10-Q

UNITED STATES 

SECURITIES AND EXCHANGE COMMISSION 

Washington, D.C. 20549

FORM 10-Q 

☒  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2017

☐  TRANSITION REPORT PURSUANT SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ______________

Commission file number:  000-30396 

GLYECO, INC. 

(Exact name of registrant as specified in its charter)

Nevada	45-4030261
(State or other jurisdiction of incorporation)	(IRS Employer Identification No.)
230 Gill Way Rock Hill, South Carolina	29730
(Address of principal executive offices)	(Zip Code)

(866) 960-1539

(Registrant’s telephone number, including area code)

N/A

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  

Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 

Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange ct. (Check one):

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

Emerging  growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). 

Yes ☐  No ☒

As of August 11, 2017, the registrant had 163,452,779 shares of Common Stock, par value $0.0001 per share, issued and outstanding.

TABLE OF CONTENTS
		Page No:
PART I — FINANCIAL INFORMATION		3
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets – June 30, 2017 and December 31, 2016	3
	Condensed Consolidated Statements of Operations – Three and Six Months Ended June 30, 2017 and 2016	4
	Condensed Consolidated Statement of Stockholders’ Equity – Six Months Ended June 30, 2017	5
	Condensed Consolidated Statements of Cash Flows – Six Months Ended June 30, 2017 and 2016	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 4.	Controls and Procedures	38
PART II — OTHER INFORMATION		40
Item 1.	Legal Proceedings	40
Item 1A.	Risk Factors	40
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
Signatures		44

2

PART I—FINANCIAL INFORMATION

Item 1.  Financial Statements

GLYECO, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

 June 30, 2017 and December 31, 2016

	June 30,			December 31,
	2017			2016
	(unaudited)
ASSETS
Current Assets
Cash	$	77,590		$	1,413,999
Cash – restricted		41,090			76,552
Accounts receivable, net		1,326,549			1,096,713
Prepaid expenses		372,454			340,899
Inventories		1,527,802			644,522
Total current assets		3,345,485			3,572,685
Property, plant and equipment, net		3,915,894			3,657,839
Other Assets
Deposits		433,390			387,035
Goodwill		3,822,583			3,693,083
Other intangible assets, net		2,530,429			2,794,204
Total other assets		6,786,402			6,874,322
Total assets	$	14,047,781		$	14,104,846
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	1,691,546		$	961,010
Due to related parties		—			6,191
Contingent acquisition consideration		1,786,113			1,821,575
Notes payable – current portion, net of debt discount		1,718,496			2,541,178
Capital lease obligations – current portion		354,735			6,838
Total current liabilities		5,550,890			5,336,792
Non-Current Liabilities
Notes payable – non-current portion		2,919,069			2,963,640
Capital lease obligations – non-current portion		1,281,381			3,371
Total non-current liabilities		4,200,450			2,967,011
Total liabilities		9,751,340			8,303,803
Commitments and Contingencies
Stockholders' Equity
Preferred stock; 40,000,000 shares authorized; $0.0001 par value; no shares issued and outstanding as of June 30, 2017 and December 31, 2016		—			—
Common stock, 300,000,000 shares authorized; $0.0001 par value; 131,204,275 and 126,156,189 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively		13,121			12,616
Additional paid-in capital		43,109,519			42,603,490
Accumulated deficit		(38,826,199	)		(36,815,063	)
Total stockholders' equity		4,296,441			5,801,043
Total liabilities and stockholders' equity	$	14,047,781		$	14,104,846

See accompanying notes to the condensed consolidated financial statements.

3 

GLYECO, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

 For the three and six months ended June 30, 2017 and 2016

	Three months ended June 30,						Six months ended June 30,
	2017			2016			2017			2016
	(unaudited)			(unaudited)			(unaudited)			(unaudited)
Sales, net	$	2,918,097		$	1,313,863		$	5,208,418		$	2,756,761
Cost of goods sold		2,441,243			1,380,467			4,591,829			2,685,994
Gross profit (loss)		476,854			(66,604	)		616,589			70,767
Operating expenses:
Consulting fees		165,536			58,863			218,962			101,423
Share-based compensation		94,548			317,471			231,534			598,235
Salaries and wages		363,546			282,561			706,601			539,011
Legal and professional		187,740			43,124			348,731			141,897
General and administrative		343,128			276,893			700,341			536,381
Total operating expenses		1,154,498			978,912			2,206,169			1,916,947
Loss from operations		(677,644	)		(1,045,516	)		(1,589,580	)		(1,846,180	)
Other (income) and expenses:
Interest income		—			(165	)		—			(218	)
Interest expense		223,385			7,366			419,603			11,978
Gain on settlement of note payable		—			(15,000	)		—			(15,000	)
Total other (income) expense, net		223,385			(7,799	)		419,603			(3,240	)
Loss before provision for income taxes		(901,029	)		(1,037,717	)		(2,009,183	)		(1,842,940	)
Provision for income taxes		1,197			5,259			1,953			5,946
Net loss	$	(902,226	)	$	(1,042,976	)	$	(2,011,136	)	$	(1,848,886	)
Basic and diluted loss per share	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)
Weighted average number of common shares outstanding - basic and diluted		128,876,960			112,772,095			127,583,831			99,679,783

 See accompanying notes to the condensed consolidated financial statements. 

4 

GLYECO, INC. AND SUBSIDIARIES

Unaudited Condensed Consolidated Statement of Stockholders’ Equity

 For the six months ended June 30, 2017

					Additional					Total
	Common Stock				Paid -In		Accumulated			Stockholders'
	Shares		Par Value		Capital		Deficit			Equity
Balance, December 31, 2016		126,156,189	$	12,616	$	42,603,490	$	(36,815,063	)	$	5,801,043
Share-based compensation		1,610,586		161		231,373		—			231,534
Exercise of warrants		3,437,500		344		274,656		—			275,000
Net loss		—		—		—		(2,011,136	)		(2,011,136	)
Balance, June 30, 2017		131,204,275	$	13,121	$	43,109,519	$	(38,826,199	)	$	4,296,441

See accompanying notes to the condensed consolidated financial statements.

5 

GLYECO, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

 For the six months ended June 30, 2017 and 2016

	Six months ended June 30,
	2017			2016
	(unaudited)			(unaudited)
Net cash flows from operating activities
Net loss	$	(2,011,136	)	$	(1,848,886	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation		233,612			119,855
Amortization		263,775			35,914
Share-based compensation expense		231,534			598,235
Amortization of debt discount		174,416			—
Loss on disposal of equipment		28,446			—
Provision for bad debt		37,086			24,014
Gain on settlement of note payable		—			(15,000	)
Changes in operating assets and liabilities:
Accounts receivable, net		(266,922	)		168,649
Prepaid expenses		(31,555	)		(13,612	)
Inventories		(883,280	)		125,660
Deposits		(46,355	)		(5,348	)
Accounts payable and accrued expenses		730,536			(531,307	)
Due to related parties		(6,191	)		(31,709	)
Net cash used in operating activities		(1,546,034	)		(1,373,535	)
Cash flows from investing activities
Cash paid for acquisition		—			(100,000	)
Cash – restricted		—			(100,000	)
Cash paid for noncontrolling interests in RS&T		(129,500	)		—
Purchases of property, plant and equipment		(520,113	)		(95,305	)
Net cash used in investing activities		(649,613	)		(295,305	)
Cash flows from financing activities
Repayment of notes payable		(1,041,669	)		(113,772	)
Repayment of capital lease obligations		(74,093	)		(8,083	)
Proceeds from sale-leaseback		1,700,000			—
Proceeds from exercise of warrants		275,000			—
Proceeds from sale of common stock, net		—			2,936,792
Net cash provided by financing activities		859,238			2,814,937
Net change in cash		(1,336,409	)		1,146,097
Cash at beginning of the period		1,413,999			1,276,687
Cash at end of the period	$	77,590		$	2,422,784
Supplemental disclosure of cash flow information
Interest paid during period	$	68,238		$	11,978
Income taxes paid during period	$	1,953		$	5,946
Supplemental disclosure of non-cash items
Acquisition of equipment with notes payable	$	—		$	203,152
Acquisition of equipment with capital lease obligation	$	1,700,000		$	—
Reduction in contingent acquisition liability through restricted cash	$	35,462		$	—

See accompanying notes to the condensed consolidated financial statements.

6 

GLYECO, INC. and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – Organization and Nature of Business

GlyEco, Inc. (the “Company”, “we”, or “our”) is a specialty chemical company formed in the State of Nevada on October 21, 2011. We have two segments, Consumer and Industrial (see Note 7).

On December 27, 2016, the Company purchased WEBA Technology Corp. (“WEBA”), a privately-owned company that develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries; and purchased 96% of Recovery Solutions & Technologies Inc. (“RS&T”), a privately-owned company involved in the development and commercialization of glycol recovery technology. On December 28, 2016, the Company purchased certain glycol distillation assets from Union Carbide Corporation (“UCC”), a wholly-owned subsidiary of The Dow Chemical Company (“Dow”), located in Institute, West Virginia (the “Dow Assets”). During the three months ended March 31, 2017, the Company acquired the remaining 4% of RS&T not already owned by the Company.

Going Concern

The condensed consolidated financial statements as of June 30, 2017 and December 31, 2016 and for the three and six months ended June 30, 2017 and 2016, have been prepared assuming that the Company will continue as a going concern. As of June 30, 2017, the Company has yet to achieve profitable operations and is dependent on its ability to raise capital from stockholders or other sources to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Ultimately, we plan to achieve profitable operations through the implementation of operating efficiencies at our facilities and increased revenue through the offering of additional products and the expansion of our geographic footprint through acquisitions, broader distribution from our current facilities and/or the opening of additional facilities. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

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

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation on an interim basis. The operating results for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however, management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, including the Company’s audited consolidated financial statements and related notes included therein.

Principles of Consolidation

These consolidated financial statements include the accounts of GlyEco, Inc., and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated as a result of consolidation.

7

Noncontrolling Interests

The Company recognizes noncontrolling interests as equity in the consolidated financial statements separate from the parent company’s equity. Noncontrolling interests’ partners have less than 50% share of voting rights at any one of the subsidiary level companies. The amount of net income (loss) attributable to noncontrolling interests is included in consolidated net income (loss) on the face of the consolidated statements of operations. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income (loss) when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the noncontrolling equity investment on the deconsolidation date. Additionally, operating losses are allocated to noncontrolling interests even when such allocation creates a deficit balance for the noncontrolling interest partner.

The Company provides either in the consolidated statements of stockholders’ equity, if presented, or in the notes to consolidated financial statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity (net assets), equity (net assets) attributable to the parent, and equity (net assets) attributable to the noncontrolling interest that separately discloses:

(1)	Net income or loss
(2)	Transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners.
(3)	Each component of other comprehensive income or loss

Operating Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing the performance of the segment. Operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics, among other criteria. Prior to the December 2016 acquisitions of WEBA, RS&T and the DOW Assets and through December 31, 2016, the Company operated as one segment. As of January 1, 2017 we have two operating segments, Consumer and Industrial.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent within the financial reporting process, actual results may differ significantly from those estimates.  Significant estimates include, but are not limited to, items such as the allowance for doubtful accounts, the value of share-based compensation and warrants, the allocation of the purchase price in the Company’s acquisitions, the recoverability of property, plant and equipment, goodwill, other intangibles and their estimated useful lives, contingent liabilities, and environmental and asset retirement obligations. Due to the uncertainties inherent in the formulation of accounting estimates, it is reasonable to expect that these estimates could be materially revised within the next year.

Revenue Recognition

The Company recognizes revenue when (1) delivery of product has occurred or services have been rendered, (2) there is persuasive evidence of a sale arrangement, (3) selling prices are fixed or determinable, and (4) collectability from the customer (individual customers and distributors) is reasonably assured. Revenue consists primarily of revenue generated from the sale of the Company’s products. This generally occurs either when the Company’s products are shipped from its facility or delivered to the customer when title has passed. Revenue is recorded net of estimated cash discounts. The Company estimates and accrues an allowance for sales returns at the time the product is sold. To date, sales returns have not been material. Shipping costs passed to the customer are included in net sales. 

8

Costs

Cost of goods sold includes all direct material and labor costs and those indirect costs of bringing raw materials to sale condition, including depreciation of equipment used in manufacturing and shipping and handling costs. Selling, general, and administrative costs are charged to operating expenses as incurred. Research and development costs are expensed as incurred, are included in operating expenses and were insignificant in 2017 and 2016. Advertising costs are expensed as incurred.

Accounts Receivable

Accounts receivable are recognized and carried at the original invoice amount less an allowance for expected uncollectible amounts. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates including, among others, the customer’s willingness or ability to pay, the Company’s compliance with customer invoicing requirements, the effect of general economic conditions and the ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are considered past due. We do not charge interest on past due balances. The Company writes off trade receivables when all reasonable collection efforts have been exhausted. Bad debt expense is reflected as a component of general and administrative expenses in the consolidated statements of operations. The allowance for doubtful accounts totaled $105,185 and $80,207 as of June 30, 2017 and December 31, 2016, respectively.

Inventories

Inventories are reported at the lower of cost or net realizable value. The cost of raw materials, including feedstocks and additives, is determined on an average unit cost of the units in a production lot. Work-in-process represents labor, material and overhead costs associated with the manufacturing costs at an average unit cost of the units in the production lot. Finished goods represents work-in-process items with additive costs added. The Company periodically reviews its inventories for obsolete or unsalable items and adjusts its carrying value to reflect estimated realizable values.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. The Company provides for depreciation on the cost of its equipment using the straight-line method over an estimated useful life, ranging from three to twenty years, and zero salvage value. Expenditures for repairs and maintenance are charged to expense as incurred.

For purposes of computing depreciation, the useful lives of property, plant and equipment are as follows:

Leasehold improvements	Lesser of the remaining lease term or 5 years
Machinery and equipment	3-15 years

Business Combinations

The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets the Company has acquired or may acquire in the future include but are not limited to:

● future expected cash flows from product sales, other customer contracts, and

● discount rates utilized in valuation estimates.

9

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate.

Goodwill and Intangible Assets

Intangible assets that we acquire are recognized separately if they arise from contractual or other legal rights or if they are separable and are recorded at fair value less accumulated amortization. We analyze intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. We review the amortization method and period at least at each balance sheet date. The effects of any revision are recorded to operations when the change arises. We recognize impairment when the estimated undiscounted cash flow generated by those assets is less than the carrying amounts of such assets. The amount of impairment is the excess of the carrying amount over the fair value of such assets. The Company’s management believes there is no impairment of long-lived assets as of June 30, 2017. However, market conditions could change or demand for the Company’s products could decrease, which could result in future impairment of long-lived assets

Goodwill is recorded as the excess of (i) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquired over the (ii) fair value of the net identifiable assets acquired. We do not amortize goodwill; however, we annually, or whenever there is an indication that goodwill may be impaired, evaluate qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the assets exceeds fair value. Any future increases in fair value would not result in an adjustment to the impairment loss that may be recorded in our consolidated financial statements. Our test of goodwill impairment includes assessing qualitative factors and the use of judgment in evaluating economic conditions, industry and market conditions, cost factors, and entity-specific events, as well as overall financial performance. Based on our analysis, no impairment loss of goodwill was recorded in 2017 and 2016 as the carrying amount of the reporting unit’s assets did not exceed the estimated fair value determined.

Impairment of Long-Lived Assets

Property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material.

Fair Value of Financial Instruments

The Company has adopted the framework for measuring fair value that establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).

