual disposition of the asset (asset group). Estimates of future cash flows used to test
the recoverability of a long-lived asset (asset group) shall incorporate the entity’s own assumptions about its use of the
asset (asset group) and shall consider all available evidence. The assumptions used in developing those estimates shall be reasonable
in relation to the assumptions used in developing other information used by the entity for comparable periods, such as internal
budgets and projections, accruals related to incentive compensation plans, or information communicated to others.
However,
if alternative courses of action to recover the carrying amount of a long-lived asset (asset group) are under consideration or
if a range is estimated for the amount of possible future cash flows associated with the likely course of action, the likelihood
of those possible outcomes shall be considered. A probability-weighted approach may be useful in considering the likelihood of
those possible outcomes.
Estimates of future cash flows used to test the recoverability of a long-lived asset (asset group)
shall be made for the remaining useful life of the asset (asset group) to the entity. For long-lived assets (asset groups) that
have uncertainties both in timing and amount, an expected present value technique will often be the appropriate technique with
which to estimate fair value.
Pursuant to ASC Paragraphs 360-10-45-4 and
360-10-45-5 an impairment loss recognized for a long-lived asset (asset group) to be held and used shall be included in income
from continuing operations before income taxes in the income statement of a business entity. If a subtotal such as income from
operations is presented, it shall include the amount of that loss. A gain or loss recognized on the sale of a long-lived asset
(disposal group) that is not a component of an entity shall be included in income from continuing operations before income taxes
in the income statement of a business entity. If a subtotal such as income from operations is presented, it shall include the amounts
of those gains or losses.
Leases
Lease agreements are evaluated to determine
whether they are capital leases or operating leases in accordance with paragraph 840-10-25-1 of the FASB Accounting Standards Codification
(“Paragraph 840-10-25-1”). Pursuant to Paragraph 840-10-25-1 A lessee and a lessor shall consider whether a lease meets
any of the following four criteria as part of classifying the lease at its inception under the guidance in the Lessees Subsection
of this Section (for the lessee) and the Lessors Subsection of this Section (for the lessor): a. Transfer of ownership. The lease
transfers ownership of the property to the lessee by the end of the lease term. This criterion is met in situations in which the
lease agreement provides for the transfer of title at or shortly after the end of the lease term in exchange for the payment of
a nominal fee, for example, the minimum required by statutory regulation to transfer title. b. Bargain purchase option. The lease
contains a bargain purchase option. c. Lease term. The lease term is equal to 75 percent or more of the estimated economic life
of the leased property. d. Minimum lease payments. The present value at the beginning of the lease term of the minimum lease payments,
excluding that portion of the payments representing executory costs such as insurance, maintenance, and taxes to be paid by the
lessor, including any profit thereon, equals or exceeds 90 percent of the excess of the fair value of the leased property to the
lessor at lease inception over any related investment tax credit retained by the lessor and expected to be realized by the lessor.
In accordance with paragraphs 840-10-25-29
and 840-10-25-30, if at its inception a lease meets any of the four lease classification criteria in Paragraph 840-10-25-1, the
lease shall be classified by the lessee as a capital lease; and if none of the four criteria in Paragraph 840-10-25-1 are met,
the lease shall be classified by the lessee as an operating lease. Pursuant to Paragraph 840-10-25-31 a lessee shall compute the
present value of the minimum lease payments using the lessee’s incremental borrowing rate unless both of the following conditions
are met, in which circumstance the lessee shall use the implicit rate: a. It is practicable for the lessee to learn the implicit
rate computed by the lessor. b. The implicit rate computed by the lessor is less than the lessee’s incremental borrowing
rate. Capital lease assets are depreciated on a straight line method, over the capital lease assets estimated useful lives consistent
with the Company’s normal depreciation policy for tangible fixed assets. Interest charges are expensed over the period of
the lease in relation to the carrying value of the capital lease obligation.
Operating leases primarily relate to the Company’s
leases of office spaces. When the terms of an operating lease include tenant improvement allowances, periods of free rent, rent
concessions, and/or rent escalation amounts, the Company establishes a deferred rent liability for the difference between the scheduled
rent payment and the straight-line rent expense recognized, which is amortized over the underlying lease term on a straight-line
basis as a reduction of rent expense.
Related Parties
The Company follows subtopic 850-10 of the
FASB Accounting Standards Codification for the identification of related parties and disclosure of related party transactions.
Pursuant to Section 850-10-20 the related parties
include (a.) affiliates of the Company (“Affiliate” means, with respect to any specified Person, any other Person that,
directly or indirectly through one or more intermediaries, controls, is controlled by or is under common control with such Person,
as such terms are used in and construed under Rule 405 under the Securities Act); (b.) entities for which investments in their
equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section
825–10–15, to be accounted for by the equity method by the investing entity; (c.) trusts for the benefit of employees,
such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; (d.) principal owners of
the Company
and members of their immediate families
; (e.) management of the Company
and members of their immediate families
;; (f.) other parties with which the Company may deal if one party controls or can
significantly influence the management or operating policies of the other to an extent that one of the transacting parties might
be prevented from fully pursuing its own separate interests; and (g.) other parties that can significantly influence the management
or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly
influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate
interests.
Pursuant to ASC Paragraphs 850-10-50-1 and
50-5 financial statements shall include disclosures of material related party transactions, other than compensation arrangements,
expense allowances, and other similar items in the ordinary course of business. The disclosures shall include: (a.) the nature
of the relationship(s) involved; (b.) a description of the transactions, including transactions to which no amounts or nominal
amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary
to an understanding of the effects of the transactions on the financial statements; (c.) the dollar amounts of transactions for
each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms
from that used in the preceding period; and (d.) amounts due from or to related parties as of the date of each balance sheet presented
and, if not otherwise apparent, the terms and manner of settlement.
Transactions involving related
parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free-market
dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party
transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations
can be substantiated.
Product Warranty
The Company estimates future costs of warranty
obligations in accordance with ASC 460-10, which requires an entity to disclose and recognize a liability for the fair value of
the obligation it assumes upon issuance of a warranty. As of the fourth quarter of 2015, GRS LLC is no longer purchasing product
for its own account and reconditioning said product for resale with a GRS LLC warranty. Prior to the fourth quarter of 2015, GRS
LLC would warrant most of its reconditioned product for a specific period of time, usually 30 – 90 days but sometimes one
year, from the date of purchase, for certain covered reasons. The Company provides for the estimated future costs of warranty obligations
in cost of revenues when the related revenues are recognized. The accrued warranty costs represent the best estimate at the time
of sale of the total costs that the Company will incur to repair or replace product parts that fail while still under warranty.
