NOTES
TO FINANCIAL STATEMENTS
AS
OF MARCH 31, 2016 AND 2015
Note
1 - Company Background
The
consolidated financial statements include Greenparts International, Inc.(“GNPT”), Greenparts, Inc., and Metal Max
Recycling, LLC, and are referred collectively herein as “the Company”. The Company’s principal activities include
processing of salvage vehicles and trucks and other scrap material for the purpose of recycling of metals, selling used parts
and rebuilding of vehicles for resale. The Company’s facilities are primarily based in the vicinity of Atlanta, Georgia.
The
Company has acquired various acquisitions in an effort to capitalize on the growing need of recycling and turning these materials
into multiple revenue streams and expanded distribution.
Note
2 - Summary of Significant Accounting Policies
This
summary of significant account policies of the Company is presented to assist in understanding the Company’s financial statements.
The financial statements and the notes are the representation of the Company’s management, who are responsible for their
integrity and objectivity. These accounting policies conform to U.S. generally accepted accounting principles (“US GAAP”)
and have been consistently applied in the preparation of the financial statements.
Basis
of Presentation
The
Consolidated Financial Statements include the accounts of the Company and its majority-owned and wholly-owned subsidiaries. All
significant intercompany account balances, transactions, profits and losses have been eliminated.
Use
of Estimates
The
preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect
reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Fair
Value of Financial Instruments
For
certain of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable,
the carrying amounts approximate fair value due to their short maturities.
Revenue
Recognition
The
majority of the Company’s revenue is derived from the sale of recycled OEM products and aftermarket products. Revenue is
recognized when the products are shipped, title and risk of loss transfer to the buyer, and collectability is reasonably assured,
subject to an allowance for estimated returns, discounts and allowances that management estimates based upon historical information.
Retail revenues are recognized when customers pay for parts, and wholesale product revenues are recognized when customer weight
certificates are received following shipments. Historically, there have been very few sales returns and adjustments that impact
the ultimate collection of revenues; therefore, no material provisions have been made when the sale is recognized.
Cash
and Cash Equivalents
Cash
comprise cash in hand and cash held on demand with banks. The Company considers all highly liquid investments with original maturities
of 90 days or less to be cash equivalents. Cash equivalents are carried at cost, which approximates market value. presented in
in US Dollars.
Note
2 - Summary of Significant Accounting Policies (Continued)
Accounts
Receivables, Net
Accounts
receivable represent amounts due from customers on product and other sales. These accounts receivable, which are reduced by an
allowance for doubtful accounts, are recorded at the invoiced amount and do not bear interest. The Company evaluates the collectability
of its accounts receivable based on a combination of factors, including whether sales were made pursuant to letters of credit.
In cases where management is aware of circumstances that may impair a specific customer’s ability to meet its financial
obligations, management records a specific allowance against amounts due, and reduces the net recognized receivable to the amount
the Company believes will be collected. For all other customers, the Company maintains an allowance that considers the total receivables
outstanding, historical collection rates and economic trends. Accounts are written off when all efforts to collect have been exhausted.
Inventory
A
salvage vehicle product is a recycled vehicle part suitable for sale as a replacement part. A core is a recycled mechanical part
that is not suitable for sale as a replacement part without further remanufacturing work. Salvage inventory and cores are recorded
at the lower of cost or market using weighted average method. Cost is established based upon the price the Company pays for a
vehicle. Scrap inventory is inventory that is considered for the purpose of recycling by mills that process metals. For all inventory,
carrying value is reduced regularly to reflect the age of the inventory and current anticipated demand. If actual demand differs
from management estimates, additional reductions to inventory carrying value would be necessary in the period such determination
is made.
Property,
Plant and Equipment
Property,
plant and equipment are recorded at cost less accumulated depreciation. Expenditures for major additions and improvements are
capitalized. As property and equipment are sold or retired, the applicable cost and accumulated depreciation are removed from
the accounts and any resulting gain or loss thereon is recognized as operating expenses.
Depreciation
is calculated using the straight-line method over the estimated useful lives or, in the case of leasehold improvements, the term
of the related lease, including renewal periods, if shorter. Estimated useful lives are as follows:
Buildings
|
|
|
40 years
|
|
Equipment
|
|
|
5-15 years
|
|
The
Company reviews property, plant and equipment and all amortizable intangible assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of these assets may not be recoverable. Recoverability is based on estimated
undiscounted cash flows. Measurement of the impairment loss, if any, is based on the difference between the carrying value and
fair value.
Impairment
of Long-Lived Assets and Amortizable Intangible Assets
The
Company follows ASC 360-10,
“Property, Plant, and Equipment,”
which established a
“primary asset”
approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting
for a long-lived asset to be held and used. Long-lived assets to be held and used are reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The carrying amount of a long-lived
asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition
of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Note
-2- Summary of Significant Accounting Policies (Continued)
Intangible
Assets - Goodwill
The
excess of the purchase price over net tangible and identifiable intangible assets of business acquired is carried as Goodwill
on the balance sheet. Goodwill is not amortized, but instead is assessed for impairment at least annually and upon the occurrence
of certain triggering events or substantive changes in circumstances that indicate that the fair value of goodwill may be impaired.
Measurement
of the impairment loss, if any, is based on the difference between the carrying value and fair value of reporting unit. The goodwill
impairment test follows a two-step process. In the first step, the fair value of a reporting unit is compared to its carrying
value. If the carrying value of a reporting unit exceeds its fair value, the second step of the impairment test is performed for
purposes of measuring the impairment. In the second step, the fair value of the reporting unit is allocated to all of the assets
and liabilities of the reporting unit to determine an implied goodwill value. If the carrying amount of the reporting unit’s
goodwill exceeds the implied fair value of goodwill, an impairment loss will be recognized in an amount equal to that excess.
There were no material impairments to the carrying value of long-lived assets and intangible assets subject to amortization during
the periods ended March 31, 2016, and 2015.
Business
segments
ASC
280,
“Segment Reporting”
requires use of the
“management approach”
model for segment reporting.
The management approach model is based on the way a company’s management organizes segments within the company for making
operating decisions and assessing performance. The Company determined it has two operating segments as of March 31, 2016 and 2015.
Acquisitions
The
Company recognizes the assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date. Contingent purchase consideration is recorded at fair value at the date of
acquisition. Any excess purchase price over the fair value of the net assets acquired is recorded as goodwill. Within one year
from the date of acquisition, the Company may update the value allocated to the assets acquired and liabilities assumed and the
resulting goodwill balances as a result of information received regarding the valuation of such assets and liabilities that was
not available at the time of purchase. Measuring assets and liabilities at fair value requires the Company to determine the price
that would be paid by a third party market participant based on the highest and best use of the assets or interests acquired.
Acquisition costs are expensed as incurred.
Environmental
Liabilities
The
Company estimates future costs for known environmental remediation requirements and accrues for them on an undiscounted basis
when it is probable that the Company has incurred a liability and the related costs can be reasonably estimated but the timing
of incurring the estimated costs is unknown. The Company considers various factors when estimating its environmental liabilities.
Adjustments to the liabilities are recorded to selling, general and administrative expense and made when additional information
becomes available that affects the estimated costs to study or remediate any environmental issues or when expenditures are made
for which liabilities were established. Legal costs incurred in connection with environmental contingencies are expensed as incurred.
When only a wide range of estimated amounts can be reasonably established and no other amount within the range is a better estimate
than another, the low end of the range is recorded in the financial statements. In a number of cases, it is possible that the
Company may receive reimbursement through insurance or from other potentially responsible parties for a site. In these situations,
recoveries of environmental remediation costs from other parties are recognized when the claim for recovery is actually realized.
The amounts recorded for environmental liabilities are reviewed periodically as site assessment and remediation progresses at
individual sites and adjusted to reflect additional information that becomes available. Due to evolving remediation technology,
changing regulations, possible third party contributions, the subjective nature of the assumptions used and other factors, amounts
accrued could vary significantly from amounts paid.
Note
-2- Summary of Significant Accounting Policies (Continued)
Fair
Value Measurements
For
certain financial instruments, including accounts receivable, accounts payable, interest payable, advances payable and notes payable,
the carrying amounts approximate fair value due to their relatively short maturities.
On
January 1, 2008, the Company adopted ASC 820-10,
“Fair Value Measurements and Disclosures.”
ASC 820-10 defines
fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure
requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current
liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period
of time between the origination of such instruments and their expected realization and their current market rate of interest.
The three levels of valuation hierarchy are defined as follows:
Level
1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
Level
2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that
are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level
3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
The
Company did not identify any non-recurring assets and liabilities that are required to be presented in the balance sheets at fair
value in accordance with ASC 815.
In
February 2007, the FASB issued ASC 825-10
“Financial Instruments.”
ASC 825-10 permits entities to choose to
measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings. ASC 825-10 is effective as of the beginning of an entity’s first
fiscal year that begins after November 15, 2007. The Company adopted ASC 825-10 on January 1, 2008. The Company chose not to elect
the option to measure the fair value of eligible financial assets and liabilities.
Income
Taxes
Deferred
income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carry-forwards, and deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the
changes in tax laws and rates of the date of enactment.
When
tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities,
while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately
sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available
evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution
of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions
that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50
percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated
with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax
benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing
authorities upon examination.
Note
-2- Summary of Significant Accounting Policies (Continued)
Applicable
interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the statements of
operations.
Borrowings
Borrowings
are recognized initially at cost which is the fair value of the proceeds received, net of transaction costs incurred. In subsequent
periods, borrowings are stated at amortized cost using the effective yield method; any difference between fair value of the proceeds
(net of transaction costs) and the redemption amount is recognized as interest expense over the period of the borrowings.
Provisions
Provisions
are recognized when the Company has a present legal or constructive obligation as a result of past events, and it is probable
that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. Where
the Company expects a provision to be reimbursed, for example under an insurance contract, the reimbursement is recognized as
a separate asset but only when the reimbursement is virtually certain.
The
Company recognizes the estimated liability to repair or replace products sold still under warranty at the balance sheet date.
This provision is calculated based on past history of the level of repairs and replacements.
Research
and Development
Research
expenditure is recognized as an expense as incurred. Costs incurred on development projects (relating to the design and testing
of new or improved products) are recognized as intangible assets to the extent that such expenditure is expected to generate future
economic benefits. Other development expenditures are recognized as an expense as incurred. Development costs previously recognized
as an expense are not recognized as an asset in a subsequent period. Development costs that have been capitalized are amortized
from the commencement of the commercial production of the product on a straight-line basis over the period of its expected benefit.
The amortization periods adopted do not exceed five years.
Legal
Matters
The
Company currently and from time to time is involved in litigation incidental to the conduct of the business. The damages claimed
in some of this litigation are substantial. Based on an internal review, the Company accrues reserves using management’s
best estimate of the probable and reasonably estimable contingent liabilities. The management does not currently believe that
any of these legal claims incidental to the conduct of the business, individually or in the aggregate, will result in liabilities
material to the combined financial position, results of operations or cash flows. However, if such estimates related to these
contingent liabilities are incorrect, the future results of operations for year could be materially adversely affected.
Special
Purpose Entities
The
Company does not have any off-balance sheet financing activities.
Net
Income per Share
The
Company computes net income (loss) per share in accordance with ASC 260-10,
“Earnings Per Share.”
The basic
net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted
net loss per share gives effect to all dilutive potential common shares outstanding during the period using the
“as if
converted”
basis. For the six months ended June 30, 2015, and 2014 there were no potential dilutive securities.
Note
-2- Summary of Significant Accounting Policies (Continued)
Common
Stock
There
is currently only one class of common stock. Each share common stock is entitled to one vote. The authorized number of common
stock of Greenparts International Inc. at March 31, 2016 was 2,960,000,000 thousand shares with a nominal value per share of $0.001.
Authorized shares that have been issued and fully paid amounted to 677,249,435 thousand common stocks.
Preferred
Stock
On
June 4, 2007, the Company’s Board of Directors authorized the issuance of Series “A” Preferred stock of 3,000,000.
These shares had super voting rights of 100 common shares votes to each preferred share. The Company issued a total of 3,000,000
shares were issued on this date.
Derivative
Financial Instruments
The
Company does not use derivative instruments to hedge exposures to cash flow, market or foreign currency risks. The Company reviews
the terms of the common stock, warrants and convertible debt it issues to determine whether there are embedded derivative instruments,
including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial
instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion
option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative
instrument. Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date
with changes in the fair value reported as non-operating income or expense. The Company uses a lattice model for valuation of
the derivative. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated
and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative
instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those
instruments being recorded at a discount from their face value.
The
discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the
life of the instrument through periodic charges to interest expense, using the effective interest method.
Derivative
instrument liabilities are classified in the balance sheet as current or non-current based on whether net cash settlement of the
derivative instrument could be required within the 12 months of the balance sheet date.
Note
3 – Recent Accounting Pronouncements
The
Company has implemented all other new accounting pronouncements that are in effect and that may impact its consolidated financial
statements and does not believe that there are any other new accounting pronouncements that have been issued that might have a
material impact on its financial position or results of operations.
Note
4 - Inventories
|
|
3/31/2016
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
Processed and unprocessed scrap metal
|
|
$
|
161,250
|
|
|
$
|
506,250
|
|
Finished goods - parts
|
|
|
1,548,950
|
|
|
|
1,117,951
|
|
|
|
|
|
|
|
|
|
|
Inventories, net
|
|
$
|
1,710,200
|
|
|
$
|
1,624,201
|
|
Note
5 - Property, Plant and Equipment
Property,
plant and equipment and related accumulated depreciation consist of the following:
|
|
3/31/2016
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
$
|
2,883,387
|
|
|
$
|
2,883,387
|
|
Land and building
|
|
|
135,000
|
|
|
|
135,000
|
|
Improvements
|
|
|
258,198
|
|
|
|
258,198
|
|
Land
|
|
|
2,200,000
|
|
|
|
0
|
|
Property, plant and equipment, gross
|
|
|
5,476,585
|
|
|
|
3,276,585
|
|
Less: accumulated depreciation
|
|
|
(1,066,795
|
)
|
|
|
(1,022,885
|
)
|
Property, plant and equipment, net
|
|
$
|
4,409,790
|
|
|
$
|
2,253,700
|
|
Note
6 - Bank Loans and Long-Term Leases
Bank
Loans and Long-Term Leases
Notes payable consist of the following for the periods ended;
|
|
3/31/2016
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
Nine month convertible note with 8% stated interest rate, maturity date of April 17, 2016 and shares convert at 50% of market. This is recorded net of debt discount of $22,500.
|
|
$
|
39,800
|
|
|
$
|
22,500
|
|
|
|
|
|
|
|
|
|
|
Working capital loan unsecured with an interest rate of 18%, unsecured and payable on demand.
|
|
|
0
|
|
|
|
82,901
|
|
|
|
|
|
|
|
|
|
|
Working capital loan unsecured with an interest rate of 22%, unsecured and payable on demand.
|
|
|
101,981
|
|
|
|
54,058
|
|
|
|
|
|
|
|
|
|
|
Nine month convertible note with 8% stated interest rate, maturity date of January 5, 2016 and shares convert at 30% of market. This is recorded net of debt discount of $1,844.
|
|
|
7,000
|
|
|
|
5,156
|
|
|
|
|
|
|
|
|
|
|
Equipment loan secured by Company Loader with an interest rate of 8%, and is fully amortizing with principal payments of $1,580 per month.
|
|
|
0
|
|
|
|
68,794
|
|
|
|
|
|
|
|
|
|
|
Bank revolving line of credit with maximum $500, 000 limit. Annual interest rate at 6.5%, secured by equipment
|
|
|
460,815
|
|
|
|
460,815
|
|
|
|
|
|
|
|
|
|
|
Term note with maturity at January 5, 2041 with an SBA secured lendor, secured with various company assets with an interest rate of prime plus 2.75% amortizing with principal and interest over twenty five years.
|
|
|
4,993,604
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Twelve month convertible note with 8% stated interest rate, maturity date of February 8, 2017 and shares convert at 50% of market. This note has been converted to common stock.
|
|
|
210,000
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Capital lease obligations secured by weighting equipment with a maturity date of June 1, 2017.
|
|
|
0
|
|
|
|
40,812
|
|
Note
6 - Bank Loans and Long-Term Leases (Continued)
Bank working capital loan unsecured with an interest rate of 12%, and and is payable on demand.
|
|
|
0
|
|
|
|
83,269
|
|
|
|
|
|
|
|
|
|
|
Six month convertible note with 8% stated interest rate, maturity date of June 18, 2016 and shares convert at 60% of market. This is recorded net of debt discount of $127,575.
|
|
|
127,364
|
|
|
|
42,525
|
|
|
|
|
|
|
|
|
|
|
Nine month convertible note with 8% stated interest rate, maturity date of April 7, 2016. Shares convert at 40% of market value. This note is recorded net of debt discount of $12,830.
|
|
|
0
|
|
|
|
31,420
|
|
|
|
|
|
|
|
|
|
|
On March 27, 2014, the Company secured a senior note secured line of credit facility for a maximum amount of $10 million. On September 11, 2014, the Company has drawn $2.3 million credit facility with the six months renewable maturity at 15% interest. This note is secured by Company assets .
|
|
|
550,000
|
|
|
|
2,212,360
|
|
|
|
|
|
|
|
|
|
|
Twelve month convertible note with 8% stated interest rate, maturity date of March 1, and shares convert at 60% of market. This is recorded is fully amortized.
|
|
|
41,289
|
|
|
|
50,000
|
|
|
|
|
|
|
|
|
|
|
Twelve month convertible note with 8% stated interest rate, maturity date of January 19, 2017 and shares convert at 60% of market. This note has been converted to common stock.
|
|
|
60,193
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
On August 2014, the Company entered into an Accounts Receivables Advance Agreement for the advance amount of $700 thousand with the 12 months maturityat 15% interest payable in daily instalments of $3,096. Such credit facility is secured by the Company’s tangible and intangible assets.
|
|
|
0
|
|
|
|
546,613
|
|
|
|
|
|
|
|
|
|
|
Twelve month convertible note with 12% stated interest rate, maturity date of October 31, 2014. Initial proceeds were $25,000, shares convert at $0.25 per share. This note has ben fully amortized.
|
|
|
25,000
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
Total Notes Payable
|
|
|
6,617,046
|
|
|
|
3,726,223
|
|
|
|
|
|
|
|
|
|
|
Less Current Portion
|
|
|
1,491,243
|
|
|
|
3,704,995
|
|
|
|
|
|
|
|
|
|
|
Long Term Notes Payable
|
|
$
|
5,125,803
|
|
|
$
|
21,228
|
|
Note
7 - Note Receivable
During
the 2012 the company sold the assets of a business Booming (Valencia Motors LLC) which was previously acquired in 2007. The remaining
items that were sold were not material to the Company and therefore no additional detail is provided. The sale was for $425,000
in the form of a note which included $30,000 paid down and a note for the balance. There was $145,000 in notes receivable as of
March 31, 2016 $60,000 current and $85,000 long term, and $220,000 in notes receivable at December 31, 2015, $60,000 current and
$100,000 long term.
Note
8 – Commitments and Contingencies
Commitments
The
table below sets forth the Company’s future minimum obligations under non-cancelable operating leases as of March 31, 2016:
Non
Related Party Long Term Commitments
Twelve months ending
|
|
Debt
|
|
|
Capital Lease Obligations
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
3/31/2017
|
|
$
|
1,491,243
|
|
|
$
|
0
|
|
|
$
|
1,491,243
|
|
3/31/2018
|
|
|
89,523
|
|
|
|
0
|
|
|
|
89,523
|
|
3/31/2019
|
|
|
95,518
|
|
|
|
0
|
|
|
|
95,518
|
|
3/31/2020
|
|
|
101,916
|
|
|
|
0
|
|
|
|
101,916
|
|
3/31/2021 & Beyond
|
|
|
4,608,999
|
|
|
|
0
|
|
|
|
4,608,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
6,387,199
|
|
|
$
|
0
|
|
|
$
|
6,387,199
|
|
Note
9 – Commitments and Contingencies (Continued)
Guarantees,
Indemnifications and Warranties
Standard
Guarantees / Indemnifications
In
the ordinary course of business, the Company enters into a number of agreements that contain standard guarantees and indemnities
where the Company may indemnify another party for, among other things, breaches of representations and warranties. These guarantees
or indemnifications are granted under various agreements, including those governing (i) purchases and sales of assets or businesses,
(ii) leases of real property, (iii) licenses of intellectual property, (iv) long-term supply agreements, (v) employee benefits
services agreements and (vi) agreements with public authorities on subsidies for designated research and development projects.
These guarantees or indemnifications issued are for the benefit of the (i) buyers in sale agreements and sellers in purchase agreements,
(ii) landlords or lessors in lease contracts, (iii) licensors or licensees in license agreements, (iv) vendors or customers in
long-term supply agreements, (v) service providers in employee benefits services agreements and (vi) governments or agencies subsidizing
research or development. In addition, the Company guarantees some of the payables of its subsidiaries to purchase raw materials
in the ordinary course of business. These parties may also be indemnified against any third party claim resulting from the transaction
that is contemplated in the underlying agreement. While some of these guarantees extend only for the duration of the underlying
agreement, many survive the expiration of the term of the agreement or extend into perpetuity (unless they are subject to a legal
statute of limitations). There are no specific limitations on the maximum potential amount of future payments that the Company
could be required to make under its guarantees, nor is the Company able to estimate the maximum potential amount of future payments
to be made under these guarantees because the triggering events are not predictable. With respect to some of these guarantees,
the Company maintains limited insurance coverage that mitigates the potential payments that may be required to be made.
Warranties
The
Company does not make express warranties on its products, other than that they comply with the Company’s specifications;
therefore, the Company does not record a warranty liability. Adjustments for product quality claims are not material and are charged
against net sales.
Environmental
Matters
The
Company periodically evaluates its obligations under environmental regulations. As obligations are determined, they are recognized
immediately. Potential liabilities, which might arise as a result of changes in existing regulations, civil litigation or legislation,
cannot be estimated but could be material. In the current enforcement climate under existing legislation, management believes
that there are no significant liabilities for environmental damage. The Company has had studies done in 2008 and 2009 and had
these studies further updated in 2012 in conjunction with requirements needed for refinancing. Based upon these studies, a provision
has been established. The liabilities relate to the potential future remediation of soil contamination, groundwater contamination
and storm water runoff issues and were not individually material to any site. No material environmental compliance enforcement
proceedings are currently pending related to these sites.
Legal
Proceedings
During
the year, the Company was involved in a number of court proceedings (both as a plaintiff and a defendant) arising in the ordinary
course of business. In the opinion of management, there are no current legal proceedings or other claims outstanding, which could
have a material effect on the result of operations or financial position of the Company and which have not been accrued or disclosed
in these financial statements.
Note
10 – Net Income per Share
The
following table sets forth the information used to compute basic and diluted net income per share attributable to GNPT for the
three months ended March 31, 2016 and 2015:
|
|
3/31/2016
|
|
|
3/31/2015
|
|
|
|
|
|
|
|
|
Net Income (Loss)
|
|
$
|
(254,705
|
)
|
|
$
|
(627,749
|
)
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common stock basic
|
|
|
575,661,481
|
|
|
|
163,863,978
|
|
Equivalents
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
-
|
|
|
|
-
|
|
Warrants
|
|
|
-
|
|
|
|
-
|
|
Convertible Notes
|
|
|
1,905,604,769
|
|
|
|
837,750,000
|
|
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding-
Diluted
|
|
|
2,481,266,250
|
|
|
|
1,001,613,978
|
|
Note
11 – Income Taxes Payable
Income
from continuing operations before income taxes was as follows for the nine months ended March 31:
|
|
3/31/2016
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
Net Operating Loss carryforward
|
|
|
(6,178,026
|
)
|
|
|
(5,923,321
|
)
|
Deferred Tax
|
|
|
(2,100,529
|
)
|
|
|
(2,013,929
|
)
|
Valuation allowance
|
|
|
2,100,529
|
|
|
|
2,013,929
|
|
Total deferred tax asset
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
3/31/2016
|
|
|
12/31/2015
|
|
Federal statutory rate
|
|
|
15
|
%
|
|
|
15
|
%
|
State taxes, net of credits
|
|
|
6
|
%
|
|
|
6
|
%
|
Foreign income taxed at different rates
|
|
|
0
|
%
|
|
|
0
|
%
|
Section 199 deduction
|
|
|
0
|
%
|
|
|
0
|
%
|
Other
|
|
|
0
|
%
|
|
|
0
|
%
|
Effective tax rate
|
|
|
0
|
%
|
|
|
0
|
%
|
In
fiscal 2015 the effective tax rate differed from the U.S. federal statutory rate of 34.0% primarily due to tax benefits from accelerated
depreciation deductions.
Note
12 – Related Party Transactions
For
the purposes of these financial statements, parties are considered to be related if one party has the ability to control the other
party or exercise significant influence over the other party in making financial or operational decisions. In considering each
possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.
Related
parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected
on the same terms, conditions and amounts as transactions between unrelated parties. The Company bought land that was owned by
its president that its main operating facility operated on at fair market value during January 2016 . This also allowed the Company
to refinance some its debt into long term monthly amoertizations.
Also,
during the 2016 Asif Balagamwala has increased his note through the advancement of small amounts of working capital.
Additionally,
balances and transactions with related parties of the Company consist of the following:
|
|
|
|
3/31/2016
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
|
|
Notes Payable Related Party
|
|
Asif Balagamwala
|
|
$
|
2,279,143
|
|
|
$
|
2,239,669
|
|
Notes Payable Related Party
|
|
Other
|
|
|
162,557
|
|
|
|
162,557
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL
|
|
|
|
$
|
2,441,700
|
|
|
$
|
2,402,226
|
|
Note
13 – Segment Information
The
accounting standards for reporting information about operating segments define operating segments as components of an enterprise
for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the Chief Executive
Officer. The Company is organized by line of business. While the Chief Executive Officer evaluates results in a number of different
ways, the line of business management structure is the primary basis for which the allocation of resources and financial results
are assessed. Under the aforementioned criteria, the Company operates in two operating and reporting segments: metal purchasing,
processing, recycling and selling, and used auto parts.
Metal
Max Recycling is one segment of the Company that derives its income from the sale of metals and recyclable materials both in the
United States and overseas. Our other business segment is Greenparts, which purchases used and salvaged vehicles, sells parts
from those vehicles through its retail facilities and wholesale operations, and sells the remaining portion of the vehicles to
metal recyclers, including Metal max Recycling.
The
information provided below is obtained from internal information that is provided to the Company’s chief operating decision
maker for the purpose of corporate management. The Company uses operating income (loss) to measure segment performance. The Company
does not allocate corporate interest income and expense, income taxes, other income and expenses related to corporate activity
or corporate expense for management and administrative services that benefit both segments. In addition, the Company does not
allocate restructuring charges to the segment operating income (loss) because management does not include this information in
its measurement of the performance of the operating segments. Because of this unallocated income and expense, the operating income
(loss) of each reporting segment does not reflect the operating income (loss) the reporting segment would report as a stand-alone
business and therefore we do not present indirect operating expenses.
Note
13 – Segment Information (Continued)
The
table below illustrates the Company’s results by reporting segment for the three months endedMarch 31:
|
|
3/31/2016
|
|
|
3/31/2015
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parts
|
|
$
|
663,947
|
|
|
$
|
1,099,232
|
|
Scrap Metal
|
|
|
117,717
|
|
|
|
889,952
|
|
|
|
|
|
|
|
|
|
|
Total Revenue
|
|
$
|
781,664
|
|
|
$
|
1,989,184
|
|
|
|
3/31/2016
|
|
|
3/31/2015
|
|
Product Cost
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parts
|
|
$
|
520,085
|
|
|
$
|
1,138,388
|
|
Scrap Metal
|
|
|
92,725
|
|
|
|
639,729
|
|
|
|
|
|
|
|
|
|
|
Total Product Cost
|
|
$
|
612,810
|
|
|
$
|
1,778,117
|
|
|
|
3/31/2016
|
|
|
3/31/2015
|
|
Net Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parts
|
|
$
|
(217,280
|
)
|
|
$
|
(381,539
|
)
|
Scrap Metal
|
|
|
(39,039
|
)
|
|
|
(26,974
|
)
|
|
|
|
|
|
|
|
|
|
Total Net Operating Income
|
|
$
|
(256,319
|
)
|
|
$
|
(408,513
|
)
|
Note
14 – Goodwill
In
the fourth quarter of fiscal 2014, the Company performed its annual goodwill impairment testing by comparing the fair value of
each reporting unit with its carrying value, including goodwill. As a result of both tests, the Company determined that the fair
value for which goodwill was allocated was in excess of its respective carrying value and the goodwill balance was not impaired.
The
determination of fair value of the assets used to perform the first step of the impairment test requires judgment and involves
significant estimates and assumptions about the expected future cash flows and the impact of market conditions on those assumptions.
Future events and changing market conditions, including a sustained decline in the Company’s market capitalization, may
lead the Company to reevaluate its assumptions as to future growth rates, operating margins, capital expenditures, working capital
requirements, tax rates, terminal growth rates, appropriate discount rates and other factors that may result in changes in the
estimates of discounted future cash flows. Due to the inherent uncertainty associated with forming these estimates, actual results
could differ from those estimates.
The
carrying amount of goodwill for the as of March 31, 2016 and December 31, 2015:
Goodwill Source
|
|
3/31/2016
|
|
|
12/31/2015
|
|
|
|
|
|
|
|
|
Samson
|
|
$
|
560,371
|
|
|
$
|
560,371
|
|
Booming
|
|
|
0
|
|
|
|
40,000
|
|
Jonsboro:
|
|
|
40,000
|
|
|
|
0
|
|
Impairment Charges
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Total Goodwill
|
|
$
|
600,371
|
|
|
$
|
600,371
|
|
Note
16 - Derivative Liability
The
Company evaluated their convertible note agreements pursuant to ASC 815 and due to there being no minimum or fixed conversion
price resulting in an indeterminate number of shares to be issued in the future, the Company determined an embedded derivative
existed and ASC 815 applied for all their convertible note with a cumulative balance of $67,614 at March 31, 2016, respectively.
In
accordance with the option allowed in ASC 815, the Company has elected to value the derivatives separately at the fair value on
the issuance date using the Black-Scholes valuation model and bifurcate the instruments. The Company valued the embedded derivative
within the convertible note using the Black-Scholes valuation model. The result of the valuation is a derivative liability in
the amount of $672,614 as of March 31, 2016 and $420,693 as of December 31, 2015. We estimated the fair value of the derivative
using the Black-Scholes valuation method with assumptions including: (1) term of the note; (2) a computed 180 day volatility rate
(3) a discount rate per note agreement and (4) zero dividends. The valuation of this embedded derivative was recorded with an
offsetting gain/loss on derivative liability.
The
Company evaluated all convertible debt and outstanding warrants to determine whether these instruments may be tainted from the
aforementioned derivative. It was determined there was sufficient share authorization for all instruments.
Convertible note Derivative Liability at 12/31/15
|
|
$
|
420,693
|
|
|
|
|
|
|
(Gain) Loss on Derivative for the Three Month Ended March 31, 2016
|
|
|
125,586
|
|
|
|
|
|
|
Conversions during the period
|
|
|
(251,172
|
)
|
|
|
|
|
|
Derivative liability from new notes
|
|
|
377,507
|
|
|
|
|
|
|
Convertible note Derivative Liability at 3/31/16
|
|
$
|
672,614
|
|
PART
I