ITEM 1. BUSINESS
Company History
Green Parts International Inc. was originally incorporated in Georgia under the name of Thrive Development Inc. in 1998. In 2005 the company changed its name to the current Green Parts International Inc. through a reverse merger with Millennium Cellular Inc. a Nevada company incorporated in the State of Nevada on March 19, 1998. Greenparts International formed a working subsidiary in 2009 called Greenparts, Inc. During 2010. Greenparts Inc. formed a wholly owned subsidiary Metal Max LLC. This combined entity of Greenparts International. Inc., its wholly owned subsidiary Greenparts Inc. and its subsidiary Metal Max LLC are now “the Company”. The Company has acquired various asset acquisitions including Booming in 2007 and Milton and US Auto parts in 2012 in an effort to capitalize on the growing need of recycling and turning these materials into multiple revenue streams and expanded distribution which did not impact our financial position in a material way.
Green Parts International is a salvage and reclamation company, dealing expressly with non-landfill materials through sorting, and recycling of its salvaged materials. Green Parts feels high demand for cheaper parts and the need to recycle in today’s world will allow the company, its shareholders, and well-wishers the ability to capitalize on the demand for these products while benefiting the world with a cleaner environment. Millions of vehicles are considered salvaged by individuals and insurance companies, with the ability to have various channels to distribute the products derived from the vehicles, Green Parts maximizes the return for each salvaged vehicle by combining the efforts of the selling of used parts and selling of the rest of the vehicle as scrap material.
Currently the company operates two salvage yards in the Atlanta Georgia area. Both locations allow the resale of auto parts and the sale of raw materials. The bulk of our raw materials is sold out of our 844 Regina Drive, Atlanta GA location and our retail sales are equally split between that location and Jonsboro, GA our other location.
The issuer is not a shell company (as defined in Rule 12b-2 of the Exchange Act).
The company and/or any predecessor have not, and are not currently in the process of filing bankruptcy, receivership or any similar proceeding.
The Issuer currently owns no trademark rights nor has any trademarks pending.
Suppliers
The primary suppliers of salvage vehicles for the automotive recycling industry are insurance companies. After an automobile accident, adjusters representing the insurance provider estimate the cost of repairing the vehicle and gather information to estimate the vehicle’s pre-loss value. If the cost to repair is greater than the pre-loss value minus the estimated salvage value, the vehicle is classified as a total loss (“totaled”). The insurance carrier then settles with the owner of the totaled vehicle, receives title to the vehicle and either assigns the vehicle to a salvage vehicle auction company or sells it directly to a reseller or a dismantler.
Other suppliers of salvage vehicles include automobile rental companies, vehicle leasing companies and financial institutions. Rental and leasing companies supply vehicles that have either been damaged or have exceeded an internally-determined mileage limit or age. Financial institutions such as banks and other lenders also supply vehicles that have been repossessed. Vehicles from these suppliers pass along the same distribution chain as those from insurance companies with a greater percentage being sold to resellers (i.e. used car dealers).
Customers
Buyers represent the final player in the distribution cycle and include both consumers and auto industry specialists. Do-it-yourself vehicle owners often seek used parts from salvage yards due to the significant cost advantage. Likewise, many vehicle owners grant permission to auto repair shops to use less expensive salvage parts.
Employees
As of December 31, 2015, Green Parts had 9 full time employees and 3 part time employees.
ITEM 1A.
ITEM 1A. RISK FACTORS.
RISK FACTORS
An investment in our Common Stock is highly speculative and involves a high degree of risk. Before making an investment decision, you should carefully consider the risks described below together with all of the other information included in this Form 10. The statements contained in or incorporated into this Form 10 that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition or results of operations could be harmed. In that case, the value of our Common Stock could decline, and an investor in our securities may lose all or part of their investment.
Risks Related to the Issuer
The prolonged downturn in the global economy could materially and adversely affect our business and results of operations.
The global market and economic conditions during the years 2008 through 2015 are unprecedented and challenging, with recessions occurring in most major economies. Continued concerns about the systemic impact of potential long-term and wide-spread recession, energy costs, geopolitical issues, and the availability and cost of credit have contributed to increased market volatility and diminished expectations for economic growth around the world. The difficult economic outlook has negatively affected businesses and consumer confidence and contributed to volatility of unprecedented levels.
The economy faces challenges. The government has implemented various measures to curb inflation. If economic growth continues to slow or the economic downturn continues, our business and results of operations may be materially and adversely affected.
We may not maintain sufficient insurance coverage for the risks associated with our business operations.