10

The three levels of inputs that may be used to measure fair value are as follows:

● Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date;

● Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and

● Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability. Valuation is generated from model-based techniques with the unobservable assumptions reflecting our own estimate of assumptions that market participants would use in pricing the asset or liability.

Cash, restricted cash, accounts receivable, accounts payable and accrued expenses, amounts due to related parties and current portion of capital lease obligations and notes payable are reflected in the consolidated balance sheets at their estimated fair values primarily due to their short-term nature. As to long-term capital lease obligations and notes payable, carrying values approximate fair value since the estimated fair values are based on borrowing rates currently available to the Company for loans with similar terms and maturities. 

Deferred Financing Costs, Debt Discount and Detachable Debt-Related Warrants

Costs incurred in connection with debt are deferred and recorded as a reduction to the debt balance in the accompanying condensed consolidated balance sheets. The Company amortizes debt issuance costs over the expected term of the related debt using the effective interest method. Debt discounts related to the relative fair value of warrants issued in conjunction with the debt are also recorded as a reduction to the debt balance and amortized over the expected term of the debt to interest expense using the effective interest method.

Net Loss per Share Calculation

The basic net loss per common share is computed by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during a period. Diluted loss per common share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding plus potentially dilutive securities. The Company’s potentially dilutive securities outstanding are not shown in a diluted net loss per share calculation because their effect in both 2017 and 2016 would be anti-dilutive. At June 30, 2017, these potentially dilutive securities included warrants of 7,879,374 and stock options of 7,622,437 for a total of 15,501,811.  At June 30, 2016, these potentially dilutive securities included warrants of 8,266,137 and stock options of 10,461,618 for a total of 18,727,755. 

Income Taxes

The Company accounts for its income taxes in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes,” which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. An allowance for the deferred tax asset is established if it is more likely than not that the asset will not be realized. 

Share-based Compensation

All share-based payments to employees and non-employee directors, including grants of employee stock options, are expensed based on their estimated fair values at the grant date, in accordance with ASC 718. Compensation expense for share-based payments to employees and directors is recorded over the vesting period using the estimated fair value on the date of grant, as calculated by the Company using the Black-Scholes-Merton (“BSM”) option-pricing model or the Monte Carlo Simulation. For awards with only service conditions that have graded vesting schedules, compensation cost is recorded on a straight-line basis over the requisite service period for the entire award, unless vesting occurs earlier. For awards with market conditions, compensation cost is recorded on the accelerated attribution method over the derived service period.

11

Non-employee share-based compensation is accounted for based on the fair value of the related stock or options, using the BSM, or the fair value of the goods or services on the measurement date, whichever is more readily determinable.

Recently Issued Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance to the Company, except as discussed below.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). This updated guidance supersedes the current revenue recognition guidance, including industry-specific guidance. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The updated guidance is effective for interim and annual periods beginning after December 15, 2016, and early adoption is not permitted. In July 2015, the FASB decided to delay the effective date of ASU 2014-09 until December 15, 2017. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The Company has not yet selected a transition method and is currently assessing the impact the adoption of ASU 2014-09 will have on its condensed consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating ASU 2016-02, the Company expects the adoption of ASU 2016-02 to have a material effect on the Company’s consolidated financial condition due to the recognition of the lease rights and obligations as assets and liabilities. The Company is currently assessing the impact of the adoption of ASU 2016-02 will have on its condensed consolidated financial statements and disclosures.

In January 2017, the FASB, issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test.  Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company has not yet decided if it will early adopt the provisions in this ASU for its annual goodwill impairment test during 2017.

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NOTE 3 – Inventories

The Company’s total inventories were as follows:

	June 30,		December 31,
	2017		2016
Raw materials	$	460,651	$	221,088
Work in process		34,528		172,142
Finished goods		1,032,623		251,292
Total inventories	$	1,527,802	$	644,522

NOTE 4 – Acquisitions, Goodwill and Other Intangible Assets

WEBA 

On December 27, 2016, the Company entered into a Stock Purchase Agreement (“WEBA SPA”) with WEBA, a privately-owned company that develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries. Pursuant to the WEBA SPA, the Company acquired all of the WEBA shares from the WEBA sellers for $150,000 in cash and $2.65 million in 8% Promissory Notes (see Note 8). In addition, the WEBA sellers may be entitled to receive earn-out payments of up to an aggregate of $2,500,000 for calendar years 2017, 2018, and 2019 based upon terms set forth in the WEBA SPA. The Company also issued 5,625,000 shares as repayment of $450,000 of notes payable due to the WEBA sellers. The fair market value of the shares was $0.10 on the date of issuance. Following the WEBA acquisition, WEBA became a wholly owned subsidiary of the Company.

We accounted for the acquisition of WEBA as required under applicable accounting guidance. Tangible assets acquired are recorded at fair value. Identifiable intangible assets that we acquired are recognized separately if they arise from contractual or other legal rights or if they are separable, and are recorded at fair value. Goodwill is recorded as the excess of the consideration transferred over the fair value of the net identifiable assets acquired. The earn-out payments liability was recorded at their estimated fair value of $1,745,023.

Although management estimates that certain of the contingent consideration will be paid, it has applied a discount rate to the contingent consideration amounts in determining fair value to represent the risk of these payments not being made. The total acquisition date fair value of the consideration transferred and to be transferred is estimated at approximately $6.1 million, as follows:

Cash payment to the WEBA Sellers at closing	$	150,000
Common Stock issuance to the WEBA Sellers		562,500
Promissory notes to the WEBA Sellers		2,650,000
Contingent cash consideration to the WEBA Sellers		1,745,023
Income tax benefit		1,030,000
Total acquisition date fair value	$	6,137,523

Allocation of Consideration Transferred

The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based on their estimated fair values as of December 27, 2016, the acquisition date. The excess of the acquisition date fair value of consideration transferred over the estimated fair value of the net tangible assets and intangible assets acquired was recorded as goodwill.

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The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

Cash	$	172,950
Accounts receivable		342,151
Loan receivable from RS&T		500,000
Property and equipment		8,720
Customer list		470,000
Intellectual property		880,000
Trade name		390,000
Non complete agreement		835,000
Total identifiable assets acquired		3,598,821
Accounts payable and accrued expenses		190,527
Total liabilities assumed		190,527
Total identifiable assets less liabilities assumed		3,408,294
Goodwill		2,729,229
Net assets acquired	$	6,137,523

The Company is amortizing the intangibles (excluding goodwill) over an estimated useful life of five to ten years. The Company will evaluate the fair value of the earn-out liability on a periodic basis and adjust the balance, with an offsetting adjustment to the income statement, as needed. The acquisition was considered to be significant. The Company has included the financial results of the WEBA acquisition in its consolidated financial statements from the acquisition date and the results from WEBA were not material to the Company’s consolidated financial statements for the year ended December 31, 2016.

Pro Forma Financial Information

The following table presents the Company’s unaudited pro forma results (including WEBA) for the three and six months ended June 30, 2016 as though the companies had been combined as of the beginning of each of the periods presented. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of each period presented, nor is it indicative of results of operations which may occur in the future. The unaudited pro forma results presented include amortization charges for intangible assets and eliminations of intercompany transactions.

	For the			For the
	Three Months Ended			Six Months Ended
	June 30, 2016			June 30, 2016
Total revenues	$	1,795,502		$	3,777,955
Net loss	$	(1,033,464	)	$	(1,933,637	)

The Company did not incur material acquisition expenses related to the WEBA acquisition.

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The components of goodwill and other intangible assets related to the WEBA SPA, along with various other business combinations are as follows:

		Gross Balance at					Net Balance at							Net Balance at
	Estimated	December 31,		Accumulated			December 31,				Accumulated			June 30,
	Useful Life	2016		Amortization			2016		Additions		Amortization			2017
Finite live intangible assets:
Customer list and tradename	5 years	$	987,500	$	(26,296	)	$	961,204	$	—	$	(126,171	)	$	861,329
Non-compete agreements	5 years		1,199,000		(246,000	)		953,000		—		(365,900	)		833,100
Intellectual property	10 years		880,000		—			880,000		—		(44,000	)		836,000
Total intangible assets		$	3,066,500	$	(272,296	)	$	2,794,204	$	—	$	(536,071	)	$	2,530,429
Goodwill	Indefinite	$	3,693,083	$	—		$	3,693,083	$	129,500	$	—		$	3,822,583

We compute amortization using the straight-line method over the estimated useful lives of the intangible assets. The Company has no indefinite-lived intangible assets other than goodwill.  

NOTE 5 – Property, Plant and Equipment

The Company’s property, plant and equipment were as follows:

	June 30,			December 31,
	2017			2016
Machinery and equipment	$	4,329,412		$	4,154,305
Leasehold improvements		262,476			126,598
Accumulated depreciation		(1,060,572	)		(927,909	)
		3,531,316			3,352,994
Construction in process		384,578			304,845
Total property, plant and equipment, net	$	3,915,894		$	3,657,839

NOTE 6– Stockholders’ Equity

Preferred Stock

The Company’s articles of incorporation authorize the Company to issue up to 40,000,000 shares of $0.0001 par value, preferred shares having preferences to be determined by the board of directors for dividends, and liquidation of the Company’s assets. Of the 40,000,000 preferred shares the Company is authorized by its articles of incorporation, the Board of Directors has designated up to 3,000,000 as Series AA preferred shares. 

As of June 30, 2017, the Company had no shares of Preferred Stock outstanding.

Common Stock

As of June 30, 2017, the Company has 131,204,275 shares of Common Stock, par value $0.0001, outstanding. The Company’s articles of incorporation authorize the Company to issue up to 300,000,000 shares of Common Stock. The holders are entitled to one vote for each share on matters submitted to a vote to shareholders, and to share pro rata in all dividends payable on Common Stock after payment of dividends on any preferred shares having preference in payment of dividends.

Equity Incentive Program

On December 18, 2014, the Company’s Board of Directors approved an Equity Incentive Program (the “Equity Incentive Program”), whereby the Company’s employees may elect to receive equity in lieu of cash for all or part of their salary compensation.

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During the six months ended June 30, 2017, the Company issued the following shares of common stock for compensation:

On February 13, 2017, the Company issued an aggregate of 160,000 shares of common stock to two employees of the Company at a price of $0.125 per share. 

During the quarter ended March 31, 2017, the Company issued an aggregate of 115,503 shares of common stock to employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.12 per share.

On March 31, 2017, the Company issued an aggregate of 512,498 shares of common stock to six directors of the Company pursuant to the Company’s FY2017 Director Compensation Plan at a price of $0.12 per share.

During the quarter ended June 30, 2017, the Company issued an aggregate of 195,039 shares of common stock to employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.10 per share.

On June 30, 2017, the Company issued an aggregate of 627,546 shares of common stock to six directors of the Company pursuant to the Company’s FY2017 Director Compensation Plan at a price of $0.098 per share.

Summary:

	Shares of Number of Common Stock Issued		Value
Share-based compensation		1,610,586	$	176,363

Shares of common stock issued under warrant exercise

On May 11, 2017, the Company issued an aggregate of 3,437,500 shares of Common Stock to three accredited investors in connection with the exercise of warrants at an exercise price of $0.08 per share.

Performance and/or market based stock awards

In January 2015, the Board of Directors approved the issuance of 940,595 restricted shares of the Company. These shares will be issued to the then members of the Board of Directors upon vesting, which will be when the market price of the Company’s common stock trades at or above $2 for a specified period.

The initial value of the restricted stock grant was approximately $38,000, as adjusted for forfeitures resulting from directors who have resigned, which will be amortized over the estimated service period. The Company recorded an expense of $7,698 and $41,854 from the amortization of the unvested restricted shares for the six months ended June 30, 2017 and 2016, respectively. The shares were valued using a Monte Carlo Simulation with a six year life, 88.0% volatility and a risk free interest rate of 1.79%.

In February 2016, the Board of Directors approved the issuance of 3,301,358 restricted shares of the Company. These shares will be issued to the then President (1,100,453 shares) and Chief Financial Officer (2,200,905 shares) upon vesting, which will be according to the following terms:

- 20% when the market price of the Company’s common stock trades at or above $0.30 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.40 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.50 for a specified period.

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- 20% when the market price of the Company’s common stock trades at or above $0.60 for a specified period.

The initial value of the restricted stock grant was approximately $198,000, which was amortized over the estimated service period. The Company recorded an expense of $11,756 and $11,697 from the amortization of the unvested restricted shares for the six months ended June 30, 2017 and 2016, respectively. The shares were valued using a Monte Carlo Simulation with a six-year life, 91.0% volatility and a risk free interest rate of 1.34%. In December 2016, the Board of Directors modified the terms of the 1,100,453 shares award in conjunction with the resignation of the President to provide for an expiration date of December 2017. The Company revalued this award based on the new terms and determined the value of the award was approximately $18,000, which is being amortized over the estimated service period. The current period expense was insignificant.

In January 2016, the Board of Directors approved the issuance of 6,281,250 restricted common shares of the Company. These shares will be issued to the then members of the Board of Directors upon vesting, which will be when the market price of the Company’s common stock trades at or above $0.12 for a specified period or if the Company has positive EBITDA (a non GAAP measure) for one quarter in 2016. These shares were issued to the members of the Board on June 13, 2016, when the market price of the Company’s common stock traded at or above $0.12 for a 30-day volume weighted average price.

The initial value of the restricted stock grant was $509,000, which has been amortized over the estimated performance period. The Company recorded the entire value as expense from the amortization of the restricted shares for the year ended December 31, 2016, including $254,391 for the six months ended June 30, 2016. The shares were valued using a Monte Carlo Simulation with a one-year life, 106.0% volatility and a risk free interest rate of 0.65%.

In May 2016, the Board of Directors approved the issuance of 1,100,453 restricted shares of the Company. These shares will be issued to the Chief Executive Officer upon vesting, which will be according to the following terms:

- 20% when the market price of the Company’s common stock trades at or above $0.30 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.40 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.50 for a specified period.

- 20% when the market price of the Company’s common stock trades at or above $0.60 for a specified period.

The initial value of the restricted stock grant was approximately $94,000, which was to be amortized over the estimated service period. In December 2016, the then Chief Executive Officer resigned from the Company; therefore, any recognized expense was reversed and the expense recognized by the Company during the year ended December 31, 2016 was $0. In December 2016, the Board of Directors modified the terms of this award in conjunction with the resignation of the then Chief Executive Officer to provide for an expiration date of December 2017. The Company revalued this award based on the new terms and determined the value of the award was approximately $18,000, which is being amortized over the estimated service period. The current period expense was insignificant. 

In September 2016, the Board of Directors approved the issuance of 1,650,680 restricted common shares of the Company. These shares will be issued to the then Vice President of Sales and Marketing upon vesting, which will be according to the following terms:

- 20% when the market price of the Company’s common stock trades at or above $0.30 for a specified period.

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- 30% when the market price of the Company’s common stock trades at or above $0.40 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.50 for a specified period.

- 20% when the market price of the Company’s common stock trades at or above $0.60 for a specified period.

The initial value of the restricted stock grant was approximately $141,000, which was amortized over the estimated service period. Upon the termination of the then Vice President of Sales and Marketing on April 28, 2017, this grant was terminated and the Company reversed all previous expense and is no longer recording expense related to this award. The Company recorded income of $14,082 from the reversal of previous amortization of the unvested restricted shares for the three months ended June 30, 2017. The shares were valued using a Monte Carlo Simulation with a 6-year life, 92.0% volatility and a risk free interest rate of 1.35%.

In December 2016, the Board of Directors approved the issuance of 6,290,000 restricted common shares of the Company. These shares will be issued to members of the Board of Directors and certain executives and employees upon vesting, which will occur when the price per share of the Company’s common stock, measured and approved based upon a 30-day trading volume weighted average price (“VWAP”), is equal to at least $0.20 per share.

The initial value of the restricted stock grant was approximately $430,000, which is being amortized over the estimated service period. The Company recorded an expense of $35,800 from the amortization of the unvested restricted shares for the six months ended June 30, 2017. The shares were valued using a Monte Carlo Simulation with a 6-year life, 98.0% volatility and a risk free interest rate of 2.00%.

In June 2017, the Board of Directors approved the issuance of 1,000,000 restricted common shares of the Company. These shares will be issued to certain executives upon the Company meeting the following bench marks: 50% will vest when the price per share of the Company’s common stock, based upon a 30-day trading VWAP, is equal to at least $0.20 per share and 50% will vest when the price per share of the Company’s common stock, measured and approved based upon a 30-day trading VWAP, is equal to at least $0.35 per share. The current period expense was insignificant.

A summary of the Company’s restricted stock awards is presented below:

	Number of Shares			Weighted- Average Grant-Date Fair Value per Share
Unvested at January 1, 2017		12,691,084		$	0.08
Restricted stock granted		1,700,000			0.07
Restricted stock vested		—			—
Restricted stock forfeited		(1,920,680	)		0.07
Unvested at June 30, 2017		12,470,404		$	0.08

Options and warrants

During the six months ended June 30, 2017, the Company issued 3,437,500 shares of common stock in connection with the exercise of stock warrants to purchase 3,437,500 shares of common stock at an exercise price of $0.08 per share. During the six months ended June 30, 2016, the Company did not have any issuances or exercises of stock warrants. The Company recognized $7,500 of expense related to the vesting of outstanding options during the six months ended June 30, 2017.

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NOTE 7 – Segments

Prior to the December 2016 acquisitions of WEBA, RS&T and the DOW Assets and through December 31, 2016, the Company operated as one segment. Effective January 1, 2107, we have two segments, Consumer and Industrial. Consumer’s principal business activity is the processing of waste glycol into high-quality recycled glycol products, specifically automotive antifreeze, and related specialty blended antifreeze, which we sell in the automotive and industrial end markets. We operate six processing and distribution centers located in the eastern region of the United States. Industrial’s principal business activity consists of two divisions: WEBA and RS&T. WEBA develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries throughout North America, and RS&T, operates a 14-20 million gallons per year ASTM E1177 EG-1 glycol re-distillation plant in West Virginia that processes waste glycol into virgin quality recycled glycol for sale to industrial customers worldwide.

The Company uses loss before provision for income taxes as its measure of profit/loss for segment reporting purposes. Loss before provision for income taxes by operating segment includes all operating items relating to the businesses, including inter segment transactions. Items that primarily relate to the Company as a whole are assigned to Corporate.

Inter segment eliminations present the adjustments for inter segment transactions to reconcile segment information to the Company’s consolidated financial statements.

Segment information, and the reconciliation to the Company’s consolidated financial statements, for the three months ended June 30, 2017, is presented below:

	Consumer			Industrial			Inter Segment Eliminations			Corporate			Total
Sales, net	$	1,647,263		$	1,608,502		$	(337,668	)	$	—		$	2,918,097
Cost of goods sold		1,262,853			1,516,058			(337,668	)		—			2,441,243
Gross profit		384,410			92,444			—			—			476,854
Total operating expenses		540,387			325,556			—			288,555			1,154,498
Loss from operations		(155,977	)		(233,112	)		—			(288,555	)		(677,644	)
Total other expenses		(6,133	)		(30,923	)		—			(186,329	)		(223,385	)
Loss before provision for income taxes	$	(162,110	)	$	(264,035	)	$	—		$	(474,884	)	$	(901,029	)

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Segment information, and the reconciliation to the Company’s consolidated financial statements, for the six months ended June 30, 2017, is presented below:

	Consumer			Industrial			Inter Segment Eliminations			Corporate			Total
Sales, net	$	3,245,903		$	2,549,183		$	(586,668	)	$	—		$	5,208,418
Cost of goods sold		2,669,554			2,508,943			(586,668	)		—			4,591,829
Gross profit		576,349			40,240			—			—			616,589
Total operating expenses		1,008,889			579,351			—			617,929			2,206,169
Loss from operations		(432,539	)		(539,111	)		—			(617,929	)		(1,589,580	)
Total other expenses		(11,219	)		(30,923	)		—			(377,461	)		(419,603	)
Loss before provision for income taxes	$	(443,759	)	$	(570,034	)	$	—		$	(995,390	)	$	(2,009,183	)

NOTE 8 – Notes Payable

Notes payable consist of the following:

	June 30, 2017			December 31, 2016
2016 Secured Notes		354,893			396,562
2016 5% Related Party Unsecured Notes		—			1,000,000
2016 8% Related Party Unsecured Notes, net of unamortized debt discount of $177,328 and $351,744, respectively		1,632,672			1,458,256
2016 WEBA Seller Notes		2,650,000			2,650,000
Total notes payable		4,637,565			5,504,818
Less current portion		(1,718,496	)		(2,541,178	)
Long-term portion of notes payable	$	2,919,069		$	2,963,640

2016 Secured Notes

In January 2016, the Company entered into a secured promissory note with Ascentium Capital. In April 2016, the Company entered into secured promissory notes with Ascentium Capital. In July 2016, the Company entered into a secured promissory note with PACCAR Financial. In September 2016, the Company entered into a secured promissory note with PACCAR Financial. In November 2016, the Company entered into secured promissory notes with MHC Financial Services, Inc. (collectively, the “2016 Secured Notes”). The key terms of the 2016 Secured Notes include: (i) an aggregate principal balance of $437,000, (ii) interest rates ranging from 5.8% to 9.0%, and (iii) terms of 4-5 years. The 2016 Secured Notes are collateralized by vehicles and equipment.

2016 Related Party Unsecured Notes

5% Notes Issuance

On December 27, 2016, the Company entered into a subscription agreement (the “5% Notes Subscription Agreement”) by and between the Company and various funds managed by Wynnefield Capital. Pursuant to the 5% Notes Subscription Agreement, the Company offered and issued $1,000,000 in principal amount of 5% Senior Unsecured Promissory Notes (the “5% Notes”). The Company received $1,000,000 in gross proceeds from the offering. The 5% Notes were scheduled to mature on May 31, 2017 (the “5% Note Maturity Date”). The 5% Notes bore interest at a rate of 5% per annum due on the 5% Note Maturity Date or as otherwise specified by the 5% Notes. The 5% Notes contained standard events of default, including: (i) failure to repay the 5% Note when it is due at maturity; (ii) failure to pay any interest payment when due; (iii) failure to deliver financial statements on time; and (iv) other standard events of default. On April 17, 2017, the Company repaid the 5% Notes in full.

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8% Notes Issuance

On December 27, 2016, the Company entered into subscription agreements (the “8% Notes Subscription Agreements”) by and between the Company and certain accredited investors. Pursuant to the 8% Notes Subscription Agreements, the Company offered and issued: (i) $1,810,000 in principal amount of 8% Senior Unsecured Promissory Notes (the “8% Notes”); and (ii) warrants (the “Warrants”) to purchase up to 5,656,250 shares of common stock of the Company (the “Common Stock”). The Company received $1,810,000 in gross proceeds from the offering of which $1,760,000 was received in 2016 and $50,000 was accrued as an other current asset at December 31, 2016 and received in 2017. The 8% Notes will mature on December 27, 2017 (the “8% Note Maturity Date”). The 8% Notes bear interest at a rate of 8% per annum due on the 8% Note Maturity Date or as otherwise specified by the 8% Note. The 8% Notes contain standard events of default, including: (i) failure to repay the 8% Note when it is due at maturity; (ii) failure to pay any interest payment when due; (iii) failure to deliver financial statements on time; and (iv) other standard events of default. The Company also incurred $26,872 of issuance costs, which were recorded as a debt discount and will be amortized as interest expense through the 8% Note Maturity Date. The Warrants are exercisable for an aggregate of 5,656,250 shares of Common Stock, beginning on December 27, 2016, and will be exercisable for a period of three years. The exercise price with respect to the warrants is $0.08 per share. The exercise price and the amount of shares of common stock issuable upon exercise of the warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other similar issuances. On August 4, 2017, the Company redeemed $1,550,000 of the 8% Notes through the issuance of common shares of the Company’s stock as of the rights offering that closed on August 4, 2017. On August 10, 2017, the Company repaid the remaining $260,000 of 8% Notes through a combination of issuance of common shares of the Company’s stock and cash. See Note 12 for additional information.

The Company allocated the proceeds received to the 8% Notes and the warrants on a relative fair value basis at the time of issuance. The total debt discount is being amortized over the life of the 8% Notes to interest expense. Amortization expense during the six months ended June 30, 2017 was $174,421.

WEBA Seller Notes

In connection with the WEBA acquisition (see Note 4) the Company issued $2.65 million in 8% promissory notes (“Seller Notes”). The Seller Notes mature on December 27, 2021. The Seller Notes bear interest at a rate of 8% per annum payable on a quarterly basis in arrears. The Seller Notes contain standard default provisions, including: (i) failure to repay the Seller Note when it is due at maturity; (ii) failure to pay any interest payment when due; (iii) failure to deliver financial statements on time; and (iv) other standard events of default.

NOTE 9 – Capital Lease

On April 13, 2017, the Company closed an amended sale-leaseback transaction with NFS Leasing, Inc. (“NFS”), wherein the Company sold $1,700,000 of certain operational equipment used in the Company’s glycol recovery and recycling operations (the “Equipment”) pursuant to a bill of sale and simultaneously entered into a master equipment lease agreement, as modified (the “Lease Agreement”) with NFS for the lease of the Equipment by the Company. Pursuant to the Lease Agreement, the lease term (the “Lease Term”) is 48 months commencing on May 1, 2017. There was no gain or loss associated with the sale-leaseback. During the Lease Term, the Company is obligated to make monthly rental payments of $44,720 to NFS. The agreements are effective as of March 31, 2017. At the conclusion of the Lease Term, the Company may repurchase the Equipment from NFS for $1. The Company has accounted for this transaction as a capital lease.

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NOTE 10 – Related Party Transactions

Vice President of U.S. Operations

The Vice President of U.S. Operations is the sole owner of BKB Holdings, LLC, which is the landlord of the property where GlyEco Acquisition Corp #5’s processing center is located. The Vice President of U.S. Operations also is the sole owner of Renew Resources, LLC, which provides services to the Company as a vendor.

	2017			2016
Beginning Balance as of January 1,	$	5,123		$	2,791
Monies owed to related party for services performed		61,818			47,219
Monies paid		(66,941	)		(51,807	)
Ending Balance as of June 30, payable (receivable)	$	—		$	(1,797	)

5% Notes

On December 27, 2016, we entered into debt agreements for an aggregate principal amount of $1,000,000 from the offering and issuance of 5% Notes to Wynnefield Partners I, Wynnefield Partners and Wynnefield Offshore, all of which are under the management of Wynnefield Capital, Inc. (“Wynnefield Capital”), an affiliate of the Company. The Company’s Chairman of the Board, Dwight Mamanteo, is a portfolio manager of Wynnefield Capital. See Note 8 for additional information.

8% Notes

On December 27, 2016, we entered into debt agreements for an aggregate principal amount of $1,810,000 from the offering and issuance of 8% Notes and warrants to purchase up to 5,656,250 shares of our common stock. The 8% Notes and warrants were sold to Dwight Mamanteo, our Chairman of the Board, Charles F. Trapp and Scott Nussbaum, members of the Board of Directors, Ian Rhodes, our Chief Executive Officer, Wynnefield Capital, an affiliate of the Company, and certain family members of Mr. Mamanteo and of Mr. Nussbaum. See Note 8 for additional information.

NOTE 11 – Commitments and Contingencies

Litigation

The Company may be party to legal proceedings in the ordinary course of business.  The Company believes that the nature of these proceedings (collection actions, etc.) are typical for a Company of our size and scope of operations. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Below is an overview of a recently resolved legal proceeding, one pending legal proceeding, and one outstanding alleged claim.

On January 8, 2016, Acquisition Sub. #4 filed a civil action against Onyxx Group LLC in the Circuit Court of Hillsborough County, Florida. This civil action relates to an outstanding balance due from Onyxx Group LLC to Acquisition Sub. #4. In September 2016, the Company received a favorable judgment regarding this civil action in the amount of $95,000.

On March 22, 2016, Acquisition Sub. #4 filed a civil action against Encore Petroleum, LLC in the Superior Court of New Jersey Law Division, Hudson County. This civil action relates to an outstanding balance due from Encore Petroleum to Acquisition Sub. #4. This civil action is still pending.

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The Company is also aware of one matter that involves an alleged claim against the Company, and it is at least reasonably possible that the claim will be pursued. The claim involves contracts with our former director and his related entities that provided services and was our landlord for the Company’s former processing facility in New Jersey. In this matter, the landlord of the Company’s formerly leased property claims back rent is due for property used by the Company outside of the scope of its lease agreement. During the quarter ended March 31, 2015, the former landlord denied the Company access to the New Jersey facility and prepared an eviction notice. The Company negotiated a payment in the amount of $250,000 to regain access to the facility, and reached an accord to negotiate with the landlord to resolve the outstanding issues by May 31, 2015. On December 28, 2015, the Company ultimately approved the termination of the lease agreements related to the New Jersey facility, thereby ceasing all operations at that particular facility. This termination was prompted by the former landlord’s demand for payment of approximately $2.3 million to maintain access to the facility. In September 2016, the Company reached an agreement with the landlord. The agreement required the Company to resolve certain environmental issues regarding the former processing facility and make certain payments to the landlord. The Company, the landlord and their related entities also agreed to a full and final settlement of existing and possible future claims between the parties. As of August 14, 2017, the Company believes it has addressed the environmental issues by removing and disposing of the waste from the facility and cleaning the storage tanks. Additionally, as of August 14, 2017, the Company has paid in full the agreed upon $335,000 payment to the landlord.

Environmental Matters

We are subject to federal, state, and local laws, regulations and ordinances relating to the protection of the environment, including those governing discharges to air and water, handling and disposal practices for solid and hazardous wastes, and occupational health and safety. It is management’s opinion that the Company is not currently exposed to significant environmental remediation liabilities or asset retirement obligations. However, if a release of hazardous substances occurs, or is found on one of our properties from prior activity, we may be subject to liability arising out of such conditions and the amount of such liability could be material.

The Company accrues for potential environmental liabilities in a manner consistent with accounting principles generally accepted in the United States; that is, when it is probable a liability has been incurred and the amount of the liability is reasonably estimable. The Company reviews the status of its environmental sites on a yearly basis and adjusts its reserves accordingly. Such potential liabilities accrued by the Company do not take into consideration possible recoveries of future insurance proceeds. The Company maintains insurance coverage for unintentional acts that result in environmental remediation liabilities up to $1 million per occurrence; $2 million in the aggregate, with an umbrella liability policy that doubles the coverage. These policies do, however, take into account the likely share other parties will bear at remediation sites. It would be difficult to estimate the Company’s ultimate level of liability due to the number of other parties that may be involved, the complexity of determining the relative liability among those parties, the uncertainty as to the nature and scope of the investigations and remediation to be conducted, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur. Nevertheless, the Company does not currently believe that any claims, penalties or costs in connection with known environmental matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company is aware of one environmental remediation issue related to our former leased property in New Jersey, which is currently subject to a remediation stemming from the sale of property by the previous owner in 2008 to the current landlord. To Management’s knowledge, the former landlord has engaged a licensed site remediation professional and had assumed responsibility for this remediation. In Management’s opinion the liability for this remediation is the responsibility of the former landlord. However, the former landlord has disputed this position and it is an open issue subject to negotiation. Currently, we have no knowledge as to the scope of the landlord’s former remediation obligation.

NOTE 12 – Subsequent Events

Recent Stock Issuances

Since June 30, 2017, the Company has issued an aggregate of 78,973 shares of common stock pursuant to the Company’s Equity Incentive Program.

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Rights Offering

On August 10, 2017, the Company announced the closing of its rights offering, which expired on August 4, 2017, and raised aggregate gross proceeds of approximately $2.29 million, including $670,000 in cash and $1.62 million in redemption of previously issued notes, from the sale of 28.6 million shares of common stock at a price of $0.08 per share. The rights offering was made pursuant to a registration statement on Form S-1 (Reg. No. 333-215941) and prospectus on file with the Securities and Exchange Commission. The Company plans to use the net proceeds for general working capital purposes.

The Company also repaid the remaining 8% promissory notes issued in December 2016 through a combination of shares of its common stock at a per share price of $0.08 and cash. The Company issued 2,754,500 shares in exchange for a total of $220,360 in principal and interest and repaid the balance in cash in the full amount of $52,467. As a result of these transactions, the previously issued 8% notes have been repaid in full.

Warrants Exercise

Since June 30, 2017, the Company has issued 781,250 shares of common stock in connection with the exercise of warrants to purchase 781,250 shares of common stock with an exercise price of $0.08. For total proceeds of $62,500. These warrants were issued in connection with the 8% Notes.

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

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our consolidated financial statements for the fiscal year ended December 31, 2016, and the notes thereto, along with Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, filed separately with the US Securities and Exchange Commission. This discussion and analysis contains forward-looking statements based upon current beliefs, plans, expectations, intentions and projections that involve risks, uncertainties and assumptions, such as statements regarding our plans, objectives, expectations, intentions and projections. We use words such as “anticipate,” “estimate,” “plan, “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of several factors, including those set forth under the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and any updates to those risk factors filed from time in our Quarterly Reports on Form 10-Q including those set forth under Part II, Item 1A of this Quarterly Report on Form 10-Q.

Unless otherwise noted herein, terms such as the “Company,” “GlyEco,” “we,” “us,” “our” and similar terms refer to GlyEco, Inc., a Nevada corporation, and our subsidiaries.

In addition, the following discussion should be read in conjunction with the information contained in the condensed consolidated financial statements of the Company and related notes included elsewhere herein.

Company Overview

GlyEco is a leading specialty chemical company, leveraging technology and innovation to focus on vertically integrated, eco-friendly manufacturing, customer service and distribution solutions. Our eight facilities, including the recently acquired 14-20 million gallons per year, ASTM E1177 EG-1, glycol re-distillation plant in West Virginia, deliver superior quality glycol products that meet or exceed ASTM quality standards, including a wide spectrum of ready to use antifreezes and additive packages for antifreeze/coolant, gas patch coolants and heat transfer fluid industry, throughout North America. Our team’s extensive experience in the chemical field, including direct experience with reclamation of all types of glycols, gives us the ability to process a wide range of feedstock streams, formulate and produce unique products and has earned us an outstanding reputation in our markets.

Prior to the December 2016 acquisitions of WEBA, RS&T and the DOW Assets and through December 31, 2016, the Company operated as one segment. Effective January 1, 2017, GlyEco has two segments: Consumer and Industrial. Consumer’s principal business activity is the processing of waste glycol into high-quality recycled glycol products, specifically automotive antifreeze, and related specialty blended antifreeze, which we sell in the automotive and industrial end markets. We operate six processing and distribution centers located in the eastern region of the United States. Industrial’s principal business activity consists of two divisions: WEBA and RS&T. WEBA develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries throughout North America, and RS&T, which operates a 14-20 million gallons per year ASTM E1177 EG-1 glycol re-distillation plant in West Virginia that processes waste glycol into virgin quality recycled glycol for sale to industrial customers worldwide.

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Consumer segment

Our Consumer segment has processing and distribution centers located in (1) Minneapolis, Minnesota, (2) Indianapolis, Indiana, (3) Lakeland, Florida, (4) Rock Hill, South Carolina, (5) Tea, South Dakota, and (6) Landover, Maryland. The Minneapolis, Minnesota, Lakeland, Florida, Rock Hill, South Carolina and Tea, South Dakota facilities have distillation equipment and operations for recycling waste glycol streams as well as blending equipment and operations for mixing glycol and other chemicals to produce finished products for sale to third party customers, while the Indianapolis, Indiana and Landover, Maryland facilities currently only have blending equipment and operations for mixing glycol and other chemicals to produce finished products for sale to third party customers. We estimate that the monthly processing capacity of our four facilities with distillation equipment is approximately 100,000 gallons of ready to use finished products. We have invested significant time and money into increasing the capacity and actual production of our facilities. Our average monthly production was approximately 44,000 gallons in the first quarter of 2016 as compared to approximately 80,000 gallons in the first quarter of 2017. Our processing and distribution centers utilize a fleet of trucks to collect waste material for processing and delivering recycled glycol products directly to retail end users at their storefront, which is typically 50-100 gallons per customer order. Collectively, we directly service approximately 5,000 generators of waste glycol. To meet the delivery volume needs of our existing customers, we supplement our collected and processed glycol with new or virgin glycol that we purchase in bulk from various suppliers. In addition to our retail end users, we also sell our recycled glycol products to wholesale or bulk distributors who, in turn, sell to retail end users specifically as automotive or specialty blended antifreeze. In certain markets we also sell windshield washer fluids which we do not recycle.

We have deployed our proprietary technology across our six processing distribution centers, allowing for safe and efficient handling of waste streams, application of our processing technology and Quality Control & Assurance Program (“QC&A”), sales of high-quality glycol products, and data systems allowing for tracking, training, and further development of our products and service.

Our Consumer segment product offerings include:

● High-Quality Recycled Glycols - Our technology allows us to produce glycols which meet ASTM standards and can be used in any industrial application.

● Recycled Antifreeze - We formulate several universal recycled antifreeze products to meet ASTM and/or OEM manufacturer specifications for engine coolants. In addition, we custom blend recycled antifreeze to customer specifications.

● Recycled HVAC Fluids - We formulate a universal recycled HVAC coolant to meet ASTM and/or OEM manufacturer specifications for heating, ventilation and air conditioning fluids. In addition, we custom blend recycled HVAC coolants to customer specifications.

● Waste Glycol Disposal Services - Utilizing our fleet of collection/delivery trucks, we collect waste glycol from generators for recycling. We coordinate large batches of waste glycol to be picked up from generators and delivered to our processing centers for recycling or in some cases to be safely disposed.

● Windshield Washer Fluid - In certain markets we sell windshield washer fluids which we do not recycle.

We currently sell and deliver all of our products in bulk containers (55 gallon barrels, 250 gallon totes, etc.) or variable metered bulk quantities.

We began developing innovative new methods for recycling glycols in 1999. We recognized a need in the market to improve the quality of recycled glycol being returned to retail customers. In addition, we believed through process technology, systems, and footprint we could clean more types of waste glycol in a more cost efficient manner. Each type of industrial waste glycol contains a different list of impurities which traditional waste antifreeze processing does not clean effectively. Additionally, many of the contaminants left behind using these processes - such as esters, organic acids and high dissolved solids - leave the recycled material risky to use in vehicles or machinery.

Our proprietary and patented technology removes difficult pollutants, including esters, organic acids, high dissolved solids and high un-dissolved solids in addition to the benefit of clearing oil/hydrocarbons, additives and dyes that are typically found in used engine coolants. Our QC&A program (Quality Control & Assurance) seeks to ensure consistently high quality, ASTM (American Society for Testing and Materials) standard compliant recycled material. Our products are trusted in all vehicle makes and models, regional fleet, local auto, and national retailers. Our proprietary QC&A program is managed and supported by dedicated process and chemical engineering staff and requires periodic onsite field audits, and ongoing training by our facility managing partners.

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Industrial Segment

Our Industrial segment consists of two divisions: WEBA, our additives business and RS&T, our glycol re-distillation plant in West Virginia.

WEBA develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries throughout North America. We believe WEBA is one of the largest companies serving the North American additive market. WEBA’s METALGUARD® additive package product line includes one-step inhibitor systems, which give our customers the ability to easily make various types of antifreeze concentrate and 50/50 coolants for all automobiles, heavy-duty diesel engines, stationary engines in gas patch and other applications. METALGUARD additive packages cover the entire range of coolant types from basic green conventional to the newest extended life OAT antifreezes of all colors. Our heat transfer fluid additives allow our customers to make finished heat transfer fluids for most industry applications including all-aluminum systems. The METALGUARD heat transfer fluids include light and heavy-duty fluids, both propylene and ethylene glycol based, for various operating temperatures. These inhibitors cover the industry standard of phosphate-based inhibitors as well as all-organic (OAT) inhibitors for specific pH range and aluminum system requirements.

All of the METALGUARD products are tested at our in-house laboratory facility and by third-party laboratories to assure conformance. We use the standards set by ASTM (American Society of Testing Materials) for all of our products. All of our products pass the most current ASTM standards and testing for each type of product. Our manufacturing facility conforms to the highest levels of process quality control including ISO 9001 certification.

RS&T operates a 14-20 million gallons per year, ASTM E1177 EG-1, glycol re-distillation plant in West Virginia, which processes waste glycol into virgin quality recycled glycol for sale to industrial customers worldwide. The facility is uniquely designed to process industrial waste glycol. It utilizes the only currently active process that produces a product that both meets the virgin glycol antifreeze grade specification, ASTM E1177 EG-1, and achieves the important aesthetic requirement for most applications of having no odor. It is the largest glycol re-distillation plant in North America, with a capacity of 14-20 million gallons per year, several times higher processing capacity than the next largest glycol recycling facility. The facility, located at the Dow Institute Site in Institute, West Virginia, includes five distillation columns, three wiped-film evaporators, heat exchangers, processing and storage tanks, and other processing equipment. The facility’s tanks include feedstock storage capacity of several million gallons and finished goods storage capacity of several million gallons. The plant is equipped with rail and truck unloading/loading facilities, and on-site barge loading/unloading facilities.

Our Strategy

We are a vertically integrated specialty chemical company focused on high quality glycol-based and other products where we can be an efficiency leader providing value added products. To deliver value to all of our stakeholders we: develop, manufacture and deliver value-added niche or specialty products, deliver high quality products which meet or exceed industry standards, provide superior customer service, effectively manage costs as a low cost manufacturer, operate a dependable low cost distribution network, leverage technology and innovation throughout our company and are eco-friendly.

To effectively deliver on our strategy, we offer a broad spectrum of products in our niches, focus on non-standard innovative products, leverage multiple distribution channels and we are market smart in that we maximize less competitive/under-served markets. We provide white glove proactive customer service. Our manufacturing operations produce the highest quality products while effectively managing costs by recycling at high capacity and high up time, driving down raw material costs with focused feedstock streams management and using technology and data to manage our business in real-time. Our distribution operations provide dependable service at a low cost by effectively using know how, technology and data. We leverage technology and innovation to develop a recognized brand and operate certified laboratories and well supported research and development activities. Similarly, we focus on internal and external training programs. We are eco-friendly with the products we offer and the way we operate our businesses.

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Critical Accounting Policies

We have identified in the condensed consolidated financial statements contained herein certain critical accounting policies that affect the more significant judgments and estimates used in the preparation of the consolidated financial statements. Our discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. Management reviews with the audit committee the selection, application and disclosure of critical accounting policies. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include going concern, collectability of accounts receivable, inventory, impairment of goodwill, carrying amounts and useful lives of intangible assets, fair value of assets acquired and liabilities assumed in business combinations, stock-based compensation expense, and deferred taxes. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated.

We believe that of our significant accounting policies, the following may involve a higher degree of judgment and complexity:

Revenue Recognition

The Company recognizes revenue when (1) delivery of product has occurred or services have been rendered, (2) there is persuasive evidence of a sale arrangement, (3) selling prices are fixed or determinable, and (4) collectability from the customer (individual customers and distributors) is reasonably assured. Revenue consists primarily of revenue generated from the sale of the Company’s products. This generally occurs either when the Company’s products are shipped from its facility or delivered to the customer when title has passed. Revenue is recorded net of estimated cash discounts. The Company estimates and accrues an allowance for sales returns at the time the product is sold. To date, sales returns have not been material. Shipping costs passed to the customer are included in the net sales.

Collectability of Accounts Receivable

Accounts receivable consist primarily of amounts due from customers from sales of products and are recorded net of an allowance for doubtful accounts. In order to record our accounts receivable at their net realizable value, we assess their collectability. A considerable amount of judgment is required in order to make this assessment, based on a detailed analysis of the aging of our receivables, the credit worthiness of our customers and our historical bad debts and other adjustments. If economic, industry or specific customer business trends worsen beyond earlier estimates, we increase the allowance for uncollectible accounts by recording additional expense in the period in which we become aware of the new conditions.

Substantially all our customers are based in the United States. The economic conditions in the United States can significantly impact the recoverability of our accounts receivable.

Inventories

Inventories consist primarily of used glycol to be recycled, recycled glycol for resale and supplies used in the recycling process. Inventories are stated at the lower of cost or net realizable value with cost recorded on an average cost basis. Costs include purchase costs, fleet and fuel costs, direct labor, transportation costs and production related costs. In determining whether inventory valuation issues exist, we consider various factors including estimated quantities of slow-moving inventory by reviewing on-hand quantities, historical sales and production usage. Shifts in market trends and conditions, changes in customer preferences or the loss of one or more significant customers are factors that could affect the value of our inventory. These factors could make our estimates of inventory valuation differ from actual results.

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Long-Lived Assets

We periodically evaluate whether events and circumstances have occurred that may warrant revision of the estimated useful life of property and equipment and intangible assets or whether the remaining balance of the long-lived assets should be evaluated for possible impairment. Instances that may lead to an impairment include the following: (i) a significant decrease in the market price of a long-lived asset group; (ii) a significant adverse change in the extent or manner in which a long-lived asset or asset group is being used or in its physical condition; (iii) a significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset or asset group, including an adverse action or assessment by a regulator; (iv) an accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset or asset group; (v) a current-period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset or asset group; or (vi) a current expectation that, more likely than not, a long-lived asset or asset group will be sold or otherwise disposed of significantly before the end of its previously estimated useful life.

Upon recognition of an event, as previously described, we use an estimate of the related undiscounted cash flows, excluding interest, over the remaining life of the property and equipment and long-lived assets in assessing their recoverability. We measure impairment loss as the amount by which the carrying amount of the asset(s) exceeds the fair value of the asset(s). We primarily employ the two following methodologies for determining the fair value of a long-lived asset: (i) the amount at which the asset could be bought or sold in a current transaction between willing parties; or (ii) the present value of expected future cash flows grouped at the lowest level for which there are identifiable independent cash flows.

Goodwill

As of June 30, 2017, goodwill and net intangible assets recorded on our consolidated balance sheet aggregated to $6,353,012 (of which $3,822,583 is goodwill that is not subject to amortization).  We perform an annual impairment review in the fourth quarter of each year. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles - Goodwill and Other, we perform goodwill impairment testing at least annually, unless indicators of impairment exist in interim periods. Our test of goodwill impairment includes assessing qualitative factors and the use of judgment in evaluating economic conditions: industry and market conditions, cost factors, and entity-specific events, as well as overall financial performance. The impairment test for goodwill uses a two-step approach. Step one compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying value exceeds the estimated fair value, step two must be performed. Step two compares the carrying value of the reporting unit to the fair value of all of the assets and liabilities of the reporting unit (including any unrecognized intangibles) as if the reporting unit was acquired in a business combination. If the carrying amount of a reporting unit’s goodwill exceeds the implied fair value of its goodwill, an impairment loss is recognized in an amount equal to the excess.

In addition to the required goodwill impairment analysis, we also review the recoverability and estimated useful life of our net intangibles with finite lives when an indicator of impairment exists. When we acquire intangible assets, management determines the estimated useful life, expected residual value if any and appropriate allocation method of the asset value based on the information available at the time. Reaching a determination on useful life requires significant judgments and assumptions regarding the future effects of obsolescence, demand, competition, other economic factors (such as the stability of the industry, known technological advances, legislative action that results in an uncertain or changing regulatory environment, and expected changes in distribution channels), the level of required maintenance expenditures, and the expected lives of other related groups of assets. Our assumptions with respect to expected future cash flows relating to intangible assets is impacted by our assessment of (i) the proprietary nature of our recycling process combined with (ii) the technological advances we have made allowing us to recycle all five major types of waste glycol into a virgin-quality product usable in any glycol application along with (iii) the fact that the market is currently served by primarily smaller local processors. If our assumptions and related estimates change in the future, or if we change our reporting structure or other events and circumstances change, we may be required to record impairment charges of goodwill and intangible assets in future periods and we may need to change our estimated useful life of amortizing intangible assets. Any impairment charges that we may take in the future or any change to amortization expense could be material to our results of operations and financial condition.

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Deferred Financing Costs, Debt Discount and Detachable Debt-Related Warrants

Costs incurred in connection with debt are deferred and recorded as a reduction to the debt balance in the accompanying consolidated balance sheets. The Company amortizes debt issuance costs over the expected term of the related debt using the effective interest method. Debt discounts related to the relative fair value of warrants issued in conjunction with the debt are also recorded as a reduction to the debt balance and accreted over the expected term of the debt to interest expense using the effective interest method.

Share-Based Compensation

We use the Black-Scholes-Merton option-pricing model to estimate the value of options and warrants issued to employees and consultants as compensation for services rendered to the Company. This model uses estimates of volatility, risk free interest rate and the expected term of the options or warrants, along with the current market price of the underlying stock, to estimate the value of the options and warrants on the date of grant. In addition, the calculation of compensation costs requires that the Company estimate the number of awards that will be forfeited during the vesting period. The fair value of the stock-based awards is amortized over the vesting period of the awards. For stock-based awards that vest based on performance conditions, expense is recognized when it is probable that the conditions will be met. For stock-based awards that vest based on market conditions, expense is recognized on the accelerated attribution method over the derived service period.

Assumptions used in the calculation were determined as follows:

● Expected term is generally determined using the weighted average of the contractual term and vesting period of the award;

● Expected volatility of award grants made under the Company’s plans is measured using the historical daily changes in the market price of the Company, over the expected term of the award;

● Risk-free interest rate is equivalent to the implied yield on zero-coupon U.S. Treasury bonds with a remaining maturity equal to the expected term of the awards; and

● Forfeitures are based on the history of cancellations of awards granted by the Company and management’s analysis of potential forfeitures.

Accounting for Income Taxes

We use the asset and liability method to account for income taxes. Significant judgment is required in determining the provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against net deferred tax assets. In preparing our consolidated financial statements, we are required to estimate income taxes in each of the jurisdictions in which we operate. This process involves estimating the actual current tax liability together with assessing temporary differences resulting from differing treatment of items, such as deferred revenue, depreciation on property, plant and equipment, intangible assets, goodwill and losses for tax and accounting purposes. These differences result in deferred tax assets, which include tax loss carry-forwards, and liabilities, which are included within our consolidated balance sheets. We then assess the likelihood that deferred tax assets will be recovered from future taxable income, and to the extent that recovery is not likely or there is insufficient operating history, a valuation allowance is established. To the extent a valuation allowance is established or increased in a period, we include an adjustment within the tax provision of our consolidated statements of operations. As of June 30, 2017 and 2016, we had established a full valuation allowance for all deferred tax assets.

As of June 30, 2017, and December 31, 2016, we did not recognize any assets or liabilities relative to uncertain tax positions, nor do we anticipate any significant unrecognized tax benefits will be recorded during the next 12 months. Any interest or penalties related to unrecognized tax benefits is recognized in income tax expense. Since there are no unrecognized tax benefits as a result of tax positions taken, there are no accrued penalties or interest.

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Contingencies

Litigation

The Company may be party to legal proceedings in the ordinary course of business.  The Company believes that the nature of these proceedings (collection actions, etc.) are typical for a Company of our size and scope of operations. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Below is an overview of a recently resolved legal proceeding, one pending legal proceeding, and one outstanding alleged claim.

On January 8, 2016, Acquisition Sub. #4 filed a civil action against Onyxx Group LLC in the Circuit Court of Hillsborough County, Florida. This civil action relates to an outstanding balance due from Onyxx Group LLC to Acquisition Sub. #4. In September 2016, the Company received a favorable judgment regarding this civil action in the amount of $95,000.

On March 22, 2016, Acquisition Sub. #4 filed a civil action against Encore Petroleum, LLC in the Superior Court of New Jersey Law Division, Hudson County. This civil action relates to an outstanding balance due from Encore Petroleum to Acquisition Sub. #4. This civil action is still pending.

The Company is also aware of one matter that involves an alleged claim against the Company, and it is at least reasonably possible that the claim will be pursued. The claim involves contracts with our former director and his related entities that provided services and was our landlord for the Company’s former processing facility in New Jersey. In this matter, the landlord of the Company’s formerly leased property claims back rent is due for property used by the Company outside of the scope of its lease agreement. During the quarter ended March 31, 2015, the former landlord denied the Company access to the New Jersey facility and prepared an eviction notice. The Company negotiated a payment in the amount of $250,000 to regain access to the facility, and reached an accord to negotiate with the landlord to resolve the outstanding issues by May 31, 2015. On December 28, 2015, the Company ultimately approved the termination of the lease agreements related to the New Jersey facility, thereby ceasing all operations at that particular facility. This termination was prompted by the former landlord’s demand for payment of approximately $2.3 million to maintain access to the facility. In September 2016, the Company reached an agreement with the landlord. The agreement required the Company to resolve certain environmental issues regarding the former processing facility and make certain payments to the landlord. The Company, the landlord and their related entities also agreed to a full and final settlement of existing and possible futures claims between the parties. As of August 15, 2017, the Company believes it has addressed the environmental issues by removing and disposing of the waste from the facility and cleaning the storage tanks. Additionally, as of August 14, 2017 the Company has paid in full the agreed upon $335,000 payment to the landlord.

Environmental Matters

We are subject to federal, state, and local laws, regulations and ordinances relating to the protection of the environment, including those governing discharges to air and water, handling and disposal practices for solid and hazardous wastes, and occupational health and safety. It is management’s opinion that the Company is not currently exposed to significant environmental remediation liabilities or asset retirement obligations. However, if a release of hazardous substances occurs, or is found on one of our properties from prior activity, we may be subject to liability arising out of such conditions and the amount of such liability could be material.

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The Company accrues for potential environmental liabilities in a manner consistent with accounting principles generally accepted in the United States; that is, when it is probable a liability has been incurred and the amount of the liability is reasonably estimable. The Company reviews the status of its environmental sites on a yearly basis and adjusts its reserves accordingly. Such potential liabilities accrued by the Company do not take into consideration possible recoveries of future insurance proceeds. The Company maintains insurance coverage for unintentional acts that result in environmental remediation liabilities up to $1 million per occurrence; $2 million in the aggregate, with an umbrella liability policy that doubles the coverage. These policies do, however, take into account the likely share other parties will bear at remediation sites. It would be difficult to estimate the Company’s ultimate level of liability due to the number of other parties that may be involved, the complexity of determining the relative liability among those parties, the uncertainty as to the nature and scope of the investigations and remediation to be conducted, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur. Nevertheless, the Company does not currently believe that any claims, penalties or costs in connection with known environmental matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company is aware of one environmental remediation issue related to our former leased property in New Jersey, which is currently subject to a remediation stemming from the sale of property by the previous owner in 2008 to the current landlord. To Management’s knowledge, the former landlord has engaged a licensed site remediation professional and had assumed responsibility for this remediation. In Management’s opinion the liability for this remediation is the responsibility of the former landlord. However, the former landlord has disputed this position and it is an open issue subject to negotiation. Currently, we have no knowledge as to the scope of the landlord’s former remediation obligation.

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Results of Operations

Six Months Ended June 30, 2017 Compared to Six Months Ended June 30, 2016

Net Sales

For the six-month period ended June 30, 2017, Net Sales were $5,208,418 compared to $2,756,761 for the six-month period ended June 30, 2016, representing an increase of $2,451,657, or approximately 89%. The increase in Net Sales was due to organic revenue growth of $489,142, or approximately 18%, and $1,962,515 of sales related to the businesses and assets acquired in December 2016. Net Sales, including intersegment sales for the six-month period ended June 30, 2017, were $3,245,903 and $2,549,183 for the Consumer and Industrial segments, respectively.

Cost of Goods Sold

For the six-month period ended June 30, 2017, our Costs of Goods Sold was $4,591,829, compared to $2,685,994 for the six-month period ended June 30, 2016, representing an increase of $1,905,835, or approximately 71%. The increase in Cost of Goods Sold was primarily due to costs associated with the increase in net sales as well as approximately $200,000 of production costs that were not fully absorbed into inventory, but rather expensed as incurred while the Institute, West Virginia facility was off line during the first two months of the first quarter for infrastructure related capital improvements.

Gross Profit (Loss)

For the six-month period ended June 30, 2017, we realized a gross profit of $616,589, compared to a gross profit of $70,767 for the six-month period ended June 30, 2016.  Gross Profit, including intersegment sales for the six-month period ended June 30, 2017, was $576,349 and $40,240 for the Consumer and Industrial segments, respectively.

Our gross profit margin for the six-month period ended June 30, 2017, was approximately 12%, compared to approximately 3% for the six-month period ended June 30, 2016. Gross profit margin, including intersegment sales for the six-month period ended June 30, 2017, was 18% and 2% for the Consumer and Industrial segments, respectively. The gross profit margin for the Consumer segment was positively impacted by increased sales and proportionately lower costs. The gross profit margin for the Industrial segment was negatively impacted by approximately $200,000 of production costs that were not fully absorbed into inventory, but rather expensed as incurred while the Institute, West Virginia facility was off line during the first two months of the first quarter for infrastructure related capital improvements as well as certain lower margin business. The Company is currently negotiating pricing changes to this lower margin business.

Operating Expenses

For the six-month period ended June 30, 2017, operating expenses increased to $2,206,169 from $1,916,947 for the six-month period ended June 30, 2016, representing an increase of $289,222, or approximately 15%.  Operating Expenses consist of Consulting Fees, Share-Based Compensation, Salaries and Wages, Legal and Professional, and General and Administrative Expenses. Our operating expense ratio for the six-month period ended June 30, 2017, was approximately 42%, compared to approximately 70% for the six-month period ended June 30, 2016.

Consulting Fees consist of marketing, administrative and management fees incurred under consulting agreements. Consulting Fees increased to $218,962 for the six-month period ended June 30, 2017, from $101,423 for the six-month period ended June 30, 2016, representing an increase of $117,539. The increase is primarily due to the Company’s use of external specialists to assist with short duration projects.

Share-Based Compensation consists of stock, options and warrants issued to consultants and employees in consideration for services provided to the Company. Share-Based Compensation decreased to $231,534 for the six-month period ended June 30, 2017, from $598,235 for the six-month period ended June 30, 2016, representing a decrease of $366,701, or 61%.  The decrease is due to a market vesting based stock grant to the Company’s Board of Directors in 2016.

33

Salaries and Wages consist of wages and the related taxes.  Salaries and Wages increased to $706,601 for the six-month period ended June 30, 2017, from $539,011 for the six-month period ended June 30, 2016, representing an increase of $167,590 or 31%.  The increase is due to the addition of employees in such areas as marketing and sales in late 2016 as well as additional employees related to the businesses and assets acquired in late December 2016.

Legal and Professional Fees consist of legal, accounting, tax and audit services.  For the six-month period ended June 30, 2017, Legal and Professional Fees increased to $348,731 from $141,897 for the six-month period ended June 30, 2016, representing an increase of $206,834. The increase is primarily related to work performed in connection with the businesses and assets acquired in late December 2016 as well as other special projects.

General and Administrative (G&A) Expenses consist of general operational costs of our business. For the six-month period ended June 30, 2017, G&A Expenses increased to $700,341 from $536,381 for the six-month period ended June 30, 2016, representing an increase of 163,960, or approximately 31%.  The increase is due to additional depreciation and amortization of $284,302 related to the tangible and intangible assets acquired in late December 2016 partially offset by lower costs in other areas.

Other Income and Expenses

For the six-month period ended June 30, 2017, Other Income and Expenses was an expense of $419,603 compared to income of $3,240 for the six-month period ended June 30, 2016, representing a change of $422,843. Other Income and Expenses consist of Interest Income and Interest Expense. The change was primarily due to interest expense associated with the debt issued in late December 2016.

Adjusted EBITDA

Presented below is the non-GAAP financial measure representing earnings before interest, taxes, depreciation, amortization and stock compensation (which we refer to as “Adjusted EBITDA”). Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, net income (loss) and cash flows from operations calculated in accordance with GAAP.

Adjusted EBITDA is used by our management as an additional measure of our Company’s performance for purposes of business decision-making, including developing budgets, managing expenditures, and evaluating potential acquisitions or divestitures. Period-to-period comparisons of Adjusted EBITDA help our management identify additional trends in our Company’s financial results that may not be shown solely by period-to-period comparisons of net income (loss) and cash flows from operations. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to many of our employees in order to evaluate our Company’s performance. Further, we believe that the presentation of Adjusted EBITDA is useful to investors in their analysis of our results and helps investors make comparisons between our company and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values and/or different forms of employee compensation. Our management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, particularly those items that are recurring in nature. In order to compensate for those limitations, management also reviews the specific items that are excluded from Adjusted EBITDA, but included in net income (loss), as well as trends in those items. The amounts of those items are set forth, for the applicable periods, in the reconciliations of Adjusted EBITDA to net loss below.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

	Six Months Ended June 30,
	2017			2016
Net loss	$	(2,011,136	)	$	(1,848,886	)
Interest expense, net		419,603			11,760
Gain on settlement of note payable		—			(15,000	)
Income tax expense		1,953			5,946
Depreciation and amortization		497,387			155,769
Share-based compensation		231,534			598,235
Adjusted EBITDA	$	(860,659	)	$	(1,092,176	)

 34

Three Months Ended June 30, 2017 Compared to Three Months Ended June 30, 2016

Net Sales

For the three-month period ended June 30, 2017, Net Sales were $2,918,097 compared to $1,313,863 for the three-month period ended June 30, 2016, representing an increase of $1,604,234. The increase in Net Sales was due to organic revenue growth of $333,400, or approximately 25%, and $1,270,834 of sales related to the businesses and assets acquired in December 2016. Net Sales, including intersegment sales for the three-month period ended June 30, 2017, were $1,647,263 and $1,608,502 for the Consumer and Industrial segments, respectively.

Cost of Goods Sold

For the three-month period ended June 30, 2017, our Costs of Goods Sold was $2,441,243, compared to $1,380,467 for the three-month period ended June 30, 2016, representing an increase of $1,060,776, or approximately 77%.  The increase in Cost of Goods Sold was primarily due to costs associated with the increase in net sales.

Gross Profit (Loss)

For the three-month period ended June 30, 2017, we realized a gross profit of $476,854, compared to a gross loss of $(66,604) for the three-month period ended June 30, 2016. Gross Profit (Loss), including intersegment sales for the three-month period ended June 30, 2017, was $384,410 and $92,444 for the Consumer and Industrial segments, respectively.

Our gross profit margin for the three-month period ended June 30, 2017, was approximately 16%, compared to approximately (5)% for the three-month period ended June 30, 2016. Gross profit (loss) margin, including intersegment sales for the three-month period ended June 30, 2017, was 23% and 6% for the Consumer and Industrial segments, respectively. The gross profit margin for the Consumer segment was positively impacted by increased sales and proportionately lower costs. The gross profit margin for the Industrial segment was negatively impacted by certain lower margin business. The Company is currently negotiating pricing changes to this lower margin business.

Operating Expenses

For the three-month period ended June 30, 2017, operating expenses increased to $1,154,498 from $978,912 for the three-month period ended June 30, 2016, representing an increase of $175,586, or approximately 18%. Operating Expenses consist of Consulting Fees, Share-Based Compensation, Salaries and Wages, Legal and Professional, and General and Administrative Expenses. Our operating expense ratio for the three-month period ended June 30, 2017, was approximately 40%, compared to approximately 75% for the three-month period ended June 30, 2016.

Consulting Fees consist of marketing, administrative and management fees incurred under consulting agreements. Consulting Fees increased to $165,536 for the three-month period ended June 30, 2017, from $58,863 for the three-month period ended June 30, 2016, representing an increase of $106,673. The increase is primarily due to the Company’s use of external specialists to assist with short duration projects.

Share-Based Compensation consists of stock, options and warrants issued to consultants and employees in consideration for services provided to the Company. Share-Based Compensation decreased to $94,548 for the three-month period ended June 30, 2017, from $317,471 for the three-month period ended June 30, 2016, representing a decrease of $222,923, or 70%.  The decrease is due to a market vesting based stock grant to the Company’s Board of Directors in 2016.

Salaries and Wages consist of wages and the related taxes.  Salaries and Wages increased to $363,546 for the three-month period ended June 30, 2017, from $282,561 for the three-month period ended June 30, 2016, representing an increase of $80,985 or 29%. The increase is due to the addition of employees in such areas as marketing and sales in late 2016 as well as additional employees related to the businesses and assets acquired in late December 2016.

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Legal and Professional Fees consist of legal, accounting, tax and audit services.  For the three-month period ended June 30, 2017, Legal and Professional Fees increased to $187,740 from $43,124 for the three-month period ended June 30, 2016, representing an increase of $144,616. The increase is primarily related to work performed in connection with the businesses and assets acquired in late December 2016 as well as other special projects.

General and Administrative (G&A) Expenses consist of general operational costs of our business. For the three-month period ended June 30, 2017, G&A Expenses increased to $343,128 from $276,893 for the three-month period ended June 30, 2016, representing an increase of $66,235, or approximately 24%. The increase is due to additional depreciation and amortization of $115,351 related to the tangible and intangible assets acquired in late December 2016 partially offset by lower costs in other areas.

Other Income and Expenses

For the three-month period ended June 30, 2017, Other Income and Expenses was an expense of $223,385 compared to income of $7,799 for the three-month period ended June 30, 2016, representing a change of $231,184. Other Income and Expenses consist of Interest Income and Interest Expense. The change was primarily due to interest expense associated with the debt issued in late December 2016.

Adjusted EBITDA

Presented below is the non-GAAP financial measure representing earnings before interest, taxes, depreciation, amortization and stock compensation (which we refer to as “Adjusted EBITDA”). Adjusted EBITDA should be viewed as supplemental to, and not as an alternative for, net income (loss) and cash flows from operations calculated in accordance with GAAP.

Adjusted EBITDA is used by our management as an additional measure of our Company’s performance for purposes of business decision-making, including developing budgets, managing expenditures, and evaluating potential acquisitions or divestitures. Period-to-period comparisons of Adjusted EBITDA help our management identify additional trends in our Company’s financial results that may not be shown solely by period-to-period comparisons of net income (loss) and cash flows from operations. In addition, we may use Adjusted EBITDA in the incentive compensation programs applicable to many of our employees in order to evaluate our Company’s performance. Further, we believe that the presentation of Adjusted EBITDA is useful to investors in their analysis of our results and helps investors make comparisons between our company and other companies that may have different capital structures, different effective income tax rates and tax attributes, different capitalized asset values and/or different forms of employee compensation. Our management recognizes that Adjusted EBITDA has inherent limitations because of the excluded items, particularly those items that are recurring in nature. In order to compensate for those limitations, management also reviews the specific items that are excluded from Adjusted EBITDA, but included in net income (loss), as well as trends in those items. The amounts of those items are set forth, for the applicable periods, in the reconciliations of Adjusted EBITDA to net loss below.

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

	Three Months Ended June 30,
	2017			2016
Net loss	$	(902,226	)	$	(1,042,976	)
Interest expense, net		223,385			7,201
Gain on settlement of note payable		—			(15,000	)
Income tax expense		1,197			5,259
Depreciation and amortization		251,905			79,238
Share-based compensation		94,548			317,471
Adjusted EBITDA	$	(331,191	)	$	(648,807	)

 36

Liquidity & Capital Resources; Going Concern

We assess our liquidity in terms of our ability to generate cash to fund our operating, investing and financing activities. Significant factors affecting the management of liquidity are cash flows generated from operating activities, capital expenditures, and acquisitions of businesses and technologies.  Cash provided from financing continues to be the Company’s primary source of funds. We believe that we can raise adequate funds through issuance of equity or debt as necessary to continue to support our planned expansion.

For the six months ended June 30, 2017 and 2016, net cash used in operating activities was $1,546,034 and $1,373,535, respectively.  The increase in cash used in operating activities is due to the increase in our net loss as well as significant period over period changes in accounts receivables, inventories and accounts payable and accrued expenses. For the six months ended June 30, 2017, the Company used $649,613 in cash for investing activities, compared to the $295,305 used in the prior year’s period.  These amounts were comprised primarily of capital expenditures for equipment. For the six months ended June 30, 2017, $859,238 was provided by financing activities, compared to the $2,814,937 provided in the prior year’s period. The 2016 amount is primarily comprised of the February rights offering. The 2017 amount is primarily comprised of the exercise of warrants and proceeds from a sale-leaseback, partially offset by the repayment of debt, including the 5% Notes.

As of June 30, 2017, we had $3,345,485 in current assets, including $77,590 in cash, $1,326,549 in accounts receivable and $1,527,802 in inventories. Cash decreased from $1,413,999 as of December 31, 2016, to $77,590 as of June 30, 2017, primarily due to cash used in operations.

As of June 30, 2017, we had total current liabilities of $5,550,890, including accounts payable and accrued expenses of $1,691,546. As of June 30, 2017, we had total non-current liabilities of $4,200,450, consisting primarily of the non-current portion of our notes payable and capital lease obligations.

The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of June 30, 2017, the Company has yet to achieve profitable operations and is dependent on our ability to raise capital from stockholders or other sources to sustain operations and to ultimately achieve profitable operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.

Our plans to address these matters include achieving profitable operations, raising additional financing through offering our shares of the Company’s capital stock in private and/or public offerings of our securities and through debt financing if available and needed. There can be no assurances, however, that the Company will be able to obtain any financings or that such financings will be sufficient to sustain our business operation or permit the Company to implement our intended business strategy. We plan to achieve profitable operations through the implementation of operating efficiencies at our facilities and increased revenue through the offering of additional products and the expansion of our geographic footprint through acquisitions, broader distribution from our current facilities and/or the opening of additional facilities.

In their report dated April 6, 2017, our independent registered public accounting firm included an emphasis-of-matter paragraph with respect to our consolidated financial statements for the year ended December 31, 2016 concerning the Company’s assumption that we will continue as a going concern. Our ability to continue as a going concern is an issue raised as a result of current working capital requirements and recurring losses from operations.

The table below sets forth certain information about the Company’s liquidity and capital resources for the six months ended June 30, 2017 and 2016:

	For the Six Months Ended
	June 30, 2017			June 30, 2016
Net cash used in operating activities	$	(1,546,034	)	$	(1,373,535	)
Net cash used in investing activities		(649,613	)		(295,305	)
Net cash provided by financing activities		859,238			2,814,937
Net change in cash and cash equivalents		(1,336,409	)		1,146,097
Cash - beginning of period		1,413,999			1,276,687
Cash - end of period	$	77,590		$	2,422,784

 37

The Company may not have sufficient capital to sustain expected operations for the next twelve months. To date, we financed operations and investing activities through private sales of our securities exempt from the registration requirements of the Securities Act of 1933, as amended. 

Off-balance Sheet Arrangements

None.

Item 3.  Quantitative and Qualitative Disclosures about Market Risk.

As a smaller reporting company, as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), we are not required to provide the information required by this Item.

Item 4.  Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to ensure 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. Our management, including our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), does not expect that our disclosure controls and procedures will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As of June 30, 2017, we carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the Exchange Act. Based on this evaluation, management concluded that as of June 30, 2017, our disclosure controls and procedures were not effective.

Our management has previously identified a material weakness regarding a deficiency, or combination of deficiencies, that creates a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected in a timely manner. The material weakness related to our Company was due to not having adequate personnel to address the reporting requirements of a public company and to fully analyze and account for our transactions. The Company made progress to remedy this deficiency through retaining accounting staff members with public company experience. However, due to the limited time that these controls have been in place, we believe that our disclosure controls remain ineffective.

 38

Changes in Internal Control Over Financial Reporting

During the quarter ended June 30, 2017, the Company hired a new Chief Financial Officer with public company experience. We believe this will help remediate the material weakness identified above.

 39

PART II—OTHER INFORMATION

Item 1.  Legal Proceedings.

The Company may be party to legal proceedings in the ordinary course of business.  The Company believes that the nature of these proceedings (collection actions, etc.) are typical for a Company of our size and scope of operations. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Below is an overview of a recently resolved legal proceeding, one pending legal proceeding, and one outstanding alleged claim.

On January 8, 2016, Acquisition Sub. #4 filed a civil action against Onyxx Group LLC in the Circuit Court of Hillsborough County, Florida. This civil action relates to an outstanding balance due from Onyxx Group LLC to Acquisition Sub. #4. In September 2016, the Company received a favorable judgment regarding this civil action in the amount of $95,000.

On March 22, 2016, Acquisition Sub. #4 filed a civil action against Encore Petroleum, LLC in the Superior Court of New Jersey Law Division, Hudson County. This civil action relates to an outstanding balance due from Encore Petroleum to Acquisition Sub. #4. This civil action is still pending.

The Company is also aware of one matter that involves an alleged claim against the Company, and it is at least reasonably possible that the claim will be pursued. The claim involves contracts with our former director and his related entities that provided services and was our landlord for the Company’s former processing facility in New Jersey. In this matter, the landlord of the Company’s formerly leased property claims back rent is due for property used by the Company outside of the scope of its lease agreement. During the quarter ended March 31, 2015, the former landlord denied the Company access to the New Jersey facility and prepared an eviction notice. The Company negotiated a payment in the amount of $250,000 to regain access to the facility, and reached an accord to negotiate with the landlord to resolve the outstanding issues by May 31, 2015. On December 28, 2015, the Company ultimately approved the termination of the lease agreements related to the New Jersey facility, thereby ceasing all operations at that particular facility. This termination was prompted by the former landlord’s demand for payment of approximately $2.3 million to maintain access to the facility. In September 2016, the Company reached an agreement with the landlord. The agreement required the Company to resolve certain environmental issues regarding the former processing facility and make certain payments to the landlord. The Company, the landlord and their related entities also agreed to a full and final settlement of existing and possible futures claims between the parties. As of August 15, 2017, the Company believes it has addressed the environmental issues by removing and disposing of the waste from the facility and cleaning the storage tanks. Additionally, as of August 14, 2017 the Company has paid in full the agreed upon $335,000 payment to the landlord.

Item 1A.  Risk Factors.

There have been no changes that constitute a material change from the risk factors previously disclosed in our 2016 Annual Report on Form 10-K filed on April 6, 2017.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

For the six months ended June 30, 2017, the Company issued unregistered securities as follows:

On January 31, 2017, the Company issued an aggregate of 38,401 shares of Common Stock to fourteen employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.12 per share. The shares were issued pursuant to Section 4(a)(2) because the investors had sufficient sophistication and knowledge of the Company and the financing transaction, and the issuance did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.

 40

On February 13, 2017, the Company issued an aggregate of 160,000 shares of Common Stock to two employees of the Company at a price of $0.125 per share. The shares were issued pursuant to Section 4(a)(2) because the investors had sufficient sophistication and knowledge of the Company and the financing transaction, and the issuance did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.  

On February 28, 2017, the Company issued an aggregate of 38,301 shares of Common Stock to fourteen employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.12 per share. The shares were issued pursuant to Section 4(a)(2) because the investors had sufficient sophistication and knowledge of the Company and the financing transaction, and the issuance did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.

On March 31, 2017, the Company issued an aggregate of 38,801 shares of Common Stock to fourteen employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.12 per share. The shares were issued pursuant to Section 4(a)(2) because the investors had sufficient sophistication and knowledge of the Company and the financing transaction, and the issuance did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.

On March 31, 2017, the Company issued an aggregate of 512,498 shares of Common Stock to six directors of the Company pursuant to the Company’s FY2017 Director Compensation Plan at a price of $0.12 per share. The shares were issued pursuant to Section 4(a)(2) because the investors had sufficient sophistication and knowledge of the Company and the financing transaction, and the issuance did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.

On April 30, 2017, the Company issued an aggregate of 44,040 shares of Common Stock to nine employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.10 per share. The shares were issued pursuant to Section 4(a)(2) because the investors had sufficient sophistication and knowledge of the Company and the financing transaction, and the issuance did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.

On May 11 2017, the Company issued an aggregate of 3,437,500 shares of Common Stock to three accredited investors in connection with the exercise of warrants at an exercise price of $0.08 per share. The shares were issued pursuant to Section 4(2) and Rule 506 of Regulation D promulgated thereunder because such purchaser represented that they were an “accredited investor” as such term is defined under the Securities Act and the sale did not involve any form of general solicitation or general advertising. The investor made investment representations that the shares were taken for investment purposes and not with a view to resale. The shares of Common Stock issued are restricted under Rule 144 promulgated under the Securities Act. 

On May 31, 2017, the Company issued an aggregate of 44,020 shares of Common Stock to nine employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.10 per share. The shares were issued pursuant to Section 4(a)(2) because the investors had sufficient sophistication and knowledge of the Company and the financing transaction, and the issuance did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.

On June 30, 2017, the Company issued an aggregate of 106,979 shares of Common Stock to nine employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.10 per share. The shares were issued pursuant to Section 4(a)(2) because the investors had sufficient sophistication and knowledge of the Company and the financing transaction, and the issuance did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.

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On June 30, 2017, the Company issued an aggregate of 627,546 shares of Common Stock to six directors of the Company pursuant to the Company’s FY2017 Director Compensation Plan at a price of $0.098 per share. The shares were issued pursuant to Section 4(a)(2) because the investors had sufficient sophistication and knowledge of the Company and the financing transaction, and the issuance did not involve any form of general solicitation or general advertising. The investors made investment representations that the shares were taken for investment purposes and not with a view to resale.

Item 3.  Defaults Upon Senior Securities.

None.

Item 4.  Mine Safety Disclosures

Not applicable.

Item 5.  Other Information.

There have been no material changes to the procedures by which holders may recommend nominees to our Board of Directors.

 42

Item 6.  Exhibits.

No.		Description
31.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document
101.LAB		XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document
	In accordance with SEC Release 33-8238, Exhibits 32.1 and 32.2 are being furnished and not filed.

 43

SIGNATURES

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

	GlyEco, Inc.
Date: August 14, 2017	By: /s/ Ian Rhodes
	Ian Rhodes
	Chief Executive Officer
	(Principal Executive Officer)
Date: August 14, 2017	By: /s/ Brian Gelman
	Brian Gelman
	Chief Financial Officer
	(Principal Financial Officer)

44

EX-31.1

EXHIBIT 31.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Ian Rhodes, certify that:

1. I have reviewed this Form 10-Q for the fiscal quarter ended June 30, 2017, of GlyEco, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including our consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2017	By:	/s/ Ian Rhodes
		Ian Rhodes
		Chief Executive Officer of GlyEco, Inc.
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002

I, Brian Gelman, certify that:

1. I have reviewed this Form 10-Q for the fiscal quarter ended June 30, 2017, of GlyEco, Inc. (the “registrant”);

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a- 15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including our consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 14, 2017	By:	/s/ Brian Gelman
		Brian Gelman
		Chief Financial Officer of GlyEco, Inc.
		(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of Title 18, United States Code), the undersigned officer of GlyEco, Inc. (the “Company”), does hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), to the best of the undersigned’s knowledge that: 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2017	By:	/s/ Ian Rhodes
		Ian Rhodes
		Chief Executive Officer of GlyEco, Inc.
		(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, chapter 63 of Title 18, United States Code), the undersigned officer of GlyEco, Inc. (the “Company”), does hereby certify with respect to the Quarterly Report of the Company on Form 10-Q for the period ended June 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), to the best of the undersigned’s knowledge that: 

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 14, 2017	By:	/s/ Brian Gelman
		Brian Gelman
		Chief Financial Officer of GlyEco, Inc.
		(Principal Financial Officer)

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2017	Aug. 11, 2017
Document And Entity Information
Entity Registrant Name	GlyEco, Inc.
Entity Central Index Key	0000931799
Document Type	10-Q
Trading Symbol	GLYE
Document Period End Date	Jun. 30, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity a Well-known Seasoned Issuer	No
Entity a Voluntary Filer	No
Entity's Reporting Status Current	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		163,452,779
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2017

XML

Condensed Consolidated Balance Sheets (unaudited) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Current Assets
Cash	$ 77,590	$ 1,413,999
Cash - restricted	41,090	76,552
Accounts receivable, net	1,326,549	1,096,713
Prepaid expenses	372,454	340,899
Inventories	1,527,802	644,522
Total current assets	3,345,485	3,572,685
Property, plant and equipment, net	3,915,894	3,657,839
Other Assets
Deposits	433,390	387,035
Goodwill	3,822,583	3,693,083
Other intangible assets, net	2,530,429	2,794,204
Total other assets	6,786,402	6,874,322
Total assets	14,047,781	14,104,846
Current Liabilities
Accounts payable and accrued expenses	1,691,546	961,010
Due to related parties		6,191
Contingent acquisition consideration	1,786,113	1,821,575
Notes payable - current portion, net of debt discount	1,718,496	2,541,178
Capital lease obligations - current portion	354,735	6,838
Total current liabilities	5,550,890	5,336,792
Non-Current Liabilities
Notes payable - non-current portion	2,919,069	2,963,640
Capital lease obligations - non-current portion	1,281,381	3,371
Total non-current liabilities	4,200,450	2,967,011
Total liabilities	9,751,340	8,303,803
Stockholders' Equity
Preferred stock; 40,000,000 shares authorized; $0.0001 par value; no shares issued and outstanding as of June 30, 2017 and December 31, 2016
Common stock, 300,000,000 shares authorized; $0.0001 par value; 131,204,275 and 126,156,189 shares issued and outstanding as of June 30, 2017 and December 31, 2016, respectively	13,121	12,616
Additional paid-in capital	43,109,519	42,603,490
Accumulated deficit	(38,826,199)	(36,815,063)
Total stockholders' equity	4,296,441	5,801,043
Total liabilities and stockholders' equity	$ 14,047,781	$ 14,104,846

XML

Condensed Consolidated Balance Sheets (unaudited) (Parenthetical) - $ / shares	Jun. 30, 2017	Dec. 31, 2016
Statement of Financial Position [Abstract]
Preferred stock, authorized	40,000,000	40,000,000
Preferred stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, authorized	300,000,000	300,000,000
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, issued	131,204,275	126,156,189
Common stock, outstanding	131,204,275	126,156,189

XML

Condensed Consolidated Statements of Operations (unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Income Statement [Abstract]
Sales, net	$ 2,918,097	$ 1,313,863	$ 5,208,418	$ 2,756,761
Cost of goods sold	2,441,243	1,380,467	4,591,829	2,685,994
Gross profit (loss)	476,854	(66,604)	616,589	70,767
Operating expenses
Consulting fees	165,536	58,863	218,962	101,423
Share-based compensation	94,548	317,471	231,534	598,235
Salaries and wages	363,546	282,561	706,601	539,011
Legal and professional	187,740	43,124	348,731	141,897
General and administrative	343,128	276,893	700,341	536,381
Total operating expenses	1,154,498	978,912	2,206,169	1,916,947
Loss from operations	(677,644)	(1,045,516)	(1,589,580)	(1,846,180)
Other (income) and expenses
Interest income		(165)		(218)
Interest expense	223,385	7,366	419,603	11,978
Gain on settlement of note payable		(15,000)		(15,000)
Total other (income) expense, net	223,385	(7,799)	419,603	(3,240)
Loss before provision for income taxes	(901,029)	(1,037,717)	(2,009,183)	(1,842,940)
Provision for income taxes	1,197	5,259	1,953	5,946
Net loss	$ (902,226)	$ (1,042,976)	$ (2,011,136)	$ (1,848,886)
Basic and diluted loss per share (in dollars per share)	$ (0.01)	$ (0.01)	$ (0.02)	$ (0.02)
Weighted average number of common shares outstanding - basic and diluted	128,876,960	112,772,095	127,583,831	99,679,783

XML

Unaudited Condensed Consolidated Statement of Stockholders' Equity (Unaudited) - 6 months ended Jun. 30, 2017 - USD ($)	Common Stock	Additional Paid-In Capital	Accumulated Deficit	Total
Balance, at beginning at Dec. 31, 2016	$ 12,616	$ 42,603,490	$ (36,815,063)	$ 5,801,043
Balance, at beginning (in shares) at Dec. 31, 2016	126,156,189			126,156,189
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Share-based compensation	$ 161	231,373		$ 231,534
Share-based compensation (in shares)	1,610,586			1,610,586
Exercise of warrants	$ 344	274,656		$ 275,000
Exercise of warrants (in shares)	3,437,500
Net loss			(2,011,136)	(2,011,136)
Balance, at end at Jun. 30, 2017	$ 13,121	$ 43,109,519	$ (38,826,199)	$ 4,296,441
Balance, at end (in shares) at Jun. 30, 2017	131,204,275			131,204,275

XML

Condensed Consolidated Statements of Cash Flows (unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Net cash flow from operating activities
Net loss	$ (2,011,136)	$ (1,848,886)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation	233,612	119,855
Amortization	263,775	35,914
Share-based compensation expense	231,534	598,235
Amortization of debt discount	174,416
Loss on disposal of equipment	28,446
Provision for bad debt	37,086	24,014
Gain on settlement of note payable		(15,000)
Changes in operating assets and liabilities:
Accounts receivable, net	(266,922)	168,649
Prepaid expenses	(31,555)	(13,612)
Inventories	(883,280)	125,660
Deposits	(46,355)	(5,348)
Accounts payable and accrued expenses	730,536	(531,307)
Due to related parties	(6,191)	(31,709)
Net cash used in operating activities	(1,546,034)	(1,373,535)
Cash flows from investing activities
Cash paid for acquisition		(100,000)
Cash - restricted		(100,000)
Cash paid for noncontrolling interests in RS&T	(129,500)
Purchases of property, plant and equipment	(520,113)	(95,305)
Net cash used in investing activities	(649,613)	(295,305)
Cash flows from financing activities
Repayment of notes payable	(1,041,669)	(113,772)
Repayment of capital lease obligations	(74,093)	(8,083)
Proceeds from sale-leaseback	1,700,000
Proceeds from exercise of warrants	275,000
Proceeds from sale of common stock, net		2,936,792
Net cash provided by financing activities	859,238	2,814,937
Net change in cash	(1,336,409)	1,146,097
Cash at beginning of the period	1,413,999	1,276,687
Cash at end of the period	77,590	2,422,784
Supplemental disclosure of cash flow information
Interest paid during period	68,238	11,978
Income taxes paid during period	1,953	5,946
Supplemental disclosure of non-cash items
Acquisition of equipment with notes payable		$ 203,152

XML

Organization and Nature of Business

6 Months Ended

Jun. 30, 2017

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Nature of Business

NOTE 1 – Organization and Nature of Business

GlyEco, Inc. (the “Company”, “we”, or “our”) is a specialty chemical company formed in the State of Nevada on October 21, 2011. We have two segments, Consumer and Industrial (see Note 7).

On December 27, 2016, the Company purchased WEBA Technology Corp. (“WEBA”), a privately-owned company that develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries; and purchased 96% of Recovery Solutions & Technologies Inc. (“RS&T”), a privately-owned company involved in the development and commercialization of glycol recovery technology. On December 28, 2016, the Company purchased certain glycol distillation assets from Union Carbide Corporation (“UCC”), a wholly-owned subsidiary of The Dow Chemical Company (“Dow”), located in Institute, West Virginia (the “Dow Assets”). During the three months ended March 31, 2017, the Company acquired the remaining 4% of RS&T not already owned by the Company.

Going Concern

The condensed consolidated financial statements as of June 30, 2017 and December 31, 2016 and for the three and six months ended June 30, 2017 and 2016, have been prepared assuming that the Company will continue as a going concern. As of June 30, 2017, the Company has yet to achieve profitable operations and is dependent on its ability to raise capital from stockholders or other sources to sustain operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Ultimately, we plan to achieve profitable operations through the implementation of operating efficiencies at our facilities and increased revenue through the offering of additional products and the expansion of our geographic footprint through acquisitions, broader distribution from our current facilities and/or the opening of additional facilities. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

XML

Basis of Presentation and Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation and Summary of Significant Accounting Policies

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

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation on an interim basis. The operating results for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however, management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, including the Company’s audited consolidated financial statements and related notes included therein.

Principles of Consolidation

These consolidated financial statements include the accounts of GlyEco, Inc., and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated as a result of consolidation.

Noncontrolling Interests

The Company recognizes noncontrolling interests as equity in the consolidated financial statements separate from the parent company’s equity. Noncontrolling interests’ partners have less than 50% share of voting rights at any one of the subsidiary level companies. The amount of net income (loss) attributable to noncontrolling interests is included in consolidated net income (loss) on the face of the consolidated statements of operations. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income (loss) when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the noncontrolling equity investment on the deconsolidation date. Additionally, operating losses are allocated to noncontrolling interests even when such allocation creates a deficit balance for the noncontrolling interest partner.

The Company provides either in the consolidated statements of stockholders’ equity, if presented, or in the notes to consolidated financial statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity (net assets), equity (net assets) attributable to the parent, and equity (net assets) attributable to the noncontrolling interest that separately discloses:

(1)	Net income or loss
(2)	Transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners.
(3)	Each component of other comprehensive income or loss

Operating Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing the performance of the segment. Operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics, among other criteria. Prior to the December 2016 acquisitions of WEBA, RS&T and the DOW Assets and through December 31, 2016, the Company operated as one segment. As of January 1, 2017 we have two operating segments, Consumer and Industrial.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent within the financial reporting process, actual results may differ significantly from those estimates.  Significant estimates include, but are not limited to, items such as the allowance for doubtful accounts, the value of share-based compensation and warrants, the allocation of the purchase price in the Company’s acquisitions, the recoverability of property, plant and equipment, goodwill, other intangibles and their estimated useful lives, contingent liabilities, and environmental and asset retirement obligations. Due to the uncertainties inherent in the formulation of accounting estimates, it is reasonable to expect that these estimates could be materially revised within the next year.

Revenue Recognition

The Company recognizes revenue when (1) delivery of product has occurred or services have been rendered, (2) there is persuasive evidence of a sale arrangement, (3) selling prices are fixed or determinable, and (4) collectability from the customer (individual customers and distributors) is reasonably assured. Revenue consists primarily of revenue generated from the sale of the Company’s products. This generally occurs either when the Company’s products are shipped from its facility or delivered to the customer when title has passed. Revenue is recorded net of estimated cash discounts. The Company estimates and accrues an allowance for sales returns at the time the product is sold. To date, sales returns have not been material. Shipping costs passed to the customer are included in net sales. 

Costs

Cost of goods sold includes all direct material and labor costs and those indirect costs of bringing raw materials to sale condition, including depreciation of equipment used in manufacturing and shipping and handling costs. Selling, general, and administrative costs are charged to operating expenses as incurred. Research and development costs are expensed as incurred, are included in operating expenses and were insignificant in 2017 and 2016. Advertising costs are expensed as incurred.

Accounts Receivable

Accounts receivable are recognized and carried at the original invoice amount less an allowance for expected uncollectible amounts. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates including, among others, the customer’s willingness or ability to pay, the Company’s compliance with customer invoicing requirements, the effect of general economic conditions and the ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are considered past due. We do not charge interest on past due balances. The Company writes off trade receivables when all reasonable collection efforts have been exhausted. Bad debt expense is reflected as a component of general and administrative expenses in the consolidated statements of operations. The allowance for doubtful accounts totaled $105,185 and $80,207 as of June 30, 2017 and December 31, 2016, respectively.

Inventories

Inventories are reported at the lower of cost or net realizable value. The cost of raw materials, including feedstocks and additives, is determined on an average unit cost of the units in a production lot. Work-in-process represents labor, material and overhead costs associated with the manufacturing costs at an average unit cost of the units in the production lot. Finished goods represents work-in-process items with additive costs added. The Company periodically reviews its inventories for obsolete or unsalable items and adjusts its carrying value to reflect estimated realizable values.

Property, Plant and Equipment

Property, plant and equipment is stated at cost. The Company provides for depreciation on the cost of its equipment using the straight-line method over an estimated useful life, ranging from three to twenty years, and zero salvage value. Expenditures for repairs and maintenance are charged to expense as incurred.

For purposes of computing depreciation, the useful lives of property, plant and equipment are as follows:

Leasehold improvements	Lesser of the remaining lease term or 5 years
Machinery and equipment	3-15 years

Business Combinations

The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets the Company has acquired or may acquire in the future include but are not limited to:

● future expected cash flows from product sales, other customer contracts, and

● discount rates utilized in valuation estimates.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate.

Goodwill and Intangible Assets

Intangible assets that we acquire are recognized separately if they arise from contractual or other legal rights or if they are separable and are recorded at fair value less accumulated amortization. We analyze intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. We review the amortization method and period at least at each balance sheet date. The effects of any revision are recorded to operations when the change arises. We recognize impairment when the estimated undiscounted cash flow generated by those assets is less than the carrying amounts of such assets. The amount of impairment is the excess of the carrying amount over the fair value of such assets. The Company’s management believes there is no impairment of long-lived assets as of June 30, 2017. However, market conditions could change or demand for the Company’s products could decrease, which could result in future impairment of long-lived assets

Goodwill is recorded as the excess of (i) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquired over the (ii) fair value of the net identifiable assets acquired. We do not amortize goodwill; however, we annually, or whenever there is an indication that goodwill may be impaired, evaluate qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the assets exceeds fair value. Any future increases in fair value would not result in an adjustment to the impairment loss that may be recorded in our consolidated financial statements. Our test of goodwill impairment includes assessing qualitative factors and the use of judgment in evaluating economic conditions, industry and market conditions, cost factors, and entity-specific events, as well as overall financial performance. Based on our analysis, no impairment loss of goodwill was recorded in 2017 and 2016 as the carrying amount of the reporting unit’s assets did not exceed the estimated fair value determined.

Impairment of Long-Lived Assets

Property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material.

Fair Value of Financial Instruments

The Company has adopted the framework for measuring fair value that establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).

The three levels of inputs that may be used to measure fair value are as follows:

● Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date;

● Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and

● Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability. Valuation is generated from model-based techniques with the unobservable assumptions reflecting our own estimate of assumptions that market participants would use in pricing the asset or liability.

Cash, restricted cash, accounts receivable, accounts payable and accrued expenses, amounts due to related parties and current portion of capital lease obligations and notes payable are reflected in the consolidated balance sheets at their estimated fair values primarily due to their short-term nature. As to long-term capital lease obligations and notes payable, carrying values approximate fair value since the estimated fair values are based on borrowing rates currently available to the Company for loans with similar terms and maturities. 

Deferred Financing Costs, Debt Discount and Detachable Debt-Related Warrants

Costs incurred in connection with debt are deferred and recorded as a reduction to the debt balance in the accompanying condensed consolidated balance sheets. The Company amortizes debt issuance costs over the expected term of the related debt using the effective interest method. Debt discounts related to the relative fair value of warrants issued in conjunction with the debt are also recorded as a reduction to the debt balance and amortized over the expected term of the debt to interest expense using the effective interest method.

Net Loss per Share Calculation

The basic net loss per common share is computed by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during a period. Diluted loss per common share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding plus potentially dilutive securities. The Company’s potentially dilutive securities outstanding are not shown in a diluted net loss per share calculation because their effect in both 2017 and 2016 would be anti-dilutive. At June 30, 2017, these potentially dilutive securities included warrants of 7,879,374 and stock options of 7,622,437 for a total of 15,501,811.  At June 30, 2016, these potentially dilutive securities included warrants of 8,266,137 and stock options of 10,461,618 for a total of 18,727,755. 

Income Taxes

The Company accounts for its income taxes in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes,” which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. An allowance for the deferred tax asset is established if it is more likely than not that the asset will not be realized. 

Share-based Compensation

All share-based payments to employees and non-employee directors, including grants of employee stock options, are expensed based on their estimated fair values at the grant date, in accordance with ASC 718. Compensation expense for share-based payments to employees and directors is recorded over the vesting period using the estimated fair value on the date of grant, as calculated by the Company using the Black-Scholes-Merton (“BSM”) option-pricing model or the Monte Carlo Simulation. For awards with only service conditions that have graded vesting schedules, compensation cost is recorded on a straight-line basis over the requisite service period for the entire award, unless vesting occurs earlier. For awards with market conditions, compensation cost is recorded on the accelerated attribution method over the derived service period.

Non-employee share-based compensation is accounted for based on the fair value of the related stock or options, using the BSM, or the fair value of the goods or services on the measurement date, whichever is more readily determinable.

Recently Issued Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance to the Company, except as discussed below.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). This updated guidance supersedes the current revenue recognition guidance, including industry-specific guidance. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The updated guidance is effective for interim and annual periods beginning after December 15, 2016, and early adoption is not permitted. In July 2015, the FASB decided to delay the effective date of ASU 2014-09 until December 15, 2017. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The Company has not yet selected a transition method and is currently assessing the impact the adoption of ASU 2014-09 will have on its condensed consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating ASU 2016-02, the Company expects the adoption of ASU 2016-02 to have a material effect on the Company’s consolidated financial condition due to the recognition of the lease rights and obligations as assets and liabilities. The Company is currently assessing the impact of the adoption of ASU 2016-02 will have on its condensed consolidated financial statements and disclosures.

In January 2017, the FASB, issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test.  Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company has not yet decided if it will early adopt the provisions in this ASU for its annual goodwill impairment test during 2017.

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Inventories

6 Months Ended

Jun. 30, 2017

Inventory Disclosure [Abstract]

Inventories

NOTE 3 – Inventories

The Company’s total inventories were as follows:

	June 30,		December 31,
	2017		2016
Raw materials	$	460,651	$	221,088
Work in process		34,528		172,142
Finished goods		1,032,623		251,292
Total inventories	$	1,527,802	$	644,522

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Acquisitions, Goodwill and Other Intangible Assets

6 Months Ended

Jun. 30, 2017

Goodwill and Intangible Assets Disclosure [Abstract]

Acquisitions, Goodwill and Other Intangible Assets

NOTE 4 – Acquisitions, Goodwill and Other Intangible Assets

WEBA 

On December 27, 2016, the Company entered into a Stock Purchase Agreement (“WEBA SPA”) with WEBA, a privately-owned company that develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries. Pursuant to the WEBA SPA, the Company acquired all of the WEBA shares from the WEBA sellers for $150,000 in cash and $2.65 million in 8% Promissory Notes (see Note 8). In addition, the WEBA sellers may be entitled to receive earn-out payments of up to an aggregate of $2,500,000 for calendar years 2017, 2018, and 2019 based upon terms set forth in the WEBA SPA. The Company also issued 5,625,000 shares as repayment of $450,000 of notes payable due to the WEBA sellers. The fair market value of the shares was $0.10 on the date of issuance. Following the WEBA acquisition, WEBA became a wholly owned subsidiary of the Company.

We accounted for the acquisition of WEBA as required under applicable accounting guidance. Tangible assets acquired are recorded at fair value. Identifiable intangible assets that we acquired are recognized separately if they arise from contractual or other legal rights or if they are separable, and are recorded at fair value. Goodwill is recorded as the excess of the consideration transferred over the fair value of the net identifiable assets acquired. The earn-out payments liability was recorded at their estimated fair value of $1,745,023.

Although management estimates that certain of the contingent consideration will be paid, it has applied a discount rate to the contingent consideration amounts in determining fair value to represent the risk of these payments not being made. The total acquisition date fair value of the consideration transferred and to be transferred is estimated at approximately $6.1 million, as follows:

Cash payment to the WEBA Sellers at closing	$	150,000
Common Stock issuance to the WEBA Sellers		562,500
Promissory notes to the WEBA Sellers		2,650,000
Contingent cash consideration to the WEBA Sellers		1,745,023
Income tax benefit		1,030,000
Total acquisition date fair value	$	6,137,523

Allocation of Consideration Transferred

The identifiable assets acquired and liabilities assumed were recognized and measured as of the acquisition date based on their estimated fair values as of December 27, 2016, the acquisition date. The excess of the acquisition date fair value of consideration transferred over the estimated fair value of the net tangible assets and intangible assets acquired was recorded as goodwill.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

Cash	$	172,950
Accounts receivable		342,151
Loan receivable from RS&T		500,000
Property and equipment		8,720
Customer list		470,000
Intellectual property		880,000
Trade name		390,000
Non complete agreement		835,000
Total identifiable assets acquired		3,598,821
Accounts payable and accrued expenses		190,527
Total liabilities assumed		190,527
Total identifiable assets less liabilities assumed		3,408,294
Goodwill		2,729,229
Net assets acquired	$	6,137,523

The Company is amortizing the intangibles (excluding goodwill) over an estimated useful life of five to ten years. The Company will evaluate the fair value of the earn-out liability on a periodic basis and adjust the balance, with an offsetting adjustment to the income statement, as needed. The acquisition was considered to be significant. The Company has included the financial results of the WEBA acquisition in its consolidated financial statements from the acquisition date and the results from WEBA were not material to the Company’s consolidated financial statements for the year ended December 31, 2016.

Pro Forma Financial Information

The following table presents the Company’s unaudited pro forma results (including WEBA) for the three and six months ended June 30, 2016 as though the companies had been combined as of the beginning of each of the periods presented. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved if the acquisition had taken place at the beginning of each period presented, nor is it indicative of results of operations which may occur in the future. The unaudited pro forma results presented include amortization charges for intangible assets and eliminations of intercompany transactions.

	For the			For the
	Three Months Ended			Six Months Ended
	June 30, 2016			June 30, 2016
Total revenues	$	1,795,502		$	3,777,955
Net loss	$	(1,033,464	)	$	(1,933,637	)

The Company did not incur material acquisition expenses related to the WEBA acquisition.

The components of goodwill and other intangible assets related to the WEBA SPA, along with various other business combinations are as follows:

		Gross Balance at					Net Balance at							Net Balance at
	Estimated	December 31,		Accumulated			December 31,				Accumulated			June 30,
	Useful Life	2016		Amortization			2016		Additions		Amortization			2017
Finite live intangible assets:
Customer list and tradename	5 years	$	987,500	$	(26,296	)	$	961,204	$	—	$	(126,171	)	$	861,329
Non-compete agreements	5 years		1,199,000		(246,000	)		953,000		—		(365,900	)		833,100
Intellectual property	10 years		880,000		—			880,000		—		(44,000	)		836,000
Total intangible assets		$	3,066,500	$	(272,296	)	$	2,794,204	$	—	$	(536,071	)	$	2,530,429
Goodwill	Indefinite	$	3,693,083	$	—		$	3,693,083	$	129,500	$	—		$	3,822,583

We compute amortization using the straight-line method over the estimated useful lives of the intangible assets. The Company has no indefinite-lived intangible assets other than goodwill.  

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Property, Plant and Equipment

6 Months Ended

Jun. 30, 2017

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

NOTE 5 – Property, Plant and Equipment

The Company’s property, plant and equipment were as follows:

	June 30,			December 31,
	2017			2016
Machinery and equipment	$	4,329,412		$	4,154,305
Leasehold improvements		262,476			126,598
Accumulated depreciation		(1,060,572	)		(927,909	)
		3,531,316			3,352,994
Construction in process		384,578			304,845
Total property, plant and equipment, net	$	3,915,894		$	3,657,839

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Stockholders' Equity

6 Months Ended

Jun. 30, 2017

Stockholders' Equity

Stockholders' Equity

NOTE 6– Stockholders’ Equity

Preferred Stock

The Company’s articles of incorporation authorize the Company to issue up to 40,000,000 shares of $0.0001 par value, preferred shares having preferences to be determined by the board of directors for dividends, and liquidation of the Company’s assets. Of the 40,000,000 preferred shares the Company is authorized by its articles of incorporation, the Board of Directors has designated up to 3,000,000 as Series AA preferred shares. 

As of June 30, 2017, the Company had no shares of Preferred Stock outstanding.

Common Stock

As of June 30, 2017, the Company has 131,204,275 shares of Common Stock, par value $0.0001, outstanding. The Company’s articles of incorporation authorize the Company to issue up to 300,000,000 shares of Common Stock. The holders are entitled to one vote for each share on matters submitted to a vote to shareholders, and to share pro rata in all dividends payable on Common Stock after payment of dividends on any preferred shares having preference in payment of dividends.

Equity Incentive Program

On December 18, 2014, the Company’s Board of Directors approved an Equity Incentive Program (the “Equity Incentive Program”), whereby the Company’s employees may elect to receive equity in lieu of cash for all or part of their salary compensation.

During the six months ended June 30, 2017, the Company issued the following shares of common stock for compensation:

On February 13, 2017, the Company issued an aggregate of 160,000 shares of common stock to two employees of the Company at a price of $0.125 per share. 

During the quarter ended March 31, 2017, the Company issued an aggregate of 115,503 shares of common stock to employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.12 per share.

On March 31, 2017, the Company issued an aggregate of 512,498 shares of common stock to six directors of the Company pursuant to the Company’s FY2017 Director Compensation Plan at a price of $0.12 per share.

During the quarter ended June 30, 2017, the Company issued an aggregate of 195,039 shares of common stock to employees of the Company pursuant to the Company’s Equity Incentive Program at a price of $0.10 per share.

On June 30, 2017, the Company issued an aggregate of 627,546 shares of common stock to six directors of the Company pursuant to the Company’s FY2017 Director Compensation Plan at a price of $0.098 per share.

Summary:

	Shares of Number of Common Stock Issued		Value
Share-based compensation		1,610,586	$	176,363

Shares of common stock issued under warrant exercise

On May 11, 2017, the Company issued an aggregate of 3,437,500 shares of Common Stock to three accredited investors in connection with the exercise of warrants at an exercise price of $0.08 per share.

Performance and/or market based stock awards

In January 2015, the Board of Directors approved the issuance of 940,595 restricted shares of the Company. These shares will be issued to the then members of the Board of Directors upon vesting, which will be when the market price of the Company’s common stock trades at or above $2 for a specified period.

The initial value of the restricted stock grant was approximately $38,000, as adjusted for forfeitures resulting from directors who have resigned, which will be amortized over the estimated service period. The Company recorded an expense of $7,698 and $41,854 from the amortization of the unvested restricted shares for the six months ended June 30, 2017 and 2016, respectively. The shares were valued using a Monte Carlo Simulation with a six year life, 88.0% volatility and a risk free interest rate of 1.79%.

In February 2016, the Board of Directors approved the issuance of 3,301,358 restricted shares of the Company. These shares will be issued to the then President (1,100,453 shares) and Chief Financial Officer (2,200,905 shares) upon vesting, which will be according to the following terms:

- 20% when the market price of the Company’s common stock trades at or above $0.30 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.40 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.50 for a specified period.

- 20% when the market price of the Company’s common stock trades at or above $0.60 for a specified period.

The initial value of the restricted stock grant was approximately $198,000, which was amortized over the estimated service period. The Company recorded an expense of $11,756 and $11,697 from the amortization of the unvested restricted shares for the six months ended June 30, 2017 and 2016, respectively. The shares were valued using a Monte Carlo Simulation with a six-year life, 91.0% volatility and a risk free interest rate of 1.34%. In December 2016, the Board of Directors modified the terms of the 1,100,453 shares award in conjunction with the resignation of the President to provide for an expiration date of December 2017. The Company revalued this award based on the new terms and determined the value of the award was approximately $18,000, which is being amortized over the estimated service period. The current period expense was insignificant.

In January 2016, the Board of Directors approved the issuance of 6,281,250 restricted common shares of the Company. These shares will be issued to the then members of the Board of Directors upon vesting, which will be when the market price of the Company’s common stock trades at or above $0.12 for a specified period or if the Company has positive EBITDA (a non GAAP measure) for one quarter in 2016. These shares were issued to the members of the Board on June 13, 2016, when the market price of the Company’s common stock traded at or above $0.12 for a 30-day volume weighted