The amount of the accrued estimated warranty costs obligation for established products is primarily based on historical experience
as to product failures adjusted for current information on repair costs. For new products, estimates include the historical experience
of similar products, as well as reasonable allowance for warranty expenses associated with new products. On a quarterly basis,
the Company reviews the accrued warranty costs and updates the historical warranty cost trends, if required.
The Company has incurred de minimis warranty
costs in connection with its sales for the reporting period ended December 31, 2015 due to the short duration of its warranty period
and it no longer purchasing consumer returns for its own account for reconditioning and resale.
Commitments and Contingencies
The Company follows subtopic 450-20 of the
FASB Accounting Standards Codification to report accounting for contingencies. Certain conditions may exist as of the date the
consolidated financial statements are issued, which may result in a loss to the Company but which will only be resolved when one
or more future events occur or fail to occur. The Company assesses such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company
or un-asserted claims that may result in such proceedings, the Company evaluates the perceived merits of any legal proceedings
or un-asserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein.
If the assessment of a contingency indicates
that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated
liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potential
material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of
the contingent liability, and an estimate of the range of possible losses, if determinable and material, would be disclosed.
Loss contingencies considered remote are generally
not disclosed unless they involve guarantees, in which case the guarantees would be disclosed.
Non-controlling Interest
The Company follows paragraph 810-10-65-1 of
the FASB Accounting Standards Codification to report the non-controlling interest in the consolidated balance sheets within the
equity section, separately from the Company’s stockholders’ equity. Non-controlling interest represents the non-controlling
interest holder’s proportionate share of the equity of the Company’s majority-owned subsidiary. Non-controlling interest
is adjusted for the non-controlling interest holder’s proportionate share of the earnings or losses and other comprehensive
income (loss), if any, and the non-controlling interest continues to be attributed its share of losses even if that attribution
results in a deficit non-controlling interest balance.
Revenue Recognition
The Company applies paragraph 605-10-S99-1
of the FASB Accounting Standards Codification for revenue recognition. The Company recognizes revenue when it is realized or realizable
and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists; (ii) the product has been shipped or the services have been rendered to the customer; (iii)
the sales price is fixed or determinable; and (iv) collectability is reasonably assured.
The Company derives its revenues from sales
contracts with customers with revenues being generated upon the 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.
Equity Instruments Issued to Parties
Other Than Employees for Acquiring Goods or Services
The Company accounts for equity instruments
issued to parties other than employees for acquiring goods or services under the guidance of Sub-topic 505-50 of the FASB Accounting
Standards Codification (“Sub-topic 505-50”).
Pursuant to ASC paragraphs 505-50-25-6 and
505-50-25-7,
a grantor shall recognize the goods acquired or services received in a share-based payment
transaction when it obtains the goods or as services are received. A grantor may need to recognize an asset before it actually
receives goods or services if it first exchanges share-based payment for an enforceable right to receive those goods or services.
Nevertheless, the goods or services themselves are not recognized before they are received.
If fully vested, nonforfeitable
equity instruments are issued at the date the grantor and grantee enter into an agreement for goods or services (no specific performance
is required by the grantee to retain those equity instruments), then, because of the elimination of any obligation on the part
of the counterparty to earn the equity instruments, a measurement date has been reached. A grantor shall recognize the equity instruments
when they are issued (in most cases, when the agreement is entered into). Pursuant to ASC paragraph 505-50-45-1, a grantor may
conclude that an asset (other than a note or a receivable) has been received in return for fully vested, nonforfeitable equity
instruments that are issued at the date the grantor and grantee enter into an agreement for goods or services (and no specific
performance is required by the grantee in order to retain those equity instruments). Such an asset shall not be displayed as contra-equity
by the grantor of the equity instruments. The transferability (or lack thereof) of the equity instruments shall not affect the
balance sheet display of the asset. This guidance is limited to transactions in which equity instruments are transferred to other
than employees in exchange for goods or services.
Pursuant to Paragraphs 505-50-25-8 and 505-50-25-9,
an entity may grant fully vested, non-forfeitable equity instruments that are exercisable by the grantee only after a specified
period of time if the terms of the agreement provide for earlier exercisability if the grantee achieves specified performance conditions.
Any measured cost of the transaction shall be recognized in the same period(s) and in the same manner as if the entity had paid
cash for the goods or services or used cash rebates as a sales discount instead of paying with, or using, the equity instruments.
A recognized asset, expense, or sales discount shall not be reversed if a stock option that the counterparty has the right to exercise
expires unexercised.
Pursuant to ASC Paragraphs 505-50-30-2 and
505-50-30-11 share-based payment transactions with nonemployees shall be measured at the fair value of the consideration received
or the fair value of the equity instruments issued, whichever is more reliably measurable. The issuer shall measure the fair value
of the equity instruments in these transactions using the stock price and other measurement assumptions as of the earlier of the
following dates, referred to as the measurement date: (a) The date at which a commitment for performance by the counterparty to
earn the equity instruments is reached (a performance commitment); or (b) The date at which the counterparty’s performance
is complete. If the Company’s common shares are traded in one of the national exchanges the grant-date share price of the
Company’s common stock will be used to measure the fair value of the common shares issued, however, if the Company’s
common shares are thinly traded the use of share prices established in the Company’s most recent private placement memorandum
(“PPM”), or weekly or monthly price observations would generally be more appropriate than the use of daily price observations
as such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading
in the market.