Risks associated with our business and operations include, but are not limited to, claims for wrongful acts committed by our officers, directors, employees and other representatives, the loss of intellectual property rights, the loss of key personnel and risks posed by natural disasters. Any of these risks may result in significant losses. We do not carry business interruption insurance. In addition, we cannot provide any assurance that our insurance coverage is sufficient to cover any losses that we may sustain, or that we will be able to successfully claim our losses under our insurance policies on a timely basis or at all. If we incur any loss not covered by our insurance policies, or the compensated amount is significantly less than our actual loss or is not timely paid, our business, financial condition and results of operations could be materially and adversely affected.
Requirements associated with being a public company will increase our costs significantly, as well as divert significant company resources and management attention.
We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We are working with our legal, independent accounting and financial advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas. However, the expenses that will be required in order to adequately prepare for being a public company could be material. Compliance with the various reporting and other requirements applicable to public companies will also require considerable time and attention of management. In addition, the changes we make may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis. We anticipate our total additional cost to be around $50,000 per year, which we expect to be able to absorb out of our current operating income. Should cost exceed these estimates or our operating be reduced for any reason we would look to raise funds from capital contributions or additional debt.
In addition, being a public company could make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.
If we are required to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and are not able to implement procedures in a timely manner or with adequate compliance, we may be subject to sanctions by regulatory authorities.
Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over financial reporting, beginning with our annual report for fiscal year 2013, which provides a management report on the internal controls over the Company’s financial reporting. If we have a material weakness in our internal controls over financial reporting, we may not detect errors on a timely basis and our consolidated financial statements may be materially misstated. When we are required to evaluate our internal control systems to allow management to report on, our independent auditors will have to attest to our internal controls. When required, we will be performing the system and process evaluation and testing (and any necessary remediation) required to comply with the management certification and auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002. We cannot be certain as to the timing of completion of our evaluation, testing and remediation actions or the impact of the same on our operations. If we are unable to implement the requirements of Section 404 in a timely manner or with adequate compliance, we may be subject to sanctions or investigation by regulatory authorities, such as the Securities and Exchange Commission (the “SEC”) or the NASDAQ Stock Market (“NASDAQ”). Any such action could adversely affect our financial results or investors’ confidence in us and could cause our stock price to fall. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal controls that are deemed to be material weaknesses, we could be subject to sanctions or investigations by NASDAQ, the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources and could materially adversely affect our stock price.
Risks Related to our Common Stock
Because of his significant stock ownership, our chief executive officer be able to exert control over us and our significant corporate decisions. Our other stockholders will have limited ability to influence corporate actions or decisions.
This concentration of ownership may harm the value of our common stock by, among other things:
● impeding a merger, consolidation, takeover or other business combination involving our company; or
● causing us to enter into transactions or agreements that are not in the best interests of all stockholders
Our officer and director owns 60.13% of the outstanding common stock and all of the voting preferred shares of the Company. The result of this ownership is our other stockholders will have limited ability to influence corporate actions or decisions on all matters submitted to our shareholders for approval and he is able to control our management and affairs including extraordinary transactions such as mergers and other changes in corporate control. Additionally this concentration of voting power could discourage or prevent a potential takeover of Green Parts International, Inc. and any potential premium over the market price of your common stock in during such an event. Also, these actions include the determination of his own compensation requirements or benefits associated with his position and .additionally, our reliance on one individual may create internal control weaknesses from the lack of separation of the duties involved and should he unable to continue in any or all of his functions our Company may not have the ability to continue operating at its current capacity.
The price of our common stock may be volatile, and you may not be able to resell your shares.
An active and liquid trading market for our common stock may not develop or be sustainable. Shareholders may be unable to sell shares of common stock at or above their purchase price due to fluctuations in the market price of our common stock. The market price of our Common Stock may fluctuate significantly in response to factors, some of which are beyond our control. Factors that could cause volatility in the market price of our common stock include, but are not limited to:
● loss of significant clients or customers;
● loss of significant strategic relationships;
● announcements relating to future collaborations or our existing collaborations;
● our failure to achieve and maintain profitability;
● changes in earnings estimates and recommendations by financial analysts;
● changes in market valuations of similar companies;
● general economic conditions in the United States and abroad;
● acquisitions and sales of new products, technologies or business;
● delays
● actual and anticipated fluctuations in our quarterly operating results;
● introduction of technological innovations or new products by us or our competitors;
● deviations in our operating results from the estimates of analysts;
● the outcome of any future legal actions to which we are a party;
● sales of our common stock by our officer, director or significant stockholders;
● frequent, irregular, under market, or large sales of shares of our common stock by any shareholder;
● additions or departures of key personnel; and
● external factors, including natural disasters and other crises.
In addition, the stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation suits against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business.
Future sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.
If our existing stockholders or indicate an intention to sell substantial amounts of our common stock in the public market, the trading price of our common stock could decline. The perception in the market place that these sales may occur could also cause the trading price of our common stock to decline.
If we sell shares of our common stock in future financings, common stockholders may experience immediate dilution and, as a result, our stock price may decline.
We may from time to time issue additional shares of common stock at a discount from the current trading price of our common stock. As a result, our common stockholders would experience immediate dilution upon the purchase of any shares of our common stock sold at such a discount. In addition, as opportunities present themselves, we may enter into financing or similar arrangements in the future, including the issuance of debt securities, preferred stock or common stock.
We do not anticipate paying any cash dividends on our capital stock in the foreseeable future, therefore capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
We have never declared or paid cash dividends on our capital stock. We do not anticipate paying any cash dividends on our capital stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of the common stock will be your sole source of gain for the foreseeable future.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. Securities and industry analysts do not currently, and may never, publish research on our company. If no securities or industry analysts commence coverage of our company, the trading price for our stock would likely be negatively impacted. In the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. In addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.
Our shares are subject to the “penny stock” rules, which may subject you to restrictions on marketability and limit your ability to sell your shares.
Broker-dealer practices in connection with transactions in “Penny Stocks” are regulated by certain penny stock rules adopted by the Securities and Exchange Commission (the “SEC”). Penny stocks generally are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ system). The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the risk associated with the penny stock market. The broker-dealer must also provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules generally require that prior to a transaction in a penny stock, the broker-dealer must make a written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. The Company’s securities are be subject to the penny stock rules, and investors may find it more difficult to sell their securities.
We will seek additional capital for our expansion, which we may be unable to obtain; should we fail to obtain sufficient financing, our potential revenues will be negatively impacted.
Our expansion capital requirements will be determined by the individual opportunities that we encounter. There is no way to determine the amounts of any financial needs until then. There is no guarantee that we will find any opportunities that fit our Company needs. Furthermore, we may have insufficient revenues to cover our new increased operating costs due to increased legal and accounting costs associated with being an SEC reporting company should our registration statement be declared effective. You should consider the risks that we will be unable to find appropriate growth opportunities or obtain adequate capital financing if we do, which will delay our operations, lead to accumulated losses, and negatively affect our ability to complete development of our services and to generate revenues with the increased cost structure.
Our Common Stock is quoted on the OTC Market, which may have an unfavorable impact on our stock price and liquidity.
Our Common Stock is currently quoted on the OTC Market under the trading symbol “GNPT.” The OTC Market is a significantly more limited market than the New York Stock Exchange or NASDAQ. The quotation of our shares on the OTC may result in a less liquid market available for existing and potential shareholders to trade shares of our Common Stock, could depress the trading price of our Common Stock and could have a long-term adverse impact on our ability to raise capital in the future.
If we fail to remain current on our SEC reporting requirements, we could be removed from any market on which our common stock trades, which may limit the liquidity of our stock and the price of our stock.
Companies trading on the OTCQB or OTC Bulletin Board must be reporting issuers under Section 12 of the Exchange Act, and must be current in their reports under Section 13 of the Exchange Act, in order to maintain price quotation privileges on the OTCQB or OTC Bulletin Board. If we fail to remain current on our reporting requirements, we could be removed from the OTCQB or OTC Bulletin Board. As a result, the market liquidity and the stock price for our securities would be adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of shareholders to sell their securities in the secondary market.
We may not be able to operate our business or implement our operating policies and strategies successfully.
The results of our operations are dependent on many factors, including, without limitation, readily accessible funding in the financial markets and our ability to cost-effectively manage and produce events and productions as well as overall economic conditions. We may not be able to maintain any agreements with our lenders on favorable terms or at all. Furthermore, we may not be able to operate our business successfully or implement our operating policies and strategies as described in this Form 10K, which could result in the loss of some or all of your investment.
We have elected to use the extended transition period for complying with new or revised accounting standards under Section 102(b)(1) of the JOBS Act.
This election means that we can delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until such standards are applicable to private companies. As a result of our election, our financial statements may not be comparable to companies that comply with public company effective dates.
Item 1B.
Item 1B. Unresolved Staff Comments.
None.
Item 2.
Item 2. Properties.
The Company leases its facilities from property owned by President and CEO Asif Balagamwala
Item 3.
Item 3. 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. None of which were deemed material and have not been accrued or disclosed in these financial statements.
Item 4.
Item 4. RESERVED.
PART II
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
a. Market information.
Green Parts is currently traded on the Over the Counter Market (“OTC Market”). The Company’s ticker symbol is “GNPT” To have our securities quoted on OTCQB or OTCBB we must: (1) be a company that reports its current financial information to the Securities and Exchange Commission (“SEC”), banking regulators or insurance regulators; and (2) have at least one market maker who completes and files a Form 211 with FINRA. Over the Counter Markets differ substantially from national and regional stock exchanges because it: (a) operates through communication of bids, offers and confirmations between broker-dealers, rather than one centralized market or exchange; and (b) securities admitted to quotation are offered by one or more broker-dealers rather than “specialists” which operate in stock exchanges.
The following table sets forth the high and low transaction price for each quarter within the two most recent fiscal years as provided by OTC Markets Group, Inc. The information reflects prices between dealers, and does not include retail markup, markdown, or commission, and may not represent actual transactions.
(1) Over The Counter Market quotations reflect inter-dealer prices without retail mark-up, mark-down or commission, and may not represent actual transactions. The transfer agent and registrar for our common stock is Signature Stock Transfer Inc. As of the date of this report, we had approximately 401 shareholders of record, not including those common shares held in street name.
b. Holders.
As of May 16, 2015, there are 63 holders of the Company’s common stock and 1 preferred stock holder.
c. Dividends.
The Company has not issued any dividends.
Green Parts International, Inc. has no plans of paying cash dividends in the future.
Recent Sales of Unregistered Securities and Equity Purchases by Company
Item 6.
Item 6. Selected Financial Data.
Not applicable.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion should be read in conjunction with our Consolidated Financial Statements and Notes thereto, included elsewhere within this report. The Annual Report on Form 10-K/A contains forward-looking statements including statements using terminology such as “can”, “may”, “believe”, “designated to”, “will”, “expect”, “plan”, “anticipate”, “estimate”, “potential” or “continue”, or the negative thereof or other comparable terminology regarding beliefs, plans, expectations or intentions regarding the future. You should read statements that contain these words carefully because they:
● discuss our future expectations;
● contain projections of our future results of operations or of our financial condition; and
● state other “forward-looking” information.
We believe it is important to communicate our expectations. However, forward looking statements involve risks and uncertainties and our actual results and the timing of certain events could differ materially from those discussed in forward-looking statements as a result of certain factors, including those set forth under “Risk Factors,” “Business” and elsewhere in this report. All forward-looking statements and risk factors included in this document are made as of the date hereof, based on information available to us as of the date thereof, and we assume no obligations to update any forward-looking statement or risk factor, unless we are required to do so by law.
The following is a discussion of certain factors affecting Registrant’s results of operations, liquidity and capital resources. You should read the following discussion and analysis in conjunction with the Registrant’s consolidated financial statements and related notes that are included herein under Item 1 above.
Overview
Greenparts International is a salvage and reclamation company, dealing expressly with non-landfill materials through sorting, recycling, and proper containment and disposal of bio-hazard. Green Parts feels high demand in emerging markets and the need to recycle in today’s world will allow the company, its shareholders, and well-wishers the ability to capitalize on the demand for these products while benefiting the world with a cleaner environment. Millions of vehicles are considered salvaged by individuals and insurance companies, with the ability to have various channels to distribute the products derived from the vehicles, Green Parts maximizes the return for each salvaged vehicle by combining the efforts of the selling of used parts with warranties and selling the rest as scrap material to emerging markets.
The Company will become the premier supplier of recycled auto parts through a strategy of consolidation and expanded distribution. Connecting the Company’s salvage yards with a proprietary inventory system, Greenparts will leverage its salvage yards as the core of its decentralized distribution system. Over the next five years, the Company will grow to approximately 36 salvage yards and 30 retail stores in 10 key markets. The issuer is not a shell company (as defined in Rule 12b-2 of the Exchange Act).
The company and/or any predecessor have not, and are not currently in the process of filing bankruptcy, receivership or any similar proceeding.
The Issuer currently owns no trademark rights nor has any trademarks pending.
Regulations
The company does not foresee any substantial changes that could adversely affect the business of the company at this time. The market for the Issuer’s product is intensely competitive. We believe that the principal competitive factors affecting the Issuer’s targeted market are those companies offering auto parts under standard brands, none of-which market uniquely used and recycled environmentally friendly parts. We believe we compete adequately with respect to these factors. The Issuer believes it has a competitive edge in the Company’s diversity as a manufacturer and wholesaler of its unique products.
The company conducts the business under the guidelines of the State of Nevada. The company, at this time does not need and has not requested government approval on the products and services provided other than local operating business licenses.
Suppliers
The primary suppliers of salvage vehicles for the automotive recycling industry are insurance companies. After an automobile accident, adjusters representing the insurance provider estimate the cost of repairing the vehicle and gather information to estimate the vehicle’s pre-loss value. If the cost to repair is greater than the pre-loss value minus the estimated salvage value, the vehicle is classified as a total loss (“totaled”). The insurance carrier then settles with the owner of the totaled vehicle, receives title to the vehicle and either assigns the vehicle to a salvage vehicle auction company or sells it directly to a reseller or a dismantler.
Other suppliers of salvage vehicles include automobile rental companies, vehicle leasing companies and financial institutions. Rental and leasing companies supply vehicles that have either been damaged or have exceeded an internally-determined mileage limit or age. Financial institutions such as banks and other lenders also supply vehicles that have been repossessed. Vehicles from these suppliers pass along the same distribution chain as those from insurance companies with a greater percentage being sold to resellers (i.e. used car dealers).
Customers
Buyers represent the final player in the distribution cycle and include refineries, consumers and auto industry specialists. Do-it-yourself vehicle owners often seek used parts from salvage yards due to the significant cost advantage. Likewise, many vehicle owners grant permission to auto repair shops to use less expensive salvage parts so long as they carry similar warranties to that of newer parts. Refineries purchase the remaining parts for recycling metals into its purest form for the re-production of materials derived of steel, aluminum, and copper. Distribution methods of the products or services;
One of the Company’s key business drivers is a robust inventory and distribution system tying together all of the Company’s salvage yards, retail stores and call center. By maintaining an efficient decentralized system with centralized controls conforming to the highest standard processes, much of the overhead that would be required in a centralized distribution operation is kept in the Company’s gross profits.
Customers will have a variety of methods to purchase high quality, warranted recycled automotive parts. Greenparts will have a number of retail stores in high traffic, easily accessible areas for most consumers in their target markets to purchase parts. For those who are close to the salvage yards, there will also be the option to go to the yard and purchase the same quality parts. Additionally, there is also an option for consumers to purchase parts through the internet (PC or thin client devices) or through the Company’s toll-free number, where inventories will be updated real-time through the Greenparts automated inventory system.
Products
Green Parts International is a recycler of automobiles and appliances providing raw materials for manufactures in the United States, China, Korea, and India. By separating the different materials and parts and shipping them to the end users Green Parts maximizes the effectiveness of the recycling efforts. Parts from cars and office equipment are reused and do not end up in landfills. By utilizing state of the art recycling equipment the parts not suitable for reuse are broken down to their base elements and sold as raw materials for manufacturing. These materials include steel, aluminum, and copper. Automotive oils and greases are also recovered and recycled. This “green” approach to total recycling is not only good for the environment but also offers tremendous profit potential.
Raw Material Availability
The Company will accumulate its inventory of vehicles from a number of sources. In addition to individuals who sell the vehicles directly to salvage yards, Greenparts will also purchase vehicles from a number of salvage auctions. As the Company becomes more established and is able to generate sufficient volume, Greenparts anticipates that it will be able to deal directly with the larger insurance companies to acquire their “totaled” vehicles at a more favorable price than through auctions.
Marketing
After vehicles are purchased from a car owner at a Greenparts yard or from a salvage auction, the vehicles are stripped of the usable hard parts (engines, transmissions, starters, compressors, windshields, etc.) and soft parts (mirrors, lights, seats, grilles, etc.) These parts are then cleaned, refurbished if necessary, labeled and placed into the Greenparts inventory system.
Unless these parts are immediately sold at the individual salvage yard, they are recycled and sold to refineries who recycle the commodities (steel, aluminum, and copper) to resell. Every salvage yard will be linked to each other as well as to the retail stores and call center through the Greenparts inventory system in order to maximize efficiency. Combining experience and research Greenparts has manuals that will allow the company to aggressively franchise their operations and grow organically without affecting the standards Greenparts wants to establish.
GEOS (Greenparts Electronic Ordering System) is designed to elevate the recycled parts industry to new heights of service and customer satisfaction. More than just an electronic ordering system for used parts, GEOS offers automotive service establishments and body shops a complete solution for all of their parts and shop supply needs.
The GEOS system is built on a web-based extranet platform. Service establishments and body shops receive, at no upfront cost, a web terminal with LCD monitor that connects to the GEOS platform via the Internet. On the system, using only a mouse, the customer can order used parts sourced from the salvage operator or new parts and supplies from established local vendors. Used parts are delivered by the salvage operator, while new parts orders are fulfilled by the local vendors with commissions paid to the salvage operator. A reciprocal commission structure is in place that rewards the local new parts vendors for developing new customer relationships for the salvage operators using the GEOS system.
Results of Operations
The Company intends to operate its business primarily through its two main segments, as described above, as well as entities that may be formed or acquired in the future. The table below is meant to give the reader some additional information into the detail of some of the line items presented in the financial statements.
1) Wages includes all wages, including subcontractor cost and commissions, general, administrative and operating wages.
2) Other G&A expenses include travel, entertainment, supplies, postage and other general & administrative expenses incurred in the day to day operations of the Company.
Results of Operations 2015-2014
Analysis of the years ended December 31, 2015 and 2014.
Revenues
For the years ended December 31, 2015, revenues were approximately $7,282,983 compared to $12,679,340 for the years ended December 31, 2014, decreasing by $5,396,357. The company’s inability to secure financing for working capital combined with pricing pressures have reduced sales.
Cost of Goods Sold
Cost of goods sold decreased to $5,863,387 for the year ended December31, 2015 from $10,264,686 for the year ended December 31, 2014, a decrease of $4,401,299. Our cost of sales ratios have remained constant with the increases being a product of our decreased sales volume for the year.
G & A Expenses
G&A expense increased to $4,154,643 for the year ended December 31, 2015 from $2,053,176 for the year ended December 31, 2014, an increase of $2,101,467. The Company costs have remained relatively constant with the major change being a write off of inventory for $2,310,439. During 2015 inventory was adjusted based on obsolete, slow moving items with decreasing sales as well as lower market price adjustments below cost. The Company has managed to decrease other cost in proportion to its overall sales decrease.
Other income and expenses
Other items decreased to a net expense of $614,071 for the year ended December 31, 2015 from a net expense of $1,051,883 for the year ended December 31, 2014, resulting in a total net other expense item decrease of $437,762. The major change here was a decrease in derivative liability if $178,858 and an increase in derivative expenses.
Net income (loss)
Net Income decreased to a loss of $3,349,118 for the year ended December 31, 2015 from a net loss of $690,355 for the year ended December 31, 2014, an increase of $2,658,763. This increase was mostly the result of onetime items general and administrative cost.
Liquidity and Capital Resources
On December 31, 2015 we had cash and cash equivalents totaling $40,692. At this time, the Company feels this is adequate to fund our operations in the short term future.
The Company has continually restructured its financing last two years reducing cash flow and liquidity requirements and also feels it has access to sufficient unused credit lines to bridge the gap of any cash flow deficiencies. We anticipate seeking additional opportunities through potential acquisitions or investments. This and other such acquisitions or investments may consume cash reserves or require additional cash or equity. Our working capital and additional funding requirements will depend upon numerous factors to be determined on a case by case basis as these opportunities arise.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 under the Exchange Act and are not required to provide the information required under this item.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The financial statements and notes thereto and supplementary data required by this Item are presented beginning on page of this annual report on Form 10-K.
Item 9.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Exchange Act that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2015. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective.
Management Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Under the supervision of our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2015 using the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In our assessment of the effectiveness of internal control over financial reporting as of December 31, 2015, we determined that control deficiencies existed that constituted material weaknesses, as described below:
● lack of documented policies and procedures.
● we have no audit committee.
● there is a risk of management override given that our officers have a high degree of involvement in our day to day operations.
● there is no effective separation of duties, which includes monitoring controls, between the members of management.
Management is currently evaluating what steps can be taken in order to address these material weaknesses.
Accordingly, we concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by our internal controls.
As a result of the material weaknesses described above, management has concluded that we did not maintain effective internal control over financial reporting as of December 31, 2015 based on criteria established in Internal Control-Integrated Framework issued by COSO.
John Scrudato CPA, an independent registered public accounting firm, was not required to and has not issued a report concerning the effectiveness of our internal control over financial reporting as of December 31, 2015.
Changes in Internal Control over Financial Reporting
There was no change in internal control over financial reporting (as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during our fiscal year that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Item 9B. Other Information.
None.
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
Executive Officers
Our directors and executive officers and additional information concerning them are as follows:
Name
Age
Term
Position
Asif M. Balagamwala
-Current
Pres/Sec/Treas/CEO/CFO/CAO, Dir.
Asif Balagamwala is the co-founder and President and CEO of Green Parts International, Inc.. He helped to form the company in 2000 after being introduced to, intrigued by and tutored in the dynamic buying and selling of automotive assets for the Used Equipment Division of Al-Hammd, Inc. from June 1998 through December 1999. In his current role, Mr. Balagamwala principally manages the upper level operations of the business, including the acquisition of and partnering with salvage yards, as well as the buying and selling of all automobiles, parts and automotive-related assets. He has been the principal point of contact for outside investment and currently serves as the company’s de facto chief financial officer. Prior to forming Greenparts, Mr. Balagamwala was the President of Al-Hammd, Inc. where he ran two divisions: Asset Management and Used Equipment. His responsibilities included all P&L items as well as hiring/firing and managing staff. Before Al-Hammd, Mr. Balagamwala held two roles: President of A.C. Travel, Inc and consultant with Saima Management both from January 1994 through June 2000. Mr. Balagamwala briefly attended Georgia State University in Business Administration before striking out on his own.
Audit Committee
The entire board of directors performs the functions of an audit committee, but no written charter governs the actions of the board when performing the functions of what would generally be performed by an audit committee. The board approves the selection of Green Parts International, Inc.’s independent accountants and meets and interacts with the independent accountants to discuss issues related to financial reporting. In addition, the board reviews the scope and results of the audit with the independent accountants, reviews with management and the independent accountants Green Parts International, Inc.’s annual operating results, considers the adequacy of Green Parts International, Inc.’s internal accounting procedures and considers other auditing and accounting matters including fees to be paid to the independent auditor and the performance of the independent auditor.
Green Parts International, Inc. has determined that Asif M. Balagamwala is a financial expert as defined by Section 407 of The Sarbanes-Oxley Act of 2002. However, Mr. Balagamwala is not independent as that term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act. In order to be considered to be independent, a member of an audit committee of a listed issuer that is not an investment company may not, other than in his capacity as a member of the audit committee, our board of directors or any other board committee:
● Accept directly or indirectly any consulting, advisory or other compensatory fee from the issuer or any subsidiary thereof, provided that, unless the rules of the national securities exchange or national securities association provide otherwise, compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the listed issuer (provided that such compensation is not contingent in any way on continued service); or
● Be an affiliated person of the issuer or any subsidiary thereof.
Asif M. Balagamwala has acquired the status of financial expert through experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions, and overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements.
Item 11.
Item 11. Executive Compensation.
Executive Officer Compensation
The Company’s directors are not compensated. The Officer receives an annual salary as described in the table below for the services rendered on behalf of the Company.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth, as of December 31, 2015, certain information concerning the beneficial ownership of our common stock by (i) each stockholder known by us to own beneficially 10% or more of our outstanding common stock; (ii) each director; (iii) each named executive officer; and (iv) all of our executive officers and directors as a group, and their percentage ownership and voting power.
(1) Except as otherwise indicated, each person possesses sole voting and investment power with respect to the shares shown as beneficially owned.
(2) Beneficial interest held by Asif M. Balagamwala.
Unless otherwise indicated below, to our knowledge, all persons named in the table have sole voting and investment power with respect to their shares of our common stock, except to the extent authority is shared by spouses under community property laws.
The following table sets forth ownership of our Series “a” super voting Preferred Stock. Each Preferred Share comes with voting rights equal to 100 shares of our common stock.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Director Independence
We are not currently listed on any national securities exchange that has a requirement that the board of directors be independent. At this time we do not have an “independent director” as that term is defined under the rules of the NASDAQ Capital Market.
Related Transactions
For the purposes of this filing, 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 currently pays rent of $15,000 per month on its main facility located at 844 Regina Drive in Atlanta which is owned by the President Asif Balagamwala.
During the past year December 31, 2014, the Company was relieved of liabilities from loans to Piedmont bank. This debt was assumed by Asif Balagamwala and the Company did not have to repay the loan. Therefore a related party liability was recorded at that time.
Additionally, balances and transactions with related parties of the Company consist of the following:
Item 14.
Item 14. Principal Accountant Fees and Services.
The following table presents the estimated aggregate fees billed by Scrudato & Co., PA for services performed during our last two fiscal years.
(1) Audit fees include professional services rendered for (i) the audit of our annual financial statements for the fiscal years ended December 31, 2015 and 2014, (ii) the reviews of the financial statements included in our quarterly reports on Form 10-Q for such years and (iii) the issuance of consents and other matters relating to registration statements filed by us.
(2) There were no tax fees billed in these two periods.
(3) Other fees include professional services for review of various filings and issuance of consents.
PART IV
Item 15.
Item 15. Exhibits and Financial Statement Schedules.
(a) 1. Financial Statements
Audited Financial Statements for years ended December 31, 2014 and 2013
2. List of Exhibits
Exhibit No.
Description
31.1*
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* Filed herewith
+ Management contract or compensatory plan or arrangement.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacity and on the dates indicated.
Signature
Title
Date
/S/ ASIF M. BALAGAMWALA
President and Chief Executive Officer
April 14, 2016
Asif M. Balagamwala
(Principal Executive Officer) Chief Financial Officer
(Principal Financial and Accounting Officer)
Director
Report of Independent Registered Public Accounting Firm
Board of Directors and Stockholders
Greenparts International, Inc.
We have audited the accompanying balance sheet of Greenparts International, Inc. and subsidiaries (“the Company”) as of December 31, 2015 and December 31, 2014, and the related statements of operations, stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Greenparts International, Inc. and subsidiaries as of December 31, 2015 and 2014, and the results of its operations, stockholders’ equity, and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 16 to the Company will need additional working capital to accomplish its intended purpose and to service its debt, which raises substantial doubt about its ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 16. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ John Scrudato CPA
Califon, New Jersey
April 1, 2016
GREENPARTS INTERNATIONAL. INC.
CONSOLIDATED BALANCE SHEETS
“The accompanying notes are an integral part of these consolidated financial statements.”
GREENPARTS INTERNATIONAL. INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
“The accompanying notes are an integral part of these consolidated financial statements.”
GREENPARTS INTERNATIONAL. INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
“The accompanying notes are an integral part of these consolidated financial statements.”
GREENPARTS INTERNATIONAL. INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
“The accompanying notes are an integral part of these consolidated financial statements.”
GREENPARTS INTERNATIONAL. INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
JANUARY 1, 2014 THROUGH DECEMBER 31, 2015(Audited)
“The accompanying notes are an integral part of these consolidated financial Statements”
GREENPARTS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
AS OF DECEMBER 31, 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”. Incorporated on March 19, 1998 in the state of Nevada as Millennium Cellular Inc. The Company later became Thrive Development, Inc., and then Greenparts International, Inc. 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 manufacturing 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. Cash and cash equivalents comprise of the non-interest bearing checking accounts 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. During 2015 inventory was adjusted based on obsolete, slow moving items with decreasing sales as well as lower market price adjustments below cost.
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.
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.
Note 2 - Summary of Significant Accounting Policies (Continued)
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 years ended December 31, 2015, and 2014.
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 December 31, 2015 and December 31, 2014.
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.
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:
Note 2 - Summary of Significant Accounting Policies (Continued)
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.
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.
Note 2 - Summary of Significant Accounting Policies (Continued)
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.
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 December 31, 2015 was 1,900,000,000 thousand shares with a nominal value per share of $0.001. Authorized shares that have been issued and fully paid amounted to 363,318,084 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.
Note 2 - Summary of Significant Accounting Policies (Continued)
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
Note 5 - Property, Plant and Equipment
Property, plant and equipment and related accumulated depreciation consist of the following:
Note 6 - Bank Loans and Long-Term Leases
Note 7 - Business Combinations
During fiscal 2015 and 2014, the Company did not make any acquisitions:
The acquisition completed in fiscal 2013 was not material to the Company’s financial position or results of operations. Pro forma operating results for the fiscal 2013 acquisition is not presented, since the aggregate results would not be significantly different than reported results.
Note 8 - 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 $160,000 in notes receivable as of December 31, 2015 $60,000 current and $85,000 long term, and $220,000 in notes receivable at December 31, 2014, $60,000 current and $100,000 long term.
Note 9 - Commitments and Contingencies
Commitments
The table below sets forth the Company’s future minimum obligations under non-cancelable operating leases as of December 31, 2015:
Non Related Party Long Term Commitments
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. None of which were deemed material and 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 years ended December 31:
Note 11 - Income Taxes Payable
Income from continuing operations before income taxes was as follows for the years ended December 31:
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 currently pays rent of $15,000 per month on its main facility located at 844 Regina Drive in Atlanta which is owned by the President Asif Balagamwala.
During the year ended December 31, 2014, the Company was relieved of liabilities from loans to Piedmont bank. This debt was assumed by Asif Balagamwala and the Company did not have to repay the loan. Therefore a related party liability was recorded at that time.
Additionally, balances and transactions with related parties of the Company consist of the following:
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.
The table below illustrates the Company’s results by reporting segment for the years ended December 31:
Segment Information
Note 14 - Goodwill
In the fourth quarter of fiscal 2015, 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 years ended December 31, 2015 and 2014:
Note 15 - 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 $420,693 and $246,910 at December 31, 2015 and 2014, 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 $420,693 as of December 31, 2015 and $246,910 as of December 31, 2014. We estimated the fair value of the derivative using the Black-Scholes valuation method with assumptions including: (1) term of 0.75 years; (2) a computed volatility rate of 127.02% (3) a discount rate of 0.12% 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.
Note 16 - Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Currently, the Company has consistently incurred operating losses, and as of December 31, 2015 the Company had a working capital deficit and an accumulated deficit. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management believes that the Company’s capital requirements will depend on many factors including the success of the Company’s development efforts and its efforts to raise capital. Management also believes the Company needs to raise additional capital for working capital purposes. There is no assurance that such financing will be available in the future. The conditions described above raise substantial doubt about our ability to continue as a going concern. The financial statements of the Company do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classifications of liabilities that might be necessary should the Company be unable to continue as a going concern. At year-end management was in process of finalizing $5 Million (see Note 17) refinance package. After securing this package the current liquidity gap of approximately -$2.5 Million turned into a positive current liquidity gap of approximate +$1.2 Million. This event along with other plans and initiatives, management believes the company is able to continue as an ongoing concern in foreseeable future.
Note 17 - Subsequent Events
On January 7, 2016, as a prerequisite to the $5,000,000 refinance package, Green Parts International, Inc. President Asif Balag a mwala transferred to the company from his personal holdings, two properties with an appraised value of more than $2,500,000. By doing so the company was able to enter a 25-year term rather than a 10-year term on the loan.
On January 7, 2016, Green Parts International, Inc. completed a $5,000,000 refinance package at Prime plus 2.75%. The package reduced the company’s debt (principle and interest) expense by approximately 75%. The loan proceeds also resolved all pending creditor litigations and various short-term loan obligations were paid.
Type of Loan: SBA 25 Year term prime plus 2.75
Use of Proceeds: