0001185185-12-002497.txt : 20121114 0001185185-12-002497.hdr.sgml : 20121114 20121114105215 ACCESSION NUMBER: 0001185185-12-002497 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20120930 FILED AS OF DATE: 20121114 DATE AS OF CHANGE: 20121114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GlyEco, Inc. CENTRAL INDEX KEY: 0000931799 STANDARD INDUSTRIAL CLASSIFICATION: INDUSTRIAL INORGANIC CHEMICALS [2810] IRS NUMBER: 330622722 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-30396 FILM NUMBER: 121201741 BUSINESS ADDRESS: STREET 1: 4802 EAST RAY ROAD, SUITE 23-196 CITY: PHOENIX STATE: AZ ZIP: 85044 BUSINESS PHONE: 866-960-1539 MAIL ADDRESS: STREET 1: 4802 EAST RAY ROAD, SUITE 23-196 CITY: PHOENIX STATE: AZ ZIP: 85044 FORMER COMPANY: FORMER CONFORMED NAME: Environmental Credits Ltd DATE OF NAME CHANGE: 20091001 FORMER COMPANY: FORMER CONFORMED NAME: BOYSTOYS COM INC DATE OF NAME CHANGE: 19990209 FORMER COMPANY: FORMER CONFORMED NAME: ALTERNATIVE ENTERTAINMENT INC DATE OF NAME CHANGE: 19950106 10-Q 1 glyeco10q093012.htm glyeco10q093012.htm


UNITED STATES
 SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 

 
FORM 10-Q
 

 
(Mark One)                                                                                                                                                                                         
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2012

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-30396

GLYECO, INC.
(Exact name of registrant as specified in its charter)

Nevada
     
45-4030261
(State or other jurisdiction of incorporation)
     
(IRS Employer Identification No.)
 
4802 East Ray Road, Suite 23-196
Phoenix, Arizona
     
85044
(Address of principal executive offices)
     
(Zip Code)

 (866) 960-1539
(Registrant’s telephone number, including area code)

N/A
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x  No¨
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x  No¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange ct. (Check one):

Large accelerated filer ¨
Accelerated filer ¨
   
Non-accelerated filer ¨ (Do not check if a smaller reporting company)
Smaller reporting company x

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes ¨ No x

As of November 14, 2012, there were 29,531,991 shares of common stock, par value $0.0001 per share, of the Registrant issued and outstanding.
 
 
TABLE OF CONTENTS
 
 
Page
No:
PART I — FINANCIAL INFORMATION
 
Item 1.
  3
    3
    4
    5
    6
Item 2.
  14
Item 3.
  21
Item 4.
  21
     
PART II — OTHER INFORMATION:
 
Item 1.
  22
Item 1A.
  22
Item 2.
  22
Item 3.
  24
Item 5.
  24
Item 6.
  24
  25
 
 
PART I—FINANCIAL INFORMATION
 
Item 1.  Financial Statements
 
GLYECO, INC. and Subsidiaries
Consolidated Balance Sheets
 
ASSETS
 
             
   
September 30,
   
December 31,
 
   
2012
   
2011
 
   
(unaudited)
   
(audited)
 
Current assets
           
Cash
  $ 950,235     $ 577,127  
Accounts receivable, net
    136,646       35,098  
Prepaid expenses
    4,550       -  
Inventories
    16,207       -  
Total current assets
  $ 1,107,638     $ 612,225  
                 
Equipment
               
Equipment
    407,870       -  
Accumulated depreciation
    (43,579 )     -  
Total equipment, net
    364,291       -  
                 
Other assets
               
Goodwill
    78,044       -  
Other intangible assets
    10,000       -  
Total other assets
    88,044       -  
                 
Total assets
  $ 1,559,973     $ 612,225  
                 
LIABILITIES AND STOCKHOLDERS' DEFICIT
 
                 
Current liabilities
               
Accounts payable and accrued expenses
  $ 205,109     $ 212,749  
Due to related parties
    474,131       568,603  
Interest payable
    565,976       431,692  
Convertible note payable
    1,000,000       1,000,000  
Total liabilities
    2,245,216       2,213,044  
                 
Stockholders' deficit
               
Preferred stock; $0.0001 par value; 10,000,000 shares authorized
and zero shares issued and outstanding as of September 30, 2012
and December 31, 2011, respectively
    -       -  
Common stock, $.0001 par value; 300,000,000 shares authorized
and 26,631,991 and 22,858,235shares issued and outstanding
as of September 30, 2012 and December 31, 2011 respectively
    2,583       2,286  
Additional paid in capital
    7,931,377       5,772,924  
Options and warrants outstanding
    129,347       107,347  
Accumulated deficit
    (8,,748,550 )     (7,483,376 )
Total stockholders' deficit
    (685,243 )     (1,600,819 )
                 
Total liabilities and stockholders' deficit
  $ 1,559,973     $ 612,225  

See accompanying notes to the financial statements
 
 
GLYECO, INC. and Subsidiaries
Consolidated Statements of Operations
 
   
Three months ended September 30,
   
Nine months ended September 30,
 
   
2012
   
2011
   
2012
   
2011
 
   
(unaudited)
   
(unaudited)
   
(unaudited)
   
(unaudited)
 
                         
Sales, net
 
$
303,456
   
$
200,256
   
$
895,390
   
$
675,581
 
Cost of goods sold
   
233,180
     
216,730
     
738,780
     
588,701
 
Gross profit
   
70,276
     
(16,474
)
   
156,610
     
86,880
 
                                 
Operating expenses
                               
Consulting fees
   
165,100
     
94,600
     
358,457
     
292,540
 
Salaries and wages
   
168,974
     
-
     
355,034
     
-
 
Legal and professional
   
60,428
     
(81,754
)
   
265,361
     
(37,909
)
General and administrative
   
76,077
     
37,237
     
308,379
     
86,565
 
Total operating expenses
   
470,579
     
50,083
     
1,287,231
     
341,196
 
                                 
Loss from operations
   
(400,303
)
   
(66,557
)
   
(1,130,621
)
   
(254,316
)
                                 
Other income and expenses
                               
Gain on fixed assets
           
(16,000
)
           
(16,000
)
Interest income
   
(136
)
   
(83
)
   
(522
)
   
(357
)
Interest expense
   
46,189
     
36,750
     
135,075
     
110,640
 
Total other income and expenses
   
46,053
     
20,667
     
134,553
     
94,283
 
                                 
Loss before provision for income taxes
   
(446,356
)
   
(87,224
)
   
(1,265,174
)
   
(348,599
)
                                 
Provision for income taxes
   
-
     
-
     
-
     
50
 
                                 
Net loss
 
$
(446,356
)
 
$
(87,224
)
 
$
(1,265,174
)
 
$
(348,649
)
                                 
Weighted average number of common shares outstanding
   
25,724,920
     
11,481,952
     
24,760,292
     
11,481,952
 
                                 
Primary and fully diluted loss per share
 
$
(0.02
)
 
$
(0.01
)
 
$
(0.05
)
 
$
(0.03
)
 
See accompanying notes to the financial statements
 
 
GLYECO, INC. and Subsidiaries
 Consolidated Statements of Cash Flows
 
   
Nine months ended September 30,
 
   
2012
   
2011
 
   
(unaudited)
   
(unaudited)
 
             
Net cash flow from operating activities
           
Net loss
 
$
(1,265,174
)
 
$
(348,649
)
Adjustments to reconcile net loss to net cash (used in) operating activities
               
Depreciation
   
43,579
     
-
 
Warrants and options for services
   
22,000
     
-
 
(Increase) decrease in assets:
               
Accounts receivable
   
(47,542
)
   
(40,216
)
Prepaid expenses
   
(4,550
)
       
Inventories
   
(16,207
)
   
-
 
Increase (decrease) in liabilities:
               
Accounts payable and accrued expenses
   
(7,640
)
   
(202,383
)
Related party payable
   
(94,472
)
   
134,500
 
Accrued interest
   
134,284
     
83,577
 
                 
Net cash (used in) operating activities
   
(1,235,722
)
   
(373,171
)
                 
Cash flows from investing activities
               
Purchase of equipment
   
(6,170
)
   
-
 
                 
Net cash (used in) investing activities
   
(6,170
)
   
-
 
                 
Cash flows from financing activities
               
Proceeds from the sale of common stock
   
1,615,000
     
470,100
 
                 
Net cash provided by financing activities
   
1,615,000
     
470,100
 
                 
Increase in cash
   
373,108
     
96,929
 
                 
Cash at the beginning of the period
   
577,127
     
5,103
 
                 
Cash at end of the period
 
$
950,235
   
$
102,032
 
                 
Supplemental disclosure of cash flow information
               
Interest paid during period
 
$
792
   
$
-
 
Taxes paid during period
 
$
-
   
$
50
 
                 
Supplemental disclosure of non-cash items
               
January 2012: Common Stock issued for an asset acquisition
   
543,750
         
 
See accompanying notes to the financial statements
 
 
Notes to Consolidated Financial Statements
September 30, 2012
Unaudited
 
NOTE 1 – Organization and Nature of Business
 
GlyEco, Inc. (the “Company”) was formed in the State of Nevada on October 21, 2011. On October 21, 2011, the Company became a wholly-owned subsidiary of Environmental Credits, Inc. (“ECVL”).  On November 21, 2011, ECVL merged itself into its wholly-owned subsidiary, GlyEco, Inc. (the “Reincorporation”).  Upon the consummation of the Reincorporation, the Company was the surviving corporation and the Articles of Incorporation and Bylaws of the Company replaced the Certificate of Incorporation and Bylaws of ECVL.
 
On November 28, 2011, the Company consummated a reverse triangular merger (the “Merger” or “Transaction”) as a tax-free reorganization within the meaning of Section 368 of the United States Internal Revenue Code of 1986, as amended, pursuant to an Agreement and Plan of Merger, dated November 21, 2011 (the “Merger Agreement”), with GRT Acquisition, Inc., a Nevada corporation and wholly-owned subsidiary of the Company, and Global Recycling Technologies, Ltd., a Delaware corporation and privately-held operating subsidiary (“Global Recycling”). Global Recycling was incorporated in Delaware on July 11, 2007.  
 
GRT Acquisition, Inc. was incorporated in the State of Nevada on November 7, 2011 for the purpose of the consummating the Merger. Pursuant to the Merger Agreement, GRT Acquisition, Inc. merged with and into Global Recycling, with Global Recycling being the surviving corporation and which resulted in Global Recycling becoming a wholly-owned subsidiary of the Company.
 
The Company has principal offices in Phoenix, Arizona, and was formed to acquire the assets of companies in the business of recycling and processing waste ethylene glycol, and to apply a newly developed proprietary technology to produce ASTM E1177 Type I virgin grade recycled ethylene glycol to end users throughout North America.
 
On December 30, 2011, Global Recycling’s wholly-owned subsidiary, Global Acquisition Corp. #6 (“Acquisition #6”), a Delaware corporation, was dissolved. Acquisition #6 ceased operations on December 31, 2009, when the assets (including rights to additive formula and goodwill) were sold in an exchange for the common shares of Global Recycling. Prior to its sale, Acquisition #6 operated as a chemical company selling additives used in producing antifreeze and heat transfer fluid from recycled ethylene glycol. Sales of additives were discontinued upon the sale of the assets effective December 31, 2009.

On January 9, 2012, the Company, and its wholly-owned subsidiary, Global Recycling Technologies, Ltd., a Delaware corporation (“Global Recycling”), consummated a merger pursuant to which Global Recycling merged with and into the Company (the “Global Merger”), with the Company being the surviving entity.

The 11,591,958 shares of common stock of Global Recycling (constituting 100% of the issued and outstanding shares of Global Recycling on the effective date of the Global Merger) held by the Company pursuant to the reverse merger consummated on November 28, 2011, were cancelled upon the consummation of the Merger.

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

Basis of Presentation

The accompanying unaudited consolidated condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Form 10-K for the year ended December 31, 2011.  In the opinion of management, all adjustments considered necessary for the fair presentation consisting solely of normal recurring adjustments, have been made.  Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.
 

Consolidation
 
The accompanying unaudited condensed consolidated financial statements include the accounts of GlyEco, Inc., and its wholly-owned subsidiaries. All intercompany accounting transactions have been eliminated.
 
Summary of Significant Accounting Policies
 
Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.

Going Concern

The Company’s consolidated condensed financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.

As of September 30, 2012, the Company had an accumulated deficit of $8,748,550. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.

Management’s plans to address these matters include, raising additional financing through offering its shares of capital stock in private and/or public offerings of its securities and through debt financing if available and needed. The Company plans to become profitable by upgrading the capacity and capabilities at its existing operating facility, continuing to implement its patent-pending technology in international markets, and acquiring profitable glycol recycling companies, which are looking to take advantage of the Company’s public company status and improve their profitability through a combined synergy. The Company intends to expand customer and supplier bases once operational capacity and capabilities have been upgraded.

Cash and Cash Equivalents

As of September 30, 2012, the Company maintained cash balances in an interest bearing account that currently does exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of September 30, 2012.
  
Recently Issued Accounting Pronouncements
 
In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this accounting standard update became effective for the reporting period beginning July 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, result of operations or cash flows.
 
Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.
 

NOTE 3 – Accounts Receivable
 
As of September 30, 2012, the Company’s net accounts receivable was $136,646.
 
NOTE 4 – Equipment
 
As of September 30, 2012, the Company’s equipment, net of accumulated depreciation, was $364,291.
 
NOTE 5 – Major Customers and Suppliers
 
For the nine months ended September 30, 2012, one customer accounted for approximately 71% of the Company’s consolidated net revenues.  With the acquisition of Recycool, the Company no longer relies on one customer for 100% of its consolidated net revenues.
 
NOTE 6 – Convertible Note Payable
 
On April 3, 2012, the Company entered into a Note Conversion Agreement (the "Conversion Agreement") with the note holder. The terms of the Conversion Agreement extend the maturity date for the convertible note held by Leonid Frenkel (the “Frenkel Convertible Note”) to December 31, 2013.  Interest will continue to accrue at a rate of 12.5% compounding semi-annually. Any and all claims of demand arising from or related to a default on the Frenkel Convertible Note prior to the Conversion Agreement were waived by the note holder.  The Conversion Agreement further states that the note holder will convert all money owed into a combination of Common and Preferred Stock on the date that the Company has received an aggregate of $5,000,000 in equity investment following the date of the Conversion Agreement. Four hundred seventy thousand dollars ($470,000) of the debt will be converted into common stock at $1.00 per share or the price offered to any investor subsequent to the Agreement, if lower.  The remainder will be converted into Series AA preferred stock at $1.00 per share or the price offered to any investor subsequent to the Agreement, if lower.  The Series AA preferred stock shall in all features be the same as common stock, with two primary exceptions: (i) the Series AA preferred stock shall accrue a dividend of 12.5% per year, compounded semi-annually; and (ii) the Series AA preferred stock shall have priority in payment upon liquidation over common stock.  As of September 30, 2012 this debt, including principal and interest, totaled $1,565,976.

NOTE 7 – Stockholders’ Equity
 
Preferred Stock

As of September 30, 2012, the Company has no preferred shares outstanding.  The Company's articles of incorporation authorize the Company to issue up to 10,000,000 shares of $0.0001 par, preferred shares having preferences to be determined by the board of directors for dividends, and liquidation of the Company's assets.

Common Stock
 
As of September 30, 2012, the Company has 300,000,000, $0.0001 par value shares of common stock authorized. The common shareholders are entitled to one vote for each share on matters submitted to a vote to shareholders, and to share pro rata in all dividends payable on common stock after payment of dividends on any preferred shares having preference in payment of dividends.
 
On January 4, 2012, the Company issued an aggregate of 543,750 shares of Common Stock to the three Selling Principals of Recycool, Inc., a Minnesota corporation (“Recycool”), pursuant to an Asset Purchase Agreement, dated December 16, 2011, as amended (the “Recycool Agreement”), by and among the Company, Recycool, the Selling Principals, and GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of the Company (“Acquisition Sub”) in consideration for business, properties and substantially of the assets of Recycool.

On January 4, 2012, the Company issued an aggregate of 100,000 shares of Common Stock for the exercise of 100,000 warrants at an exercise price of $.50 per share.

On January 17, 2012, the Company issued an aggregate of 30,000 shares of Common Stock to two investors at a price of $0.50 per share.
 

On February 3, 2012, the Company issued an aggregate of 20,000 shares of Common Stock to a current investor at a price of $0.50 per share.

On March 30, 2012, the Company issued an aggregate of 250,000 shares of Common Stock to one investor at a price of $1.00 per share.

On April 9, 2012, the Company issued an aggregate of 300,000 shares of Common Stock to one investor at a price of $1.00 per share.
 
On April 27, 2012, the Company issued an aggregate of 250,000 shares of Common Stock to one investor at a price of $1.00 per share.
 
On April 30, 2012, the Company issued an aggregate of 100,000 shares of Common Stock for the exercise of 100,000 warrants at an exercise price of $.50 per share.

On August 3, 2012, the Company issued an aggregate of 200,000 shares of Common Stock to a current investor at a price of $0.50 per share.

On August 28, 2012, the Company issued an aggregate of 600,000 shares of Common Stock to three investors at a price of $0.50 per share.

On September 4, 2012, the Company issued an aggregate of 400,000 shares of Common Stock to a current investor at a price of $0.50 per share.

On September 12, 2012, the Company issued an aggregate of 50,000 shares of Common Stock to a one investor at a price of $0.50 per share.

On September 17, 2012, the Company issued an aggregate of 50,000 shares of Common Stock to a one investor at a price of $0.50 per share.

On September 28, 2012, the Company issued an aggregate of 80,000 shares of Common Stock to a current investor at a price of $0.50 per share.

Summary:

   
Number of Common Shares Issued
   
Value of Common Shares
 
Common Shares for Acquisition
   
543,750
   
$
543,750
 
Common Shares for Cash
   
2,230,000
   
$
1,515,000
 
Warrants Exercised
   
200,000
   
$
100,000
 

Share Based Compensation

As of September 30, 2012 the Company had approximately 9.3 million common shares reserved for future issuance under the Company’s stock plans.

NOTE 8 – Options and Warrants

The following are details related to options issued by the Company:

         
Weighted
 
   
Options for
   
Average
 
   
Shares
   
Exercise Price
 
             
Outstanding as of December 31, 2011
    3,717,606     $ 0.60  
Granted
    200,000       1.73  
Exercised
    165,000       0.50  
Forfeited
    -       -  
Cancelled
    -       -  
Expired
    -       -  
Outstanding as of September 30, 2012
    3,752,606     $ 0.66  
                 
Weighted Average fair value price granted during 2012
    200,000     $ 1.73  
 

The following are details related to warrants issued by the Company:

         
Weighted
 
   
Warrants for
   
Average
 
   
Shares
   
Exercise Price
 
             
Outstanding as of December 31, 2011
    4,410,991     $ 0.64  
Granted
    2,200,000       1.05  
Exercised
    35,000       0.50  
Forfeited
    -       -  
Cancelled
    14,933       2.50  
Expired
    -       -  
Outstanding as of September 30, 2012
    6,561,058     $ 0.73  
                 
Weighted Average fair value price granted during 2012
    2,200,000     $ 1.05  

Fair Value Assumptions

Share-based compensation cost is measured based on the closing fair market value of the Company’s common stock on the date of grant. Share-based compensation cost for stock options is estimated at the grant date and offering date, respectively, based on the fair-value as calculated by the Black-Scholes Merton (“BSM”) option-pricing model. The BSM option-pricing model incorporates various assumptions including expected volatility, expected life and interest rates. The expected volatility is based on the historical volatility of the Company’s common stock over the most recent period commensurate with the estimated expected life of the Company’s stock options and other relevant factors including implied volatility in market traded options on the Company’s common stock. The Company bases its expected life assumption on its historical experience and on the terms and conditions of the stock awards it grants to employees and consultants. The Company recognizes share-based compensation cost as expense on a straight-line basis over the requisite service period.

During the nine-month period ended September 30, 2012 the Company incurred compensation expense of $22,000.

NOTE 9 – Related Party Transactions
 
During the nine months ended September 30, 2012, John Lorenz, the Company's CEO, and his wife, Janet Carnell Lorenz, provided consulting services to the Company. Consulting services were also provided by shareholder, Richard Fuld, whose beneficial ownership in the Company is approximately 6%.

For the nine months ended September 30, 2012, Mr. Lorenz, through Barcid Investment Group (Barcid), a corporation solely owned by him, was paid $500 for management consulting services. At September 30, 2012, Barcid was owed $241,800 by the Company. As of February 1, 2012, Mr. Lorenz became an employee of the Company.

For the nine months ended September 30, 2012 Mrs. Lorenz, through CyberSecurity, Inc., a corporation owned by her, was paid $22,500 for marketing consulting services. As of September 30, 2012, CyberSecurity was owed $0.

For the nine months ended September 30, 2012, Richard Fuld, through Matrix Advisors, was paid $0 for strategic planning consulting services.  As of September 30, 2012, Mr. Fuld was owed $230,000.
 

NOTE 10 – Commitments and Contingencies
 
Rental Agreements
 
During the nine months ended September 30, 2012, the Company rented office space on a monthly basis under a written rental agreement. The monthly rent under this agreement is approximately $1,250.  The term of the agreement is for two years with the end date set to January 31, 2014.  The monthly rate under the agreement will change to approximately $1,344 beginning February 1, 2013.
 
During the nine months ended September 30, 2012, the Company’s subsidiary leased office/warehouse space on a monthly basis under a written rental agreement for $1,719 per month. The agreement was assumed in the acquisition of Recycool, Inc. and will terminate on April 30, 2013.

For the nine months ended September 30, 2012, rent expense was $21,653.62.
 
Stock Issuances

During the nine months ended September 30, 2012, the Company agreed to issue an additional 800,000 shares of its common stock to shareholders who purchased common stock for $1.00.  This will be a change in the purchase price of the shares.  Once the Board of Directors approves the issuance of these additional shares, the appropriate adjustments to these transactions will be made in the consolidated financial statements.

NOTE 11 – Concentration of Credit Risk
 
As of September 30, 2012
 
The Company maintained cash deposits at financial institutions in excess of the federally insured limits.

The Company owed $1,000,000 on a convertible note plus accrued interest. Refer to Note 6 for more information regarding the convertible note.

NOTE 12 – Acquisitions

Acquisition of Recycool, Inc.

On December 16, 2011, the Company entered into that certain Asset Purchase Agreement (the “Recycool Agreement”) with Recycool, Inc., a Minnesota corporation (“Recycool”), Marty Rosauer, Kurt Rosauer and Dennis Scott (collectively, the “Selling Principals”), and GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of the Company (the “Acquisition Sub” and together with the Company, Recycool and the Selling Principals, the “Parties”).
 
Recycool operates a business located in Minneapolis, Minnesota, relating to processing used glycol streams, primarily used antifreeze, and selling glycol as remanufactured product, including the collection and distribution businesses relating thereto.
 
Pursuant to the Recycool Agreement and with the exception of the Excluded Assets (as defined in the Recycool Agreement), Recycool had agreed to sell to Acquisition Sub the business and all of the assets and properties of Recycool in consideration for an aggregate purchase price of $525,000 (the “Purchase Price”) consisting of (subject to adjustment as provided in the Agreement) an aggregate of 525,000 shares of Common Stock of the Company (the “Acquisition”).

On December 27, 2011, the Parties entered into Amendment No. 1 to the Recycool Agreement pursuant to which the Company agreed to issue, on a pro rata basis, 8,153 additional shares of restricted Common Stock to the Selling Principals under the terms of the Recycool Agreement in consideration for Recycool’s payment of $8,153 for financial statement audit related fees.
 
On January 1, 2012, the Parties entered into Amendment No. 2 to the Recycool Agreement pursuant to which the Purchase Price payable by the Company to the Selling Principals was increased from $525,000 to $543,750.  The $18,750 increase in the Purchase Price consists of: (i) 8,878 additional shares of Common Stock due to the fact that the Net Working Capital (as defined in the Recycool Agreement) of Recycool was calculated to be $63,878 (an increase of $8,878 from $55,000 under the Recycool Agreement); (ii) 8,153 additional restricted shares of Common Stock under Amendment No. 1; and (iii) 1,719 additional restricted shares of Common Stock in consideration for Recycool’s payment of $1,719 in month rent pursuant to its Office/Warehouse Lease, dated September 1, 2000, as amended, by and between Recycool and Bolger Building Partnership, L.L.P. (and Bolger Family Limited Partnership).
 

Pursuant to the purchase price allocation, the property, plant and equipment represented for $401,700 of the Purchase Price. The useful life of this equipment was estimated at seven (7) years based on an approximate average of the depreciable life of the equipment acquired.  The equipment was determined to have $0 salvage value.
 
NOTE 13 – Subsequent Events
 
Sale of Securities

The following are the sales of Common Stock subsequent to September 30, 2012 wherein a total of 3,700,000 shares of common stock were issued at a per share price of $.50 for total proceeds of $1,850,000.

On October 5, 2012, the Company issued an aggregate of 440,000 shares of Common Stock to two investors at a price of $0.50 per share.

On October 9, 2012, the Company issued an aggregate of 250,000 shares of Common Stock to five investors at a price of $0.50 per share.

On October 10, 2012, the Company issued an aggregate of 50,000 shares of Common Stock to one investor at a price of $0.50 per share.

On October 16, 2012, the Company issued an aggregate of 360,000 shares of Common Stock to three investors at a price of $0.50 per share.

On October 19, 2012, the Company issued an aggregate of 2,600,000 shares of Common Stock to fifteen investors at a price of $0.50 per share.

Closure of Offering

On October 19, 2012, the Company closed its current offering (the “Offering”).  The Company issued 6,780,000 units at a purchase price of $0.50 per unit. Total proceeds from the Offering were $3,390,000 less offering costs of $91,000.

Further, each unit sold in the Offering consists of (i) one share of common stock, par value $0.0001 per share, of the Company, and (ii) one warrant to purchase one share of common stock of the Company from the date of issuance until the third anniversary date such date for a purchase price of $1.00 per share.  This Offering was made to accredited investors only, in accordance with Rule 506 of Regulation D of the Securities Act of 1933.

Asset Purchase Agreement with Antifreeze Recycling, Inc.

On October 3, 2012, the Company’s wholly-owned subsidiary, GlyEco Acquisition Corp. #7 (“Acquisition Sub #7”), an Arizona corporation, entered into an Asset Purchase Agreement (the “ARI APA”) with Antifreeze Recycling, Inc., a South Dakota corporation (“ARI”) and Mr. Robert J. Kolhoff, the selling principal of ARI (the “Selling Principal”) on October 3, 2012. The Agreement superseded the terms of the Preliminary Agreement.

ARI operates a business located in Tea, South Dakota, relating to processing used glycol streams, primarily used antifreeze, and selling glycol as remanufactured product.

Pursuant to the ARI APA, Acquisition Sub #7 agreed to purchase on October 26, 2012, or on such later date as agreed upon by the parties (the “Closing”), all of the glycol-related assets of ARI, free and clear of any liabilities or encumbrances, consisting of ARI’s personal property (equipment, tools, machinery, furniture, supplies, materials, and other tangible personal property), inventory, intangible property, contractual rights, books and records, intellectual property, accounts receivable (excluding trade accounts receivable equal to or greater than 90 days), goodwill, and miscellaneous assets. 
 

The ARI APA states that the aggregate purchase price (the “Purchase Price”) for the Assets shall be $450,000, consisting of 361,200 unregistered shares (the “Shares”) of the Company’s common stock (the “Common Stock”), subject to adjustment, and assumption of debt in an amount of $88,800.  The Purchase Price is based on ARI having a Net Working Capital (as defined in the ARI APA) of $15,000 at Closing.  The ARI APA states that the Purchase Price be decreased to the extent that ARI’s Net Working Capital is less than $15,000 at Closing.  If, however, ARI’s Net Working Capital is greater than $15,000 at Closing, the Company has agreed to pay the full amount of such overage within 15 business days of the Closing.

On October 31, 2012, Acquisition Sub #7 and ARI executed all documents to effect a closing of the acquisition effective as of October 29, 2012.

Asset Purchase Agreement with Renew Resources

On October 3, 2012, the Company’s wholly-owned subsidiary, GlyEco Acquisition Corp. #5 (“Acquisition Sub #5”), an Arizona corporation, entered into an Asset Purchase Agreement (the “Renew APA”) with Renew Resources and Mr. Todd M. Bernard, the selling principal of Renew Resources (the “Selling Principal”).  The Agreement superseded the terms of the Preliminary Agreement.

Renew Resources operates a business located in Rock Hill, South Carolina, involving the collection and recycling of several types of waste material, including waste glycol.  The Renew APA concerns Renew Resources’ waste glycol recycling business, relating to the processing of used glycol steams, primarily used antifreeze, and selling glycol as remanufactured product.

Pursuant to the Renew APA, Acquisition Sub #5 has agreed to purchase on October 26, 2012, or on such later date as agreed upon by the parties (the “Closing”), all of the glycol-related assets of Renew Resources, free and clear of any liabilities or encumbrances, consisting of Renew Resources’ personal property (equipment, tools, machinery, furniture, supplies, materials, and other tangible personal property), inventory, intangible property, contractual rights, books and records, intellectual property, accounts receivable (excluding trade accounts receivable equal to or greater than 90 days), goodwill, and miscellaneous assets.

The Renew APA states that the aggregate purchase price (the “Purchase Price”) for the Assets shall be $325,000, consisting of a cash payment of $15,000 (the “Cash Payment”), 275,000 unregistered shares (the “Shares”) of the Company’s common stock (the “Common Stock”), subject to adjustment, and assumption of debt in an amount of $35,000.  The Cash Payment is based on Renew Resources having a Net Working Capital (as defined in the Agreement) of $15,000 at Closing.  The Agreement states that the Cash Payment shall be decreased to the extent that Renew Resources’ Net Working Capital is less than $15,000 at Closing.  If, however, Renew Resources’ Net Working Capital is greater than $15,000 at Closing, the Company has agreed to pay the full amount of such overage within 15 business days of the Closing.

On November 2, 2012, Acquisition Sub #5 and Renew Resources executed all documents to effect a closing of the acquisition effective as of October 29, 2012.


Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that are based on information currently available to management as well as management’s assumptions and beliefs. All statements, other than statements of historical fact, included in this Quarterly Report on Form 10-Q constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including but not limited to statements identified by the words “may,” “will,” “should,” “plan,” “predict,” “anticipate,” “believe,” “intend,” “estimate” and “expect” and similar expressions. Such statements reflect our current views with respect to future events, based on what we believe are reasonable assumptions; however, such statements are subject to certain risks and uncertainties. In addition to the specific uncertainties discussed elsewhere in this Quarterly Report on Form 10-Q, the risk factors set forth in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2011 may affect our performance and results of operations. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may differ materially from those in the forward-looking statements. We disclaim any intention or obligation to update or review any forward-looking statements or information, whether as a result of new information, future events or otherwise.
 
Unless otherwise noted herein, terms such as the “Company,” “GlyEco,” “we,” “us,” “our” and similar terms refer to GlyEco, Inc., a Nevada corporation, and its subsidiaries.

The following discussion should be read in conjunction with the information contained in the consolidated financial statements of the Company and the notes which form an integral part of the financial statements which are attached hereto.

Overview
 
GlyEco is a green chemistry company formed to roll-out our proprietary and patent-pending glycol recycling technology that recycles waste glycols, a hazardous material, into the ASTM E1177 Type I standard, a purity level equivalent to refinery-grade glycol (i.e. virgin grade) (“Type I”).   Our technology, branded GlyEco Technology™, can recycle waste glycol from the five major industries that use glycol in their production processes: automotive, textiles, airline, medical and HVAC.    

The Company has assembled a group of accomplished managers each of whom has more than 20 years’ experience in their field of expertise. This team includes business owners and high-ranking senior executives with leadership experience (C-level executives) from the solid waste, chemical engineering and glycol recycling industries.

Company Growth
 
We process approximately 40,000 to 80,000 gallons of glycol per month through a facility in West Virginia. At this facility, we have received waste glycol from a variety of sources—including MEGlobal (a joint venture established in 2004 between Dow Chemical and Petrochemical Industries Company of Kuwait), MEGlobal Canada, DAK Americas, and Performance Fibers. At our facility in Minnesota we process approximately 15,000 to 20,000 gallons of glycol per month. This facility’s main source of waste glycol is various auto repair and supply shops.  

Our immediate business strategy is to continue operations in the West Virginia and Minnesota while constructing or retrofitting a Type I facility capable of implementing our GlyEco Technology™ patent-pending technology.  We are considering several sites for the Type I facility, including the West Virginia facility and a facility located in Elizabeth, New Jersey.  
 
Current Acquisitions
 
We are in the process of acquiring and creating strategic alliances with companies controlling waste glycol.  In the United States, we enter into non-binding letters of intent with companies to acquire their glycol recycling businesses, and we are in discussions with several companies to acquire their glycol recycling businesses.  As of November 2, 2012, we have acquired three processing facilities located in the United States and have entered into preliminary binding agreements to acquire four (4) others.  
 

International Strategy

Internationally, we are in varying stages of development with waste collectors and polyester companies.  We have a non-binding letter of intent with a large European waste collector to recycle all of its waste glycol.  Additionally, we are in discussions with three other waste collection companies in Europe and two large polyester manufacturing companies in China and Mexico to recycle their waste glycol. We have made additional inroads with sources of waste glycol in the Eurozone, Brazil, Argentina, India, Vietnam, Thailand, and the Philippines.  Final definitive terms have not been established as of yet on any of the aforementioned letters of intent and there can be no assurances that any will be reached or that any transaction will be consummated.

Industry & Company Outlook

Competitors generally recycle waste glycols from only one or two of the five industries and most competitors can, at best, recycle waste glycol to an ASTM E1177 Type II standard (“Type II”), a standard allowing more impurities than Type I — which is unacceptable to many customers and industries.  
 
World-wide consumption for refinery produced ethylene glycol is over 5 billion gallons per year, with growth expected to exceed 350 million gallons every year for the next decade (Source: ICIS Chemical Business). Demand in China exceeds supply and currently tops 2.1 billion gallons each year. The United States consumes over 700 million gallons of ethylene glycol each year. Demand continues to exceed supply for ethylene glycol, largely because of explosive growth in poly fiber manufacturing to make clothing, plastic containers and plastic beverage bottles. This growth trend is expected to continue well into the future.

While the increase in the growth of demand for glycol has slowed in 2012 as compared to 2011 overall, demand still remains high and there are ample sources of waste glycol available.  The average sales price of refinery grade glycol shipped by rail or truck has averaged $4.72/gallon in 2012 (Source: ICIS Chemical Business).  Compared to an average sales price of $5.69/gallon in 2011, this 17% decrease in 2012 has been caused by lower demand during the antifreeze season due to an especially warm winter and a short-term slowdown in the growth of polyester production in Asia.  On the long term, demand for glycol, especially through polyester demand in Asia, remains strong.  Capacity and supply of refinery grade glycol fluctuated in a normal range in 2011 and 2012 with planned and unplanned shutdowns of glycol plants affecting pricing on a month to month basis.  Because the majority of the glycol refinery industry is controlled by five or six major producers, those producers can significantly influence the price of glycol by limiting capacity and supply.  The glycol refinery industry continues to consolidate.  In the long term, companies such as MEGlobal have doubts whether supply will keep up with demand (Source: MEGlobal).  While the competition for waste antifreeze is increasing, the participants within the industry are small, and the four other sources of waste glycol are largely untapped.  This excess volume should influence the cost of waste glycol in a positive manner.
 
Results of Operations
 
Net Sales
 
Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011
 
For the three month period ended September 30, 2012, Net Sales were $303,456, compared to $200,256 for the three month period ended September 30, 2011, an increase of $103,200, or 51.5%.  The increase in Net Sales was due to a price increase for the material processed at our facility in West Virginia as well as the acquisition of Recycool and its net sales. Net Sales was earned from our existing operations with one customer located in West Virginia and from the operations of the Company’s newly acquired wholly-owned subsidiary, Recycool, Inc., a Minnesota corporation (“Recycool”). For the three months ended September 30, 2012, Recycool accounted for approximately 29% of the Company’s consolidated net sales.

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

For the nine month period ended September 30, 2012, Net Sales were $895,390, compared to $675,581 for the nine month period ended September 30, 2011, an increase of $219,810, or 25.5%.  The increase in Net Sales was due to a price increase for the material processed at our facility in West Virginia as well as the acquisition of Recycool and its net sales.  Net Sales was earned from our existing operations with one customer located in West Virginia and from the operations of the Company’s newly acquired wholly-owned subsidiary, Recycool, Inc., a Minnesota corporation (“Recycool”). For the nine months ended September 30, 2012, Recycool accounted for approximately 30% of the Company’s consolidated net sales.
 

Cost of Goods Sold

Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011
 
For the three month period ended September 30, 2012, our Costs of Good Sold was $233,180, compared to $216,730 for the three month period ended September 30, 2011, representing an increase of $16,449 or 7.6%.  The increase in Cost of Goods Sold was due to the acquisition of Recycool. Costs of Good Sold consist of costs to purchase, transport, store and process the raw materials.  In our operations at Recycool we sometimes receive raw materials (used antifreeze) at no cost to the Company. This can have an impact on our reported consolidated gross profit.

Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

For the nine month period ended September 30, 2012, our Costs of Good Sold was $738,780, compared to $588,701 for the nine month period ended September 30, 2011, representing an increase of $150,079 or 25.5%.  The increase in Cost of Goods Sold was due to the acquisition of Recycool and its Cost of Goods Sold, the disposal of waste glycol that could not be processed in the third quarter of 2011, as well as an increase in processing costs at the facility in West Virginia. Costs of Good Sold consist of costs to purchase, transport, store and process the raw materials.  In our operations at Recycool we sometimes receive raw materials (used antifreeze) at no cost to the Company. This can have an impact on our reported consolidated gross profit.

Gross Profit

Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011
 
For the three month period ended September 30, 2012, we realized a gross profit of $70,276, compared to ($16,474) for the three month period ended September 30, 2011, an increase of $86,750, or 526.6%.  This increase is primarily due to the disposal of waste glycol that could not be processed in the third quarter of 2011, which provided for a negative gross profit in that quarter. Our Gross Profit Margin for the three month period ended September 30, 2012 was 23%, compared to (8%) for the three month period ended September 30, 2011. 
 
Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

For the nine month period ended September 30, 2012, we realized a gross profit of $156,610, compared to $86,880 for the nine month period ended September 30, 2011, an increase of $69,730, or 80.3%.  This increase is primarily due to the disposal of waste glycol that could not be processed in the third quarter of 2011, which provided for a negative gross profit in that quarter. Our Gross Profit Margin for the nine month period ended September 30, 2012 was 17%, compared to 13% for the nine month period ended September 30, 2011.

Operating Expenses
 
Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011
 
For the three month period ended September 30, 2012, operating expenses increased to $470,579 from $50,083 for the three month period ended September 30, 2011, representing an increase of $420,496, or 839.6%.  Operating expenses consist of Consulting Fees, Salaries and Wages, Legal and Professional Fees and General and Administrative Expenses. The increase is primarily due to a reduction in Legal and Professional Fees as a result of a credit from a service provider in the third quarter of 2011.  The increase is also attributable to the Company’s expansion through its acquisition strategy and related costs to fund operations.
 
Consulting Fees consist of marketing, administrative and management fees paid under consulting agreements.  Consulting Fees increased to $165,100 for the three month period ended September 30, 2012 from $94,600 for the three month period ended September 30, 2011, representing an increase of $70,500, or 74.5%.  The increase is primarily due to the Company’s expansion through its acquisition strategy and related costs to fund operations.
 

Salaries and Wages consist of wages, and taxes paid on behalf of the employee.  Salaries and Wages increased to $168,974 for the three month period ended September 30, 2012 from $0 for the three month period ended September 30, 2011, representing an increase of $168,974, or 100%.  The increase is due to the addition of John Lorenz, CEO, as an employee, three consultants who became employees, the hiring of a Senior Engineer and a Legal Analyst, as well as the three employees retained in the acquisition of our subsidiary, Recycool.
 
Legal and Professional Fees consist of legal, outsourced accounting services, corporate tax and SEC audit services, including SEC filing services.   For the three month period ended September 30, 2012, Legal and Professional Fees increased to $60,428 from ($81,754) for the three month period ended September 30, 2011, representing an increase of $142,182, or 173.9%.  The increase is primarily due to a reduction in Legal and Professional Fees as a result of a credit from a service provider in the third quarter of 2011. The increase is also attributable to the Company’s expansion through its acquisition strategy and related costs to fund operations.

General and Administrative (G&A) Expenses consist of general operational costs of our business. For the three month period ended September 30, 2012, G&A Expenses increased to $76,077 from $37,237 for the three month period ended September 30, 2011, representing an increase of $38,839, or 104.3%.  This increase is primarily due to the acquisition of our subsidiary, Recycool, and the associated costs of building out our infrastructure to support future growth of the Company.
 
Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

For the nine month period ended September 30, 2012, operating expenses increased to $1,287,231 from $341,196 for the nine month period ended September 30, 2011, representing an increase of $946,035, or 277.3%.  Operating expenses consist of Consulting Fees, Salaries and Wages, Legal and Professional Fees and General and Administrative Expenses. The increase is primarily due to a reduction in Legal and Professional Fees in the third quarter of 2011 as a result of a credit from a service provider.  The increase is also attributable to the Company’s expansion through its acquisition strategy and related costs to fund operations.
 
Consulting Fees consist of marketing, administrative and management fees paid under consulting agreements.  Consulting Fees increased to $358,457 for the nine month period ended September 30, 2012 from $292,540 for the nine month period ended September 30, 2011, representing an increase of $65,917, or 22.5%.  The increase is primarily due to four consultants who became employees.

Salaries and Wages consist of wages, and taxes paid on behalf of the employee.  Salaries and Wages increased to $355,034 for the nine month period ended September 30, 2012 from $0 for the nine month period ended September 30, 2011, representing an increase of $355,034, or 100%.  The increase is due to the addition of John Lorenz, CEO, as an employee, three consultants who became employees, the hiring of a Senior Engineer and a Legal Analyst, as well as the three employees retained in the acquisition of our subsidiary, Recycool.

Legal and Professional Fees consist of legal, outsourced accounting services, corporate tax and SEC audit services, including SEC filing services.   For the nine month period ended September 30, 2012, Legal and Professional Fees increased to $265,361 from ($37,909) for the nine month period ended September 30, 2011, representing an increase of $303,270, or 800%.  The increase is primarily due to a reduction in Legal and Professional Fees as a result of a credit from a service provider. The increase is also attributable to the Company’s expansion through its acquisition strategy and related costs to fund operations.
 
General and Administrative (G&A) Expenses consist of general operational costs of our business. For the nine month period ended September 30, 2012, G&A Expenses increased to $308,379 from $86,565 for the nine month period ended September 30, 2011, representing an increase of $221,813, or 256.2%.  This increase is primarily due to the acquisition of our subsidiary, Recycool, and the associated costs of building out our infrastructure to support future growth of the Company.

Other Income and Expenses

Three Months Ended September 30, 2012 Compared to Three Months Ended September 30, 2011
 
For the three month period ended September 30, 2012, Other Income and Expenses increased to $46,053 from $20,667 for the three month period ended September 30, 2011, representing an increase of $25,386, or 122.8%.  Other Income and Expenses consist of a Gain on Fixed Asset, Interest Income and Interest Expense.
 

Gain on Fixed Assets consists of gains on the sale of equipment that had been previously impaired. For the three month period, ended September 30, 2012 the Gain on Fixed Assets decreased to $0 from $16,000 for the three month period ended September 30, 2011, representing a decrease of 100%. In the third quarter of 2011, the Company sold equipment that had been previously impaired and assessed to have no value.
 
Interest Income consists of the interest earned on the Company’s corporate bank account.  Interest Income for the three month period ended September 30, 2012 increased to $136 from $83 for the three month period ended September 30, 2011, representing an increase of $53, or 64.2%.  The increase was primarily due to an increase in our cash balances.
 
Interest Expense consists of accrued and unpaid interest on the Company’s outstanding indebtedness.  As of September 30, 2012, the Company's outstanding indebtedness primarily consisted of accrued and unpaid interest on the convertible secured promissory note in the principal amount of $1,000,000 held by Leonid Frenkel (the “Frenkel Convertible Note”).

For the three month period ended September 30, 2012, Interest Expense increased to $46,189 from $36,750 for the three month period ended September 30, 2011, representing an increase of $9,439 or 25.7%.  The increase is primarily due to the effect of compounding interest.
 
Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011

For the nine month period ended September 30, 2012, Other Income and Expenses increased to $134,553 from $94,283 for the nine month period ended September 30, 2011, representing an increase of $40,270, or 42.7%.  Other Income and Expenses consist of a Gain on Fixed Assets, Interest Income and Interest Expense.
 
Gain on Fixed Assets consists of gains on the sale of equipment that had been previously impaired. For the nine month period, ended September 30, 2012 the Gain on Fixed Assets decreased to $0 from $16,000 for the nine month period ended September 30, 2011, representing a decrease of 100%. In the third quarter of 2011, the Company sold equipment that had been previously impaired and assessed to have no value.
 
Interest Income consists of the interest earned on the Company’s corporate bank account.  Interest Income for the nine month period ended September 30, 2012 increased to $522 from $357 for the nine month period ended September 30, 2011, representing an increase of $166, or 46.4%.  The increase was primarily due to an increase in the Company’s cash balances.
 
Interest Expense consists of accrued and unpaid interest on the Company’s outstanding indebtedness.  As of September 30, 2012, the Company's outstanding indebtedness primarily consisted of accrued and unpaid interest on the Frenkel Convertible Note.

For the nine month period ended September 30, 2012, Interest Expense increased to $135,075 from $110,640 for the nine month period ended September 30, 2011, representing an increase of $24,435 or 22.1%.  The increase is primarily due to the effect of compounding interest.

Liquidity & Capital Resources; Going Concern
 
As of September 30, 2012, we had $1,107,638 in current assets, consisting of $950,235 in cash, $136,646 in accounts receivable, $4,550 in prepaid expenses, and $16,207 in inventories. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.  As of September 30, 2012, the Company has yet to achieve profitable operations and is dependent on its ability to raise capital from stockholders or other sources to sustain operations and to ultimately achieve viable operations. These consolidated condensed financial statements do not include any adjustments that might result from the outcome of these uncertainties.
 
As of and for the years ended December 31, 2011 and 2010, our auditors have expressed substantial doubt that the Company will continue as a going concern.
 
 
Our plans to address these matters include, raising additional financing through offering shares of capital stock in private and/or public offerings of securities and through debt financing if available and needed. There can be no assurances, however, that the Company will be able to obtain any financings or that such financings will be sufficient to sustain its business operation or permit the Company to implement its intended business strategy.  The Company plans to become profitable by upgrading the capacity and capabilities at its existing operating facility, continuing to implement its patent-pending technology in international markets, and acquiring profitable glycol recycling companies, which are looking to take advantage of the Company’s public company status and improve their profitability through a combined synergy. We have non-binding letters of intent with five companies to acquire their glycol recycling businesses, and are in discussions with five other companies to acquire their glycol recycling businesses.
 
On October 24, 2012, we closed our current round of equity financing wherein we raised a net amount of approximately $3.3 million in cash.  This funding will allow us to continue to close the targeted acquisitions and the remaining balance will be used for working capital purposes, however, the Company does not currently have sufficient capital to sustain its operations for the next 12 months. To date, the Company has financed its operations from the Frenkel Convertible Note (as discussed below) and private sales of its securities exempt from the registration requirements of the Securities Act of 1933, as amended.

During the three months ended September 30, 2012, we raised an aggregate of $690,000 from private sales of its common stock.  For the nine month period ended September 30, 2012, the Company raised an aggregate of $1,615,000 from private sales of our common stock.

With the acquisition of Recycool during the nine months ended September 30, 2012, we expanded our customer and supplier bases and will continue to expand as we expect to upgrade our operational capacity and capabilities. For the three months ended September 30, 2012, Recycool accounted for approximately 29% of the Company’s consolidated net sales.  For the nine months ended September 30, 2012, Recycool’s net sales represented 30% of the Company’s consolidated net sales.
 
The table below sets forth certain information about the Company’s liquidity and capital resources for the nine months ended September 30, 2012 and 2011:
 
   
For the Nine Months ended
September 30,
 
   
2012
   
2011
 
Net cash (used in) operating activities
 
$
(1,265,174
 
$
(348,649
Net cash (used in) investing activities
 
$
(6,170
 
$
-
 
Net cash provided by financing activities
 
$
1,615,000
   
$
470,100
 
Net increase in cash and cash equivalents
 
$
373,108
   
$
96,929
 
Cash - beginning of period
 
$
577,127
   
$
5,103
 
Cash - end of period
 
$
950,235
   
$
102,032
 
 
Convertible Note Payable

On April 3, 2012, the Company entered into a Note Conversion Agreement (the "Conversion Agreement") with Mr. Leonid Frenkel in connection with that certain Secured Promissory Note issued by the Company to Mr. Frenkel in August 2008 in the principal amount of $1,000,000 and two forbearance agreements entered into by the Company and Mr. Frenkel in August 2010 and May 2011 (the “Forbearance Agreements”). The terms of the Conversion Agreement extend the maturity date for the Frenkel Convertible Note to December 31, 2013 and maintained the interest rate at 12.5% per annum (subject to increase to 18% upon an Event of Default under the terms of the Frenkel Convertible Note and Forbearance Agreements).  As of September 30, 2012, an aggregate of $1,565,976, principal and accrued interest, was outstanding under the Frenkel Convertible Note.
 
Sales of Securities
 
On January 4, 2012, the Company sold an aggregate of 100,000 shares of Common Stock for the exercise of 100,000 warrants in consideration for $50,000 ($0.50 per share) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

On January 17, 2012, the Company sold an aggregate of 30,000 shares of Common Stock to two accredited investors in consideration for $15,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.
 

On February 3, 2012, the Company sold an aggregate of 20,000 shares of Common Stock to one current stockholder in consideration for $10,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

On March 30, 2012, the Company sold an aggregate of 250,000 shares of Common Stock to one accredited investor in consideration for $250,000 ($1.00 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

On April 9, 2012, the Company sold an aggregate of 300,000 shares of Common Stock to one accredited investor in consideration for $300,000 ($1.00 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.
 
On April 27, 2012, the Company sold an aggregate of 250,000 shares of Common Stock to one current unaccredited stockholder in consideration for $250,000 ($1.00 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.
 
On April 30, 2012, the Company sold an aggregate of 100,000 shares of Common Stock for the exercise of 100,000 warrants in consideration for $50,000 ($0.50 per share) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

On August 3, 2012, the Company sold an aggregate of 200,000 shares of Common Stock to a one current accredited investor in consideration for $100,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

On August 28, 2012, the Company sold an aggregate of 600,000 shares of Common Stock to three accredited investors in consideration for $400,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

On September 4, 2012, the Company sold an aggregate of 400,000 shares of Common Stock to a one current investor in consideration for $200,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

On September 12, 2012, the Company sold an aggregate of 50,000 shares of Common Stock to a one accredited investor in consideration for $25,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

On September 17, 2012, the Company sold an aggregate of 50,000 shares of Common Stock to a one accredited investor in consideration for $25,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

On September 28, 2012, the Company sold an aggregate of 80,000 shares of Common Stock to one current accredited investor in consideration for $40,000 ($0.50 per share of Common Stock) under Section 4(2) and Rule 506 of Regulation D of the Securities Act.

See Part II, Item 2 for additional information.
 
OFF-BALANCE SHEET ARRANGEMENTS

None
 

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
 
Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures
 
As required by Rule 13a-15 under the Securities Exchange Act of 1934, we carried out an evaluation, under the supervision and with the participation of our current management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial and Accounting Officer), of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e).  Based on that evaluation, as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective.
 
Changes in Internal Control Over Financial Reporting
 
During the fiscal quarter ended September 30, 2012, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
 
  
PART II—OTHER INFORMATION

Item 1.  Legal Proceedings.
 
None.

Item 1A.  Risk Factors.

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.
 
On January 4, 2012, the Company issued an aggregate of 543,750 shares of Common Stock to the three Selling Principals of Recycool, Inc., a Minnesota corporation (“Recycool”), pursuant to an Asset Purchase Agreement, dated December 16, 2011, as amended (the “Recycool Agreement”), by and among the Company, Recycool, the Selling Principals, and GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of the Company (“Acquisition Sub”) in consideration for business, properties and substantially of the assets of Recycool. The shares of Common Stock issued pursuant to the Recycool Agreement are restricted under Rule 144 promulgated under the Securities Act.  The Company issued theses shares pursuant to the registration exemptions of the Securities Act afforded the Company under Section 4(2) thereunder.

On January 4, 2012, the Company issued an aggregate of 100,000 shares of Common Stock for the exercise of 100,000 warrants issued in exchange for services at an exercise price of $.50 per share (an aggregate purchase price of $50,000). The warrants exercised vested immediately upon issuance and were converted at a rate of one warrant for one share of Common Stock.  The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

On January 17, 2012, the Company issued an aggregate of 30,000 shares of Common Stock to two investors at a price of $0.50 per share (an aggregate purchase price of $15,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

On February 3, 2012, the Company issued an aggregate of 20,000 shares of Common Stock to a current unaccredited investor at a price of $0.50 per share (an aggregate purchase price of $10,000). The investor had sufficient sophistication and knowledge of the Company and the financing transaction. The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because the sale did not involve any form of general solicitation or general advertising.  The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

On March 30, 2012, the Company issued an aggregate of 250,000 shares of Common Stock to one investor at a price of $1.00 per share (an aggregate purchase price of $250,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

On April 9, 2012, the Company issued an aggregate of 300,000 shares of Common Stock to one investor at a price of $1.00 per share (an aggregate purchase price of $300,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.
 
 
On April 27, 2012, the Company issued an aggregate of 250,000 shares of Common Stock to one investor at a price of $1.00 per share (an aggregate purchase price of $250,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.
 
On April 30, 2012, the Company issued an aggregate of 100,000 shares of Common Stock for the exercise of 100,000 warrants at an exercise price of $.50 per share (an aggregate purchase price of $50,000).  The warrants exercised vested immediately upon issuance and were converted at a rate of one warrant for one share of Common Stock.  The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

On August 3, 2012, the Company issued an aggregate of 200,000 shares of Common Stock to one investor at a price of $0.50 per share (an aggregate purchase price of $100,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

On August 28, 2012, the Company issued an aggregate of 600,000 shares of Common Stock to three investors at a price of $0.50 per share (an aggregate purchase price of $400,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

On September 4, 2012, the Company issued an aggregate of 400,000 shares of Common Stock to one investor at a price of $0.50 per share (an aggregate purchase price of $200,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

On September 12, 2012, the Company issued an aggregate of 50,000 shares of Common Stock to one investor at a price of $0.50 per share (an aggregate purchase price of $25,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

On September 17, 2012, the Company issued an aggregate of 50,000 shares of Common Stock to one investor at a price of $0.50 per share (an aggregate purchase price of $25,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.
 

On September 28, 2012, the Company issued an aggregate of 80,000 shares of Common Stock to one investor at a price of $0.50 per share (an aggregate purchase price of $40,000). The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchasers represented that they were “accredited investors” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising.  The investor made investment representations that the shares were taken for investment purposes and not with a view to resale.  The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act.

Item 3.  Defaults Upon Senior Securities.

None.

Item 5.  Other Information.
 
None.  

Item 6.  Exhibits.

No.
 
Description
     
31.1(2)
 
     
31.2(2)
 
     
32.1(2)
 
     
32.2(2)
 
     
101.INS(4)
 
XBRL Instance Document
     
101.SCH(4)
 
XBRL Taxonomy Extension Schema Document
     
101.CAL(4)
 
XBRL Taxonomy Extension Calculation Linkbase Document
     
101.LAB(4)
 
XBRL Taxonomy Extension Labels Linkbase Document
     
101.DEF(4)
 
XBRL Taxonomy Extension Definition Linkbase Document
     
101.PRE(4)
 
XBRL Taxonomy Extension Presentation Linkbase Document

(1)  
Form 8-K filed on August 2, 2011 and incorporated by reference herein.
(2)  
Filed herewith.
(3)
Furnished herewith.
(4)  
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
GlyEco, Inc.
 
     
Date: November 14, 2012
By: /s/ John Lorenz
 
 
John Lorenz
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)
 
     
Date: November 14, 2012
By: /s/ Kevin J. Conner
 
 
Kevin J. Conner
 
 
Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)
 
 
 
 
EX-31.1 2 ex31-1.htm ex31-1.htm
Exhibit 31.1
 
CERTIFICATION PURSUANT TO 18 U.S.C. SS 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, John Lorenz, certify that:
 
1.
I have reviewed this Form 10-Q for the fiscal quarter ended September 30, 2012 of GlyEco, Inc. (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2012

/s/ John Lorenz
 
John Lorenz
 
President and Chief Executive Officer
 
(Principal Executive Officer)
 
 
 
 
EX-31.2 3 ex31-2.htm ex31-2.htm
Exhibit 31.2

CERTIFICATION PURSUANT TO 18 U.S.C. SS 1350, AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kevin J. Conner, certify that:
 
1.
I have reviewed this Form 10-Q for the fiscal quarter ended September 30, 2012 of GlyEco, Inc. (the “registrant”);
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
(a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
 
(b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
 
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
 
(d)
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
5.
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
 
(a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
 
(b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2012

/s/ Kevin J. Conner
 
Kevin J. Conner
 
Chief Financial Officer
 
(Principal Financial and Accounting Officer)
 
 
 
 
EX-32.1 4 ex32-1.htm ex32-1.htm
Exhibit 32.1
 
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
 
I, John Lorenz, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 
(1) 
the quarterly report on Form 10-Q of GlyEco, Inc. for the fiscal quarter ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
(2) 
the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of GlyEco, Inc.


Date: November 14, 2012
/s/ John Lorenz
 
John Lorenz
 
President and Chief Executive Officer
 
(Principal Executive Officer)
 
 
 
EX-32.2 5 ex32-2.htm ex32-2.htm
Exhibit 32.2
 
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
 
I, Kevin J. Conner, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
 
 
(1) 
the quarterly report on Form 10-Q of GlyEco, Inc. for the fiscal quarter ended September 30, 2012 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
 
 
(2) 
the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of GlyEco, Inc.


Date: November 14, 2012
/s/ Kevin J. Conner
 
Kevin J. Conner
 
Chief Financial Officer
 
(Principal Financial and Accounting Officer)
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10pt">GlyEco, Inc. (the &#8220;Company&#8221;) was formed in the State of Nevada on October 21, 2011. On October 21, 2011, the Company became a wholly-owned subsidiary of Environmental Credits, Inc. (&#8220;ECVL&#8221;).&#160; On November 21, 2011, ECVL merged itself into its wholly-owned subsidiary, GlyEco, Inc. (the &#8220;Reincorporation&#8221;).&#160;&#160;Upon the consummation of the Reincorporation, the Company was the surviving corporation and the Articles of Incorporation and Bylaws of the Company replaced the Certificate of Incorporation and Bylaws of ECVL.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On November 28, 2011, the Company consummated a reverse triangular merger (the &#8220;Merger&#8221; or &#8220;Transaction&#8221;) as a tax-free reorganization within the meaning of Section 368 of the United States Internal Revenue Code of 1986, as amended, pursuant to an Agreement and Plan of Merger, dated November 21, 2011 (the &#8220;Merger Agreement&#8221;), with GRT Acquisition, Inc., a Nevada corporation and wholly-owned subsidiary of the Company, and Global Recycling Technologies, Ltd., a Delaware corporation and privately-held operating subsidiary (&#8220;Global Recycling&#8221;). Global Recycling was incorporated in Delaware on July 11, 2007. &#160;</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">GRT Acquisition, Inc. was incorporated in the State of Nevada on November 7, 2011 for the purpose of the consummating the Merger. Pursuant to the Merger Agreement, GRT Acquisition, Inc. merged with and into Global Recycling, with Global Recycling being the surviving corporation and which resulted in Global Recycling becoming a wholly-owned subsidiary of the Company.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company has principal offices in Phoenix, Arizona, and was formed to acquire the assets of companies in the business of recycling and processing waste ethylene glycol, and to apply a newly developed proprietary technology to produce ASTM E1177 Type I virgin grade recycled ethylene glycol to end users throughout North America.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On December 30, 2011, Global Recycling&#8217;s wholly-owned subsidiary, Global Acquisition Corp. #6 (&#8220;Acquisition #6&#8221;), a Delaware corporation, was dissolved. Acquisition #6 ceased operations on December 31, 2009, when the assets (including rights to additive formula and goodwill) were sold in an exchange for the common shares of Global Recycling. Prior to its sale, Acquisition #6 operated as a chemical company selling additives used in producing antifreeze and heat transfer fluid from recycled ethylene glycol. Sales of additives were discontinued upon the sale of the assets effective December 31, 2009.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On January 9, 2012, the Company, and its wholly-owned subsidiary, Global Recycling Technologies, Ltd., a Delaware corporation (&#8220;Global Recycling&#8221;), consummated a merger pursuant to which Global Recycling merged with and into the Company (the &#8220;Global Merger&#8221;), with the Company being the surviving entity.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The 11,591,958 shares of common stock of Global Recycling (constituting 100% of the issued and outstanding shares of Global Recycling on the effective date of the Global Merger) held by the Company pursuant to the reverse merger consummated on November 28, 2011, were cancelled upon the consummation of the Merger.</font> </div><br/> 11591958 1.00 <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="left"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NOTE 2 &#8211; Basis of Presentation and Summary of Significant Accounting Policies</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Basis of Presentation</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The accompanying unaudited consolidated condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Form 10-K for the year ended December 31, 2011.&#160;&#160;In the opinion of management, all adjustments considered necessary for the fair presentation consisting solely of normal recurring adjustments, have been made.&#160;&#160;Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Consolidation</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The accompanying unaudited condensed consolidated financial statements include the accounts of GlyEco, Inc., and its wholly-owned subsidiaries. All intercompany accounting transactions have been eliminated.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Summary of Significant Accounting Policies</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Use of Estimates</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Going Concern</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company&#8217;s consolidated condensed financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As of September 30, 2012, the Company had an accumulated deficit of $8,748,550. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Management&#8217;s plans to address these matters include, raising additional financing through offering its shares of capital stock in private and/or public offerings of its securities and through debt financing if available and needed. The Company plans to become profitable by upgrading the capacity and capabilities at its existing operating facility, continuing to implement its patent-pending technology in international markets, and acquiring profitable glycol recycling companies, which are looking to take advantage of the Company&#8217;s public company status and improve their profitability through a combined synergy. The Company intends to expand customer and supplier bases once operational capacity and capabilities have been upgraded.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Cash and Cash Equivalents</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As of September 30, 2012, the Company maintained cash balances in an interest bearing account that currently does exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of September 30, 2012.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Recently Issued Accounting Pronouncements</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this accounting standard update became effective for the reporting period beginning July 1, 2012. The adoption of this guidance will not have a material impact on the Company&#8217;s financial position, result of operations or cash flows.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.</font> </div><br/> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Basis of Presentation</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The accompanying unaudited consolidated condensed financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The interim unaudited consolidated financial statements should be read in conjunction with the consolidated financial statements included in the Form 10-K for the year ended December 31, 2011.&#160;&#160;In the opinion of management, all adjustments considered necessary for the fair presentation consisting solely of normal recurring adjustments, have been made.&#160;&#160;Operating results for the three and nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for the year ending December 31, 2012</font></div> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Consolidation</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The accompanying unaudited condensed consolidated financial statements include the accounts of GlyEco, Inc., and its wholly-owned subsidiaries. All intercompany accounting transactions have been eliminated</font></div> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Use of Estimates</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent in the financial reporting process, actual results may differ significantly from those estimates</font></div> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Going Concern</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Company&#8217;s consolidated condensed financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As of September 30, 2012, the Company had an accumulated deficit of $8,748,550. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable.</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Management&#8217;s plans to address these matters include, raising additional financing through offering its shares of capital stock in private and/or public offerings of its securities and through debt financing if available and needed. The Company plans to become profitable by upgrading the capacity and capabilities at its existing operating facility, continuing to implement its patent-pending technology in international markets, and acquiring profitable glycol recycling companies, which are looking to take advantage of the Company&#8217;s public company status and improve their profitability through a combined synergy. The Company intends to expand customer and supplier bases once operational capacity and capabilities have been upgraded</font></div> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Cash and Cash Equivalents</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As of September 30, 2012, the Company maintained cash balances in an interest bearing account that currently does exceed federally insured limits. For the purpose of the statements of cash flows, all highly liquid investments with a maturity of three months or less are considered to be cash equivalents. There were no cash equivalents as of September 30, 2012</font></div> maturity of three months or less <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Recently Issued Accounting Pronouncements</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this accounting standard update became effective for the reporting period beginning July 1, 2012. The adoption of this guidance will not have a material impact on the Company&#8217;s financial position, result of operations or cash flows.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows</font></div> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NOTE 3 &#8211; Accounts Receivable</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As of September 30, 2012, the Company&#8217;s net accounts receivable was $136,646.</font> </div><br/> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NOTE 4 &#8211; Equipment</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">As of September 30, 2012, the Company&#8217;s equipment, net of accumulated depreciation, was $364,291.</font> </div><br/> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NOTE 5 &#8211; Major Customers and Suppliers</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">For the nine months ended September 30, 2012, one customer accounted for approximately 71% of the Company&#8217;s consolidated net revenues.&#160;&#160;With the acquisition of Recycool, the Company no longer relies on one customer for 100% of its consolidated net revenues.</font> </div><br/> one 0.71 one <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NOTE 6 &#8211; Convertible Note Payable</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On April 3, 2012, the Company entered into a Note Conversion Agreement (the "Conversion Agreement") with the note holder. The terms of the Conversion Agreement extend the maturity date for the convertible note held by Leonid Frenkel (the &#8220;Frenkel Convertible Note&#8221;) to December 31, 2013.&#160;&#160;Interest will continue to accrue at a rate of 12.5% compounding semi-annually. 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Refer to Note 6 for more information regarding the convertible note.</font> </div><br/> <div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NOTE 12 &#8211; Acquisitions</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Acquisition of Recycool, Inc.</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On December 16, 2011, the Company entered into that certain Asset Purchase Agreement (the &#8220;Recycool Agreement&#8221;) with Recycool, Inc., a Minnesota corporation (&#8220;Recycool&#8221;), Marty Rosauer, Kurt Rosauer and Dennis Scott (collectively, the &#8220;Selling Principals&#8221;), and GlyEco Acquisition Corp #1, an Arizona corporation and wholly-owned subsidiary of the Company (the &#8220;Acquisition Sub&#8221; and together with the Company, Recycool and the Selling Principals, the &#8220;Parties&#8221;).</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Recycool operates a business located in Minneapolis, Minnesota, relating to processing used glycol streams, primarily used antifreeze, and selling glycol as remanufactured product, including the collection and distribution businesses relating thereto.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Pursuant to the Recycool Agreement and with the exception of the Excluded Assets (as defined in the Recycool Agreement), Recycool had agreed to sell to Acquisition Sub the business and all of the assets and properties of Recycool in consideration for an aggregate purchase price of $525,000 (the &#8220;Purchase Price&#8221;) consisting of (subject to adjustment as provided in the Agreement) an aggregate of 525,000 shares of Common Stock of the Company (the &#8220;Acquisition&#8221;).</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On December 27, 2011, the Parties entered into Amendment No. 1 to the Recycool Agreement pursuant to which the Company agreed to issue, on a pro rata basis, 8,153 additional shares of restricted Common Stock to the Selling Principals under the terms of the Recycool Agreement in consideration for Recycool&#8217;s payment of $8,153 for financial statement audit related fees.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On January 1, 2012, the Parties entered into Amendment No. 2 to the Recycool Agreement pursuant to which the Purchase Price payable by the Company to the Selling Principals was increased from $525,000 to $543,750.&#160;&#160;The $18,750 increase in the Purchase Price consists of: (i) 8,878 additional shares of Common Stock due to the fact that the Net Working Capital (as defined in the Recycool Agreement) of Recycool was calculated to be $63,878 (an increase of $8,878 from $55,000 under the Recycool Agreement); (ii) 8,153 additional restricted shares of Common Stock under Amendment No. 1; and (iii) 1,719 additional restricted shares of Common Stock in consideration for Recycool&#8217;s payment of $1,719 in month rent pursuant to its Office/Warehouse Lease, dated September 1, 2000, as amended, by and between Recycool and Bolger Building Partnership, L.L.P. 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The useful life of this equipment was estimated at seven (7) years based on an approximate average of the depreciable life of the equipment acquired.&#160;&#160;The equipment was determined to have $0 salvage value.</font> </div><br/> 525000 525000 8153 8153 543750 18750 8878 63878 8878 55000 1719 1719 401700 seven (7) years 0 <div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">NOTE 13&#160;&#8211; Subsequent Events</font></font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Sale of Securities</font></font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; TEXT-DECORATION: underline">The following are the sales of Common Stock subsequent to September 30, 2012 wherein a total of 3,700,000 shares of common stock were issued at a per share price of $.50 for total proceeds of $1,850,000</font><font style="DISPLAY: inline; TEXT-DECORATION: underline">.</font></font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 5, 2012, the Company issued an aggregate of 440,000 shares of Common Stock to two investors at a price of $0.50 per share.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 9, 2012, the Company issued an aggregate of 250,000 shares of Common Stock to five investors at a price of $0.50 per share.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 10, 2012, the Company issued an aggregate of 50,000 shares of Common Stock to one investor at a price of $0.50 per share.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 16, 2012, the Company issued an aggregate of 360,000 shares of Common Stock to three investors at a price of $0.50 per share.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 19, 2012, the Company issued an aggregate of 2,600,000 shares of Common Stock to fifteen investors at a price of $0.50 per share.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Closure of Offering</font></font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 19, 2012, the Company closed its current offering (the &#8220;Offering&#8221;).&#160;&#160;The Company issued 6,780,000 units at a purchase price of $0.50 per unit. Total proceeds from the Offering were $3,390,000 less offering costs of $91,000.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Further, each unit sold in the Offering consists of (i) one share of common stock, par value $0.0001 per share, of the Company, and (ii) one warrant to purchase one share of common stock of the Company from the date of issuance until the third anniversary date such date for a purchase price of $1.00 per share.&#160;&#160;This Offering was made to accredited investors only, in accordance with Rule 506 of Regulation D of the Securities Act of 1933.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Asset Purchase Agreement with Antifreeze Recycling, Inc.</font></font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 3, 2012, the Company&#8217;s wholly-owned subsidiary, GlyEco Acquisition Corp. #7 (&#8220;Acquisition Sub #7&#8221;), an Arizona corporation, entered into an Asset Purchase Agreement (the &#8220;ARI APA&#8221;) with Antifreeze Recycling, Inc., a South Dakota corporation (&#8220;ARI&#8221;) and Mr. Robert J. Kolhoff, the selling principal of ARI (the &#8220;Selling Principal&#8221;) on October 3, 2012. The Agreement superseded the terms of the Preliminary Agreement.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">ARI operates a business located in Tea, South Dakota, relating to processing used glycol streams, primarily used antifreeze, and selling glycol as remanufactured product.</font> </div><br/><div style="TEXT-ALIGN: justify; TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Pursuant to the ARI APA, Acquisition Sub #7 agreed to purchase on October 26, 2012, or on such later date as agreed upon by the parties (the &#8220;Closing&#8221;), all of the glycol-related assets of ARI, free and clear of any liabilities or encumbrances, consisting of ARI&#8217;s personal property (equipment, tools, machinery, furniture, supplies, materials, and other tangible personal property), inventory, intangible property, contractual rights, books and records, intellectual property, accounts receivable (excluding trade accounts receivable equal to or greater than 90 days), goodwill, and miscellaneous assets.&#160;</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The ARI APA states that the aggregate purchase price (the &#8220;Purchase Price&#8221;) for the Assets shall be $450,000, consisting of 361,200 unregistered shares (the &#8220;Shares&#8221;) of the Company&#8217;s common stock (the &#8220;Common Stock&#8221;), subject to adjustment, and assumption of debt in an amount of $88,800.&#160;&#160;The Purchase Price is based on ARI having a Net Working Capital (as defined in the ARI APA) of $15,000 at Closing.&#160;&#160;The ARI APA states that the Purchase Price be decreased to the extent that ARI&#8217;s Net Working Capital is less than $15,000 at Closing.&#160;&#160;If, however, ARI&#8217;s Net Working Capital is greater than $15,000 at Closing, the Company has agreed to pay the full amount of such overage within 15 business days of the Closing.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On October 31, 2012, Acquisition Sub #7 and ARI executed all documents to effect a closing of the acquisition effective as of October 29, 2012.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt; FONT-WEIGHT: bold"><font style="DISPLAY: inline; TEXT-DECORATION: underline">Asset Purchase Agreement with Renew Resources</font></font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt"><font style="DISPLAY: inline; FONT-FAMILY: Times New Roman">On October 3, 2012, the Company&#8217;s wholly-owned subsidiary, GlyEco Acquisition Corp. #5 (&#8220;Acquisition Sub #5&#8221;), an Arizona corporation, entered into an</font> Asset Purchase Agreement (the &#8220;Renew APA&#8221;) with Renew Resources and Mr. Todd M. Bernard, the selling principal of Renew Resources (the &#8220;Selling Principal&#8221;).&#160;&#160;The Agreement superseded the terms of the Preliminary Agreement.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Renew Resources operates a business located in Rock Hill, South Carolina, involving the collection and recycling of several types of waste material, including waste glycol.&#160;&#160;The Renew APA concerns Renew Resources&#8217; waste glycol recycling business, relating to the processing of used glycol steams, primarily used antifreeze, and selling glycol as remanufactured product.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">Pursuant to the Renew APA, Acquisition Sub #5 has agreed to purchase on October 26, 2012, or on such later date as agreed upon by the parties (the &#8220;Closing&#8221;), all of the glycol-related assets of Renew Resources, free and clear of any liabilities or encumbrances, consisting of Renew Resources&#8217; personal property (equipment, tools, machinery, furniture, supplies, materials, and other tangible personal property), inventory, intangible property, contractual rights, books and records, intellectual property, accounts receivable (excluding trade accounts receivable equal to or greater than 90 days), goodwill, and miscellaneous assets.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">The Renew APA states that the aggregate purchase price (the &#8220;Purchase Price&#8221;) for the Assets shall be $325,000, consisting of a cash payment of $15,000 (the &#8220;Cash Payment&#8221;), 275,000 unregistered shares (the &#8220;Shares&#8221;) of the Company&#8217;s common stock (the &#8220;Common Stock&#8221;), subject to adjustment, and assumption of debt in an amount of $35,000.&#160;&#160;The Cash Payment is based on Renew Resources having a Net Working Capital (as defined in the Agreement) of $15,000 at Closing.&#160;&#160;The Agreement states that the Cash Payment shall be decreased to the extent that Renew Resources&#8217; Net Working Capital is less than $15,000 at Closing.&#160;&#160;If, however, Renew Resources&#8217; Net Working Capital is greater than $15,000 at Closing, the Company has agreed to pay the full amount of such overage within 15 business days of the Closing.</font> </div><br/><div style="TEXT-INDENT: 0pt; DISPLAY: block; MARGIN-LEFT: 0pt; MARGIN-RIGHT: 0pt" align="justify"> <font style="DISPLAY: inline; FONT-FAMILY: Times New Roman; FONT-SIZE: 10pt">On November 2, 2012, Acquisition Sub #5 and Renew Resources executed all documents to effect a closing of the acquisition effective as of October 29, 2012.</font> </div><br/> 3700000 0.50 1850000 440000 2 0.50 250000 5 0.50 50000 1 0.50 360000 3 0.50 2600000 15 0.50 6780000 0.50 3390000 91000 (i) one share of common stock, par value $0.0001 per share, of the Company, and (ii) one warrant to purchase one share of common stock of the Company from the date of issuance until the third anniversary date such date for a purchase price of $1.00 per share 450000 361200 88800 The Purchase Price is based on ARI having a Net Working Capital (as defined in the ARI APA) of $15,000 at Closing.The ARI APA states that the Purchase Price be decreased to the extent that ARI's Net Working Capital is less than $15,000 at Closing.If, however, ARI's Net Working Capital is greater than $15,000 at Closing, the Company has agreed to pay the full amount of such overage within 15 business days of the Closing 325000 15000 275000 35000 The Cash Payment is based on Renew Resources having a Net Working Capital (as defined in the Agreement) of $15,000 at Closing.The Agreement states that the Cash Payment shall be decreased to the extent that Renew Resources' Net Working Capital is less than $15,000 at Closing.If, however, Renew Resources' Net Working Capital is greater than $15,000 at Closing, the Company has agreed to pay the full amount of such overage within 15 business days of the Closing EX-101.SCH 7 glye-20120930.xsd 001 - 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