Pursuant to ASC Paragraph 718-10-55-21 if an
observable market price is not available for a share option or similar instrument with the same or similar terms and conditions,
an entity shall estimate the fair value of that instrument using a valuation technique or model that meets the requirements in
paragraph 718-10-55-11 and takes into account, at a minimum, all of the following factors:
|
a.
|
The exercise price of the option.
|
|
b.
|
The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and post-vesting employment termination behavior: Pursuant to Paragraph 718-10-50-2(f)(2)(i) of the FASB Accounting Standards Codification the expected term of share options and similar instruments represents the period of time the options and similar instruments are expected to be outstanding taking into consideration of the contractual term of the instruments and holder’s expected exercise behavior into the fair value (or calculated value) of the instruments. The Company uses historical data to estimate holder’s expected exercise behavior. If the Company is a newly formed corporation or shares of the Company are thinly traded the contractual term of the share options and similar instruments is used as the expected term of share options and similar instruments as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
|
|
c.
|
The current price of the underlying share.
|
|
d.
|
The expected volatility of the price of the underlying share for the expected term of the option. Pursuant to ASC Paragraph 718-10-55-25 a newly publicly traded entity might base expectations about future volatility on the average volatilities of similar entities for an appropriate period following their going public. A nonpublic entity might base its expected volatility on the average volatilities of otherwise similar public entities. For purposes of identifying otherwise similar entities, an entity would likely consider characteristics such as industry, stage of life cycle, size, and financial leverage. Because of the effects of diversification that are present in an industry sector index, the volatility of an index should not be substituted for the average of volatilities of otherwise similar entities in a fair value measurement. Pursuant to paragraph 718-10-S99-1 if shares of a company are thinly traded the use of weekly or monthly price observations would generally be more appropriate than the use of daily price observations as the volatility calculation using daily observations for such shares could be artificially inflated due to a larger spread between the bid and asked quotes and lack of consistent trading in the market. The Company uses the average historical volatility of the comparable companies over the expected term of the share options or similar instruments as its expected volatility.
|
|
e.
|
The expected dividends on the underlying share for the expected term of the option. The expected dividend yield is based on the Company’s current dividend yield as the best estimate of projected dividend yield for periods within the expected term of the share options and similar instruments.
|
|
f.
|
The risk-free interest rate(s) for the expected term of the option. Pursuant to ASC 718-10-55-28 a U.S. entity issuing an option on its own shares must use as the risk-free interest rates the implied yields currently available from the U.S. Treasury zero-coupon yield curve over the contractual term of the option if the entity is using a lattice model incorporating the option’s contractual term. If the entity is using a closed-form model, the risk-free interest rate is the implied yield currently available on U.S. Treasury zero-coupon issues with a remaining term equal to the expected term used as the assumption in the model.
|
Pursuant to ASC paragraph 505-50-S99-1, if
the Company receives a right to receive future services in exchange for unvested, forfeitable equity instruments, those equity
instruments are treated as unissued for accounting purposes until the future services are received (that is, the instruments are
not considered issued until they vest). Consequently, there would be no recognition at the measurement date and no entry should
be recorded.
Deferred Tax Assets
and Income Taxes Provision
Prior to March 7, 2014, GRS LLC was treated
as a partnership for federal income tax purposes, i.e. members of an LLC are taxed separately on their distributive share of the
LLC’s earnings (loss) whether or not that income is actually distributed.
Effective March 7, 2014, the Company accounts
for income taxes under Section 740-10-30 of the FASB Accounting Standards Codification. Deferred income tax assets and liabilities
are determined based upon differences between the financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Deferred tax assets are
reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in the statements of operations in the period that includes the enactment date.
The Company adopted section 740-10-25 of the
FASB Accounting Standards Codification (“Section 740-10-25”). Section 740-10-25 addresses the determination of whether
tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under Section 740-10-25,
the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized
in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty
percent (50%) likelihood of being realized upon ultimate settlement. Section 740-10-25 also provides guidance on de-recognition,
classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures.
The estimated future tax effects of temporary
differences between the tax basis of assets and liabilities are reported in the accompanying consolidated balance sheets, as well
as tax credit carry-backs and carry-forwards. The Company periodically reviews the recoverability of deferred tax assets recorded
on its consolidated balance sheets and provides valuation allowances as management deems necessary.
Management makes judgments as to the interpretation
of the tax laws that might be challenged upon an audit and cause changes to previous estimates of tax liability. In addition, the
Company operates within multiple taxing jurisdictions and is subject to audit in these jurisdictions. In management’s opinion,
adequate provisions for income taxes have been made for all years. If actual taxable income by tax jurisdiction varies from estimates,
additional allowances or reversals of reserves may be necessary.
Limitation on Utilization of
NOLs due to Change in Control
Pursuant to the Internal Revenue Code Section
382 (“Section 382”), certain ownership changes may subject the NOL’s to annual limitations which could reduce
or defer the NOL. Section 382 imposes limitations on a corporation’s ability to utilize NOLs if it experiences an “ownership
change.” In general terms, an ownership change may result from transactions increasing the ownership of certain stockholders
in the stock of a corporation by more than 50 percentage points over a three-year period. In the event of an ownership change,
utilization of the NOLs would be subject to an annual limitation under Section 382 determined by multiplying the value of its stock
at the time of the ownership change by the applicable long-term tax-exempt rate. Any unused annual limitation may be carried over
to later years. The imposition of this limitation on its ability to use the NOLs to offset future taxable income could cause the
Company to pay U.S. federal income taxes earlier than if such limitation were not in effect and could cause such NOLs to expire
unused, reducing or eliminating the benefit of such NOLs.
Pro forma income tax information
(unaudited)
Prior to March 7, 2014, the date
of acquisition, Green Remanufacturing Solutions, LLC was a LLC, treated as a partnership for federal income tax purposes. The
operating results of the LLC were included in the income tax returns of the members of LLC for income tax purposes.
There was no difference between net loss reported
as the LLC or as a C Corporation and there was no income tax provision for the reporting period ended December 31, 2014 as the
Company incurred net operating loss for the reporting period would the Company have always been incorporated as a C Corporation
upon its incorporation.
Earnings per Share
Earnings per share (“EPS”) is the
amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or
loss per share. EPS is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Pursuant to ASC Paragraphs
260-10-45-10 through 260-10-45-16 Basic EPS shall be computed by dividing income available to common stockholders (the numerator)
by the weighted-average number of common shares outstanding (the denominator) during the period. Income available to common stockholders
shall be computed by deducting both the dividends declared in the period on preferred stock (whether or not paid) and the dividends
accumulated for the period on cumulative preferred stock (whether or not earned) from net income (loss). The computation of diluted
EPS is similar to the computation of basic EPS except that the denominator is increased to include the number of additional common
shares that would have been outstanding if the dilutive potential common shares had been issued during the period to reflect the
potential dilution that could occur from common shares issuable through contingent shares issuance arrangement, stock options or
warrants.
Pursuant to ASC Paragraphs 260-10-45-45-21
through 260-10-45-45-23 Diluted EPS shall be based on the most advantageous conversion rate or exercise price from the standpoint
of the security holder. The dilutive effect of outstanding call options and warrants (and their equivalents) issued by the reporting
entity shall be reflected in diluted EPS by application of the treasury stock method. Equivalents of options and warrants include
non-vested stock granted to employees, stock purchase contracts, and partially paid stock subscriptions. Under the treasury stock
method: a. Exercise of options and warrants shall be assumed at the beginning of the period (or at time of issuance, if later)
and common shares shall be assumed to be issued. b. The proceeds from exercise shall be assumed to be used to purchase common
stock at the average market price during the period. (See paragraphs 260-10-45-29 and 260-10-55-4 through 55-5.) c. The incremental
shares (the difference between the number of shares assumed issued and the number of shares assumed purchased) shall be included
in the denominator of the diluted EPS computation. Pursuant to ASC Paragraphs 260-10-45-40 through 45-42
convertible
securities shall be reflected in diluted EPS by application of the if converted method.
The convertible preferred stock
or convertible debt shall be assumed to have been converted at the beginning of the period (or at time of issuance, if later).
In applying the if-converted method, conversion shall not be assumed for purposes of computing diluted EPS if the effect would
be anti-dilutive.
There were no potentially dilutive common shares
outstanding for the reporting period ended December 31, 2015 or 2014.
Cash Flows Reporting
The Company adopted paragraph 230-10-45-24
of the FASB Accounting Standards Codification for cash flows reporting, classifies cash receipts and payments according to whether
they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or
reconciliation method (the “Indirect Method”) as defined by paragraph 230-10-45-25 of the FASB Accounting Standards
Codification to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating
activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected
future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash
receipts and payments
Segment Information
The Company follows Topic 280 of the FASB Accounting
Standards Codification for segment reporting. Pursuant to Paragraph 280-10-50-1 an operating segment is a component of a public
entity that has all of the following characteristics: (a). It engages in business activities from which it may earn revenues and
incur expenses (including revenues and expenses relating to transactions with other components of the same public entity). (b).
Its operating results are regularly reviewed by the public entity’s chief operating decision maker to make decisions about
resources to be allocated to the segment and assess its performance. (c). Its discrete financial information is available. In accordance
with Paragraph 280-10-50-5 the term chief operating decision maker identifies a function, not necessarily a manager with a specific
title. That function is to allocate resources to and assess the performance of the segments of a public entity. Often the chief
operating decision maker of a public entity is its chief executive officer or chief operating officer, but it may be a group consisting
of, for example, the public entity’s president, executive vice presidents, and others. Pursuant to Paragraph 280-10-50-10
a public entity shall report separately information about each operating segment that meets both of the following criteria: (a).
Has been identified in accordance with paragraphs 280-10-50-1 and 280-10-50-3 through 50-9 or results from aggregating two or more
of those segments in accordance with the following paragraph; and (b). Exceeds the quantitative thresholds in paragraph 280-10-50-12.
In accordance with Paragraph 280-10-50-12 a public entity shall report separately information about an operating segment that meets
any of the following quantitative thresholds: (a). Its reported revenue, including both sales to external customers and intersegment
sales or transfers, is 10 percent or more of the combined revenue, internal and external, of all operating segments. (b). The absolute
amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount, of either: 1. The combined reported
profit of all operating segments that did not report a loss, or 2. The combined reported loss of all operating segments that did
report a loss. (c). Its assets are 10 percent or more of the combined assets of all operating segments. Pursuant to Paragraphs
280-10-50-22 and 280-10-50-29, a public entity shall report a measure of profit or loss and total assets for each reportable segment
and provide an explanation of the measurements of segment profit or loss and segment assets for each reportable segment. At a minimum,
a public entity shall disclose all of the following: (a). The basis of accounting for any transactions between reportable segments.
(b). The nature of any differences between the measurements of the reportable segments’ profits or losses and the public
entity’s consolidated income (loss) before income tax provision, extraordinary items, and discontinued operations (if not
apparent from the reconciliations described in paragraphs 280-10-50-30 through 50-31). (c). The nature of any differences between
the measurements of the reportable segments’ assets and the public entity’s consolidated assets (if not apparent from
the reconciliations described in paragraphs 280-10-50-30 through 50-31). (d). The nature of any changes from prior periods in the
measurement methods used to determine reported segment profit or loss and the effect, if any, of those changes on the measure of
segment profit or loss. (e). The nature and effect of any asymmetrical allocations to reportable segments.
Subsequent Events
The Company follows the guidance in Section
855-10-50 of the FASB Accounting Standards Codification for the disclosure of subsequent events. The Company will evaluate subsequent
events through the date when the financial statements were issued. Pursuant to ASU 2010-09 of the FASB Accounting Standards Codification,
the Company as an SEC filer considers its financial statements issued when they are widely distributed to users, such as through
filing them on EDGAR.
Recently Issued Accounting Pronouncements
In August 2014, the FASB issued the FASB Accounting
Standards Update No. 2014-15
“Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of
Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”).
In connection with preparing financial statements
for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events,
considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within
one year after the date that the
financial statements are issued
(or within one year after the date that the
financial
statements are available to be issued
when applicable). Management’s evaluation should be based on relevant conditions
and events that are known and reasonably knowable at the date that the
financial statements are issued
(or at the date that
the
financial statements are available to be issued
when applicable). Substantial doubt about an entity’s ability
to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable
that the entity will be unable to meet its obligations as they become due within one year after the date that the financial statements
are issued (or available to be issued). The term
probable
is used consistently with its use in Topic 450, Contingencies.
When management identifies conditions or events
that raise substantial doubt about an entity’s ability to continue as a going concern, management should consider whether
its plans that are intended to mitigate those relevant conditions or events will alleviate the substantial doubt. The mitigating
effect of management’s plans should be considered only to the extent that (1) it is probable that the plans will be effectively
implemented and, if so, (2) it is probable that the plans will mitigate the conditions or events that raise substantial doubt about
the entity’s ability to continue as a going concern.
If conditions or events raise substantial doubt
about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of consideration
of management’s plans, the entity should disclose information that enables users of the financial statements to understand
all of the following (or refer to similar information disclosed elsewhere in the footnotes):
|
|
a.
|
Principal conditions or events that raised substantial doubt about the entity’s ability to
continue as a going concern (before consideration of management’s plans)
|
|
|
b.
|
Management’s evaluation of the significance of those conditions or events in relation to
the entity’s ability to meet its obligations
|
|
|
c.
|
Management’s plans that alleviated substantial doubt about the entity’s ability to
continue as a going concern.
|
If conditions or events raise substantial doubt
about an entity’s ability to continue as a going concern, and substantial doubt is not alleviated after consideration of
management’s plans, an entity should include a statement in the footnotes indicating that there is
substantial doubt about
the entity’s ability to continue as a going concern
within one year after the date that the financial statements are
issued (or available to be issued). Additionally, the entity should disclose information that enables users of the financial statements
to understand all of the following:
|
|
a.
|
Principal conditions or events that raise substantial doubt about the entity’s ability to
continue as a going concern
|
|
|
b.
|
Management’s evaluation of the significance of those conditions or events in relation to
the entity’s ability to meet its obligations
|
|
|
c.
|
Management’s plans that are intended to mitigate the conditions or events that raise substantial
doubt about the entity’s ability to continue as a going concern.
|
The amendments in this Update are effective
for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application
is permitted.
In July 2015, the FASB issued the FASB Accounting
Standards Update No. 2015-11 “Inventory (Topic 330): Simplifying the Measurement of Inventory” (“ASU 2015-11”).
The amendments in this Update do not apply to inventory that is measured using last-in, first-out (LIFO) or the retail inventory
method. The amendments apply to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO)
or average cost. An entity should measure inventory within the scope of this Update at the lower of cost and net realizable value.
Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion,
disposal, and transportation. Subsequent measurement is unchanged for inventory measured using LIFO or the retail inventory method.
For public business entities, the amendments in this Update are effective for fiscal years beginning after December 15, 2016, including
interim periods within those fiscal years.
In August 2015, the FASB issued the FASB Accounting
Standards Update No. 2015-14 “Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date” (“ASU
2015-14”). The amendments in this Update defer the effective date of Update 2014-09 for all entities by one year. Public
business entities, certain not-for-profit entities, and certain employee benefit plans should apply the guidance in Update 2014-09
to annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period.
Earlier application is permitted only as of annual reporting periods beginning after December 15, 2016, including interim reporting
periods within that reporting period.
Management does not believe that any recently
issued, but not yet effective accounting pronouncements, when adopted, will have a material effect on the accompanying consolidated
financial statements.
Note 3 – Going Concern
The Company elected to adopt early application
of Accounting Standards Update No. 2014-15,
“Presentation of Financial Statements—Going Concern (Subtopic 205-40):
Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (“ASU 2014-15”)
.
The Company’s consolidated financial
statements have been prepared assuming that it will continue as a going concern, which contemplates continuity of operations, realization
of assets, and liquidation of liabilities in the normal course of business.
As reflected in the financial statements, the
Company had an accumulated deficit at December 31, 2015, 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 hopes
to generate sufficient revenue; however, the Company’s cash position may not be sufficient to support its daily operations.
While the Company believes in the viability of its strategy to generate sufficient revenue and in its ability to raise additional
funds, there can be no assurances to that effect. The ability of the Company to continue as a going concern is dependent upon its
ability to further implement its business plan and generate sufficient revenue and its ability to raise additional funds by way
of a public or private offering.
The 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:
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December 31, 2015
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December 31, 2014
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Raw materials
|
|
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-
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$
|
306,298
|
|
|
|
|
|
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|
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Finished goods
|
|
|
-
|
|
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403,551
|
|
|
|
|
|
|
|
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Inventory reserve
|
|
|
-
|
|
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(106,694
|
)
|
|
|
|
|
|
|
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$
|
603,155
|
|
The Company recorded $174,517 and $276,694
inventory obsolescence and slow moving adjustments for the year ended December 31, 2015 and 2014, respectively.
Note 5 – Property, Equipment, Leasehold
Improvement, Software and Hardware and Management Agreement
(i) Impairment
The Company completed its annual impairment
testing of property and equipment and determined that there was no impairment as the fair value of property and equipment, exceeded
their carrying values at December 31, 2015.
(ii) Depreciation and Amortization Expense
Depreciation and amortization expense were
$190,727 and $134,980 for the reporting period ended December 31, 2015 and 2014, respectively.
Note 6 – Related Party Transactions
Related parties
Related parties with whom the Company had transactions
are:
|
Related Parties
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Relationship
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|
Eugene Fernandez
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|
President, interim CFO, and significant stockholder of the Company.
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Anthony Williams
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|
Chairman of the Board of Directors of the Company and significant stockholder of the Company.
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Michael Christopher Cox
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COO and significant stockholder of the Company.
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DGS Group LLC
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An entity owned and controlled by a significant stockholder of the Company.
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Stonehenge Holdings LLC
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An entity owned and controlled by a significant stockholder of the Company.
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FLS 3, Inc.
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|
An entity owned and controlled by a significant stockholder of the Company.
|
Screening Plant Purchase Agreement
On June 19, 2015, the Company, via its majority
owned subsidiary, Speyside Holdings LLC, purchased a screening plant from FLS 3, Inc. FLS 3, Inc. is an entity solely owned by
Eugene Fernandez, a major shareholder, President and acting CFO of the Company. The screening plant was sold by FLS 3, Inc. to
Speyside Holdings LLC for $160,000. FLS 3, Inc. delivered the screening plant and a bill of sale to Speyside Holdings LLC and Speyside
Holdings LLC tendered $41,000 and a promissory note for $119,000 to FLS 3, Inc. The promissory note bears an interest rate of 5%
per annum and is due on demand.
Advances from Stockholders
From time to time, the stockholders of the
Company advance funds to the Company for working capital purpose. Those advances are unsecured, non-interest bearing and due on
demand.
Notes Payable - Stockholders
Notes payable - Stockholders consisted of the
following:
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|
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December 30,
2015
|
|
|
December 31,
2014
|
|
|
|
|
|
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|
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On January 30, 2015 the Company issued a promissory note to a stockholder to memorialize (i) the receipt of the funds in the amount of $9,800 and (ii) the terms of note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
9,800
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
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On various dates between the months of January and June 2015, the Company issued 17 promissory notes to the same stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $128,150 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. Nine of these notes remain outstanding.
|
|
$
|
73,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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On April 3, 2015 the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $50,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
50,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
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|
On May 11, 2015, the Company issued a note to a stockholder to memorialize (i) the availability of funds in the amount of $500,000 or the amount disbursed to the company and (ii) the terms of the note. As of September 30, 2015, $500,000 has been disbursed to the Company. Pursuant to the terms and conditions, the note accrues interest at the rate of LIBOR (90 day) plus the Margin (4%) per annum and interest payments are due monthly. The note is due May 8, 2016.
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|
$
|
500,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On June 19, 2015, the Company issued a note to a stockholder to acknowledge (i) the loan balance of $140,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues compound interest at 5% per annum and is due on demand. On various dates in November, payments were made to the shareholder totaling $43,000. The current balance due on this note is $76,000
|
|
$
|
76,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On July 10, 2015, the Company issued a note to, memorialize (i) the receipt of funds in the amount of $10,000 and (ii) the terms of note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand. The current balance due on this note is $5,000
|
|
$
|
5,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On August 21, 2015, the Company issued a grid note to a stockholder to memorialize (i) the receipt of funds in the amount of $19,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
19,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On August 26, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $10,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
10,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On September 1, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $10,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
10,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On September 4, 2015, the Company modified the grid note dated August 21, 2015 to a stockholder to memorialize (i) the receipt of funds in the amount of $7,500 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
7,500
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On September 11, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $4,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
4,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On September 14, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $30,000 and (ii) the terms of the note. Pursuant to the terms and conditions, the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
30,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On September 23, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $60,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
60,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On October 5, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $25,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
25,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On November 3, 2015, the Speyside Holdings LLC issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $8,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
8,000
|
|
|
|
-
|
|
|
On November 4, 2015, the Speyside Holdings LLC issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $1,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
1,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On November 5, 2015, the Speyside Holdings LLC issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $2,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
2,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On November 6, 2015, the Speyside Holdings LLC issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $25,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
25,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On November 25, 2015, the Company issued a note to memorialize (i) the receipt of funds in the amount of $10,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
10,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On December 17, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $125,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
125,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On various dates of December 2015, the Company issued 5 promissory notes to the same stockholder to memorialize (i) the receipt of the funds in the aggregate amount of $59,301 and (ii) the terms of the notes. Pursuant to the terms and conditions, the notes accrue simple interest at 5% per annum until the notes are fully repaid. The notes are due on demand. All of these notes remain outstanding.
|
|
$
|
59,301
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
On December 31, 2015, the Company issued a note to a stockholder to memorialize (i) the receipt of funds in the amount of $13,000 and (ii) the terms of the note. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and is due on demand.
|
|
$
|
13,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,123,501
|
|
|
$
|
-
|
|
Note 7 – Equipment Loan
On November 25, 2015 Speyside purchased an
excavator for $108,300; $15,600 in cash and financing of $92,700. The loan has forty-eight payments of $2,088.93 per month, commencing
December 2015 and expiring in November 2019 with an annual interest rate of 3.9%.
Equipment loan consisted of the following:
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
|
|
|
|
|
|
|
|
(i) On November 25, 2015 Speyside purchased an excavator for $108,300; $15,600 in cash and financing of $92,700. The loan has forty-eight payments of $2,088.93 per month, commencing December 2015 and expiring in November 2019 with an annual interest rate of 3.9%.
|
|
|
90,912
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Less current maturities
|
|
|
(21,911
|
)
|
|
|
(-
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total capital lease obligations, net of current maturities
|
|
$
|
69,001
|
|
|
$
|
-
|
|
The future minimum payments under this equipment
loan at December 31, 2015 were as follows:
|
Year ending December 31:
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
25,067
|
|
|
|
|
|
|
|
|
2017
|
|
|
25,067
|
|
|
|
|
|
|
|
|
2018
|
|
|
25,067
|
|
|
|
|
|
|
|
|
2019
|
|
|
22,978
|
|
|
|
|
|
|
|
|
Total capital lease obligation payments
|
|
|
98,179
|
|
|
|
|
|
|
|
|
Less amounts representing interest
|
|
|
(7,267
|
)
|
|
|
|
|
|
|
|
Present value of total future capital lease obligation payments
|
|
$
|
90,912
|
|
|
|
|
|
|
|
|
Less current maturities of capital lease obligation
|
|
|
(21,911
|
)
|
|
|
|
|
|
|
|
Capital lease obligation, net of current maturities
|
|
$
|
69,001
|
|
Note 8 – Commitments and Contingencies
Operating Lease
Operating Lease - Yaphank Facility
On August 10, 2011, effective September 1,
2011, Green Remanufacturing Solutions of NY, Inc. entered into a lease for warehouse space expiring on March 31, 2017 (the “Yaphank
Lease”). On January 10, 2013 the Green Remanufacturing Solutions of NY, Inc. amended the Yaphank Lease to expand its demised.
On August 1, 2013, Green Remanufacturing Solutions of NY, Inc. assigned the Yaphank Lease, as amended to Green Remanufacturing
Solutions LLC. On February 24, 2016, Green Remanufacturing Solutions LLC amended the Yaphank Lease (effective September 29, 2015)
to reduce the demised area.
Future
base rent minimum payments required under this non-cancelable operating lease were as follows:
|
Year ending December 31:
|
|
|
|
|
|
|
|
|
|
|
|
2015
|
|
|
370,903
|
|
|
|
|
|
|
|
|
2016
|
|
|
265,981
|
|
|
|
|
|
|
|
|
2017
|
|
|
67,053
|
|
|
|
|
|
|
|
|
|
|
$
|
703,937
|
|
Equipment Leases
During the interim period ended September 30, 2015, the Company
entered into two equipment rental contracts with purchase option for heavy machinery to be used in its quarry operations. As of
December 31, 2015, Management has decided to return one of these pieces of equipment. The cost of the machine that remains at
the quarry is $575,000. If Management pursues the purchase option, $20,000 of rental payments paid per month will be applied toward
the purchase price.
Employment Agreements – Officers
On April 23, 2015, the Company entered into
an employment agreement with
Eugene Fernandez as Chief Executive Officer of the Company. According
to the agreement which has an initial term of three years with automatic one year renewals, Mr. Fernandez will receive the following
in connection with his position:
|
●
|
Base salary of $120,000.
|
|
|
|
|
●
|
Eligibility to receive an annual cash bonus.
|
|
|
|
|
●
|
Receipt of 5 Class B Units of Speyside Holdings LLC.
|
On April 23, 2015, the Company entered into
an employment agreement with
Michael Cox as Chief Operating Officer of the Company. According
to the agreement which has an initial term of three years with automatic one year renewals, Mr. Cox will receive the following
in connection with his position:
|
●
|
Base salary of $120,000.
|
|
|
|
|
●
|
Eligibility to receive an annual cash bonus.
|
|
|
|
|
●
|
Receipt of 5 Class B Units of Speyside Holdings LLC.
|
Note 9 –Stockholders’ Equity
(Deficit)
Shares Authorized
The total number of shares of all classes of
stock which the Company is authorized to issue is Three Hundred and Ten Million (310,000,000) shares of which Ten Million (10,000,000)
shares shall be Preferred Stock, par value $0.001 per share, and Three Hundred Million (300,000,000) shares shall be Common Stock,
par value $0.001 per share.
Common Stock
Amendment to the
Articles of Incorporation to Effectuate a Reverse Stock Split
Effective March 7, 2014, the Board of Directors
and the majority voting stockholders adopted and approved a resolution to amend its Articles of Incorporation to effectuate a forward
split such that 10 shares of Common Stock were issued for every 1 share of Common Stock issued and outstanding immediately prior
to the Amendment (the “Split”).
All shares and per share amounts in the financial
statements have been adjusted to give retroactive effect to the stock Split.
Issuance of Common
Stock
During the calendar year ended December 31,
2015, the Company sold no shares of its Common Stock.
Note 10 – Concentrations and Credit
Risk
Customers and Credit Concentrations
Total net sales to any customer did not account
for more than 10% of total sale for the year ended December 31, 2015. As of December 31, 2015, two customers accounted for 30%
of Accounts Receivable.
Customer concentrations and credit concentrations
for the year ended December 31, 2014 are as follows:
|
|
|
Net Sales
|
|
|
Account Receivable
|
|
|
|
|
Twelve Months Ended
|
|
|
Twelve Months Ended
|
|
|
|
|
December 31, 2014
|
|
|
December 31, 2014
|
|
|
Customer A
|
|
|
10
|
%
|
|
|
3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Customer B
|
|
|
9
|
%
|
|
|
-
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Customer C
|
|
|
9
|
%
|
|
|
10
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Customer D
|
|
|
6
|
%
|
|
|
12
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Customer E
|
|
|
4
|
%
|
|
|
22
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Customer F
|
|
|
3
|
%
|
|
|
11
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41
|
%
|
|
|
58
|
%
|
Vendor Concentrations
Vendor purchase concentrations and accounts
payable concentration as follows:
|
|
|
Net Purchases
|
|
|
Accounts Payable
|
|
|
|
|
The year ended
|
|
|
At
|
|
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
December 31, 2015
|
|
|
December 31, 2014
|
|
|
Vendor A
|
|
|
3
|
%
|
|
|
61
|
%
|
|
|
12
|
%
|
|
|
42
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor B
|
|
|
-
|
%
|
|
|
14
|
%
|
|
|
3
|
%
|
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor C
|
|
|
1
|
%
|
|
|
8
|
%
|
|
|
3
|
%
|
|
|
21
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4
|
%
|
|
|
83
|
%
|
|
|
18
|
%
|
|
|
89
|
%
|
Note 11 – Segment Reporting
Reportable segments are components of an enterprise
about which separate financial information is available and that is evaluated regularly by the chief operating decision maker in
deciding how to allocate resources and in assessing performance. The Company’s reportable segments are based on products
and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.
The Company operates in the following business
segments:
|
|
i.
|
Parent: the Company is responsible for the overall management of its returns management segment and quarry operations segment.
|
|
|
ii.
|
Returns management: through the Company’s wholly owned subsidiary, Green Remanufacturing Solutions LLC, this segment engages in reverse logistics, remanufacturing, repair and recovery, engineering/quality assurance, warehousing and fulfillment, secondary market sales and e-commerce for retailers and manufacturers of consumer goods.
|
|
|
iii.
|
Quarry operations: through a company that the Company is a majority owner of, Speyside Holdings LLC, this segment engages in the production and sale of crushed stone and aggregates to the New York City metro area.
|
The Company measures the segment profit or
loss and segment assets for each reportable segment as follows:
|
|
a.
|
The basis of accounting for any transactions between reportable segments: The Company allows reportable segments to freely negotiate the terms and conditions of and carries out, on an arm’s-length basis, any transactions between reportable segments;
|
|
|
b.
|
The nature of any differences between the measurements of the reportable segments’ profits or losses and the public entity’s consolidated income before income taxes, extraordinary items, and discontinued operations: There are no material differences between the measurements of the reportable segments’ profits or losses and the public entity’s consolidated income (loss) as the Company presently allocates minimal centrally incurred costs to the parent;
|
|
|
c.
|
The nature of any differences between the measurements of the reportable segments’ assets and the public entity’s consolidated assets: There were no difference between the measurements of the reportable segments’ assets and the public entity’s consolidated assets as the Company does not have any jointly used assets;
|
|
|
d.
|
The nature of any changes from prior periods in the measurement methods used to determine reported segment profit or loss and the effect, if any, of those changes on the measure of segment profit or loss: this is the first period that the Company is engaging in segment reporting;
|
|
|
e.
|
The nature and effect of any asymmetrical allocations to reportable segments: There were no asymmetrical allocations to reportable segments as the Company does not allocate depreciation expense to a reportable segment without allocating the related depreciable assets to that reportable segment.
|
|
Progressive Green Solutions, Inc.
|
|
Assets by Segments
|
|
|
|
December 31, 2015
|
|
|
|
|
Parent
|
|
|
Returns
|
|
|
Quarry Operations
|
|
|
Total
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
360
|
|
|
$
|
360
|
|
|
Accounts receivable, net
|
|
|
|
|
|
|
68455
|
|
|
|
938,644
|
|
|
|
1,007,099
|
|
|
Inventories, net
|
|
|
|
|
|
|
-
|
|
|
|
|
|
|
|
-
|
|
|
Advances to related party
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
Advance on purchases
|
|
|
|
|
|
|
|
|
|
|
-
|
|
|
|
-
|
|
|
Prepayments and other current assets
|
|
|
12,526
|
|
|
|
10,763
|
|
|
|
11,562
|
|
|
|
34,851
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
12,526
|
|
|
|
79,218
|
|
|
|
950,566
|
|
|
|
1,042,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
|
|
|
|
102,580
|
|
|
|
292,558
|
|
|
|
395,138
|
|
|
Accumulated depreciation
|
|
|
|
|
|
|
(20,199
|
)
|
|
|
(19,913
|
)
|
|
|
(40,112
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
|
|
82,381
|
|
|
|
272,645
|
|
|
|
355,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SOFTWARE AND HARDWARE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software and hardware
|
|
|
|
|
|
|
190,731
|
|
|
|
16350
|
|
|
|
207,081
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
(83,284
|
)
|
|
|
(2,393
|
)
|
|
|
(85,677
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Software and hardware, net
|
|
|
|
|
|
|
107,447
|
|
|
|
13,957
|
|
|
|
121,404
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LEASEHOLD IMPROVEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
|
|
|
|
|
563,267
|
|
|
|
134,946
|
|
|
|
698,213
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
(338,016
|
)
|
|
|
|
|
|
|
(338,016
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvements, net
|
|
|
|
|
|
|
225,251
|
|
|
|
134,946
|
|
|
|
360,197
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MANAGEMENT AGREEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management agreement
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
50,000
|
|
|
Accumulated amortization
|
|
|
|
|
|
|
|
|
|
|
(22,778
|
)
|
|
|
(22,778
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Management agreement, net
|
|
|
|
|
|
|
|
|
|
|
27,222
|
|
|
|
27,222
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Security deposits
|
|
|
|
|
|
|
34,693
|
|
|
|
|
|
|
|
34,693
|
|
|
Deposit on potential purchase
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
|
|
|
|
|
34,693
|
|
|
|
200,000
|
|
|
|
234,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
12,526
|
|
|
$
|
528,990
|
|
|
$
|
1,599,336
|
|
|
$
|
2,140,852
|
|
See accompanying notes to the consolidated
financial statements.
|
Progressive Green Solutions, Inc.
|
|
Operations by Segment
|
|
|
|
For the Twelve Months
|
|
|
|
|
Ended
|
|
|
|
|
December 31, 2015
|
|
|
|
|
Parent
|
|
|
Returns Management
|
|
|
Quarry Operations
|
|
|
Total
|
|
|
NET REVENUE
|
|
$
|
-
|
|
|
$
|
1,652,382
|
|
|
$
|
3,196,075
|
|
|
$
|
4,848,457
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of goods sold
|
|
|
|
|
|
|
1,637,889
|
|
|
|
3,204,586
|
|
|
|
4,842,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
COST OF GOODS SOLD
|
|
|
-
|
|
|
|
1,637,889
|
|
|
|
3,204,586
|
|
|
|
4,842,475
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GROSS MARGIN
|
|
|
-
|
|
|
|
14,493
|
|
|
|
(8,511
|
)
|
|
|
5,982
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Salaries and wages
|
|
|
126,282
|
|
|
|
437,994
|
|
|
|
110,667
|
|
|
|
674,943
|
|
|
Professional fees
|
|
|
179,376
|
|
|
|
22,683
|
|
|
|
139,186
|
|
|
|
341,245
|
|
|
Rent and occupancy
|
|
|
-
|
|
|
|
444,440
|
|
|
|
72,363
|
|
|
|
516,803
|
|
|
Selling, general and administrative
|
|
|
99,214
|
|
|
|
345,485
|
|
|
|
276,188
|
|
|
|
720,887
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
404,872
|
|
|
|
1,250,602
|
|
|
|
598,404
|
|
|
|
2,253,878
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM OPERATIONS
|
|
|
(404,872
|
)
|
|
|
(1,236,109
|
)
|
|
|
(606,915
|
)
|
|
|
(2,247,896
|
)
|
See accompanying notes to the consolidated
financial statements.
Note 12 – Deferred Assets and Income
Tax Provision
Deferred Tax Assets
At December 31, 2015, the Company has available
for federal income tax purposes a net operating loss (“NOL”) carry-forwards of approximately $4,602,912 that may be
used to offset future taxable income through the fiscal year ending December 31, 2035. No tax benefit has been reported with respect
to these net operating loss carry-forwards in the accompanying consolidated financial statements since the Company believes that
the realization of its net deferred tax asset of approximately $1,564,990 was not considered more likely than not and accordingly,
the potential tax benefits of the net loss carry-forwards are fully offset by a full valuation allowance.
Deferred tax assets consist primarily
of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because
of the uncertainty regarding the probability of its realization. The valuation allowance increased by $794,832 and $770,158
for the years ended December 31, 2015 and 2014, respectively.
Components of deferred tax assets are as follows:
|
|
|
December 31,
2015
|
|
|
December 31,
2014
|
|
|
Net deferred tax assets – Non-current:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected income tax benefit from NOL carry-forwards
|
|
$
|
1,564,990
|
|
|
$
|
770,158
|
|
|
Less valuation allowance
|
|
$
|
(1,564,990
|
)
|
|
$
|
(770,158
|
)
|
|
Deferred tax assets, net of valuation allowance
|
|
$
|
-
|
|
|
$
|
-
|
|
Income Tax Provision
A reconciliation of the federal statutory income
tax rate and the effective income tax rate as a percentage of income before income taxes is as follows:
|
|
|
For the year
ended
December 31,
2015
|
|
|
For the year
ended
December 31,
2014
|
|
|
|
|
|
|
|
|
|
|
Federal statutory income tax rate
|
|
|
34.0
|
%
|
|
|
34.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Change in valuation allowance on net operating loss carry-forwards
|
|
|
(34.0
|
)%
|
|
|
(34.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
0.0
|
%
|
|
|
0.0
|
%
|
Note 13 – 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 the following reportable subsequent event was required to be disclosed:
During the months of January 2016 through March 2016, The Company
issued 37
notes to stockholders to memorialize (i) the receipt of funds totaling $318,700 and
(ii) the terms of the notes. Pursuant to the terms and conditions the note accrues simple interest at 5% per annum and are due
on demand.
Grafico Azioni Progressive Green Soluti... (CE) (USOTC:PGSC)
Storico
Da Gen 2025 a Feb 2025
Grafico Azioni Progressive Green Soluti... (CE) (USOTC:PGSC)
Storico
Da Feb 2024 a Feb 2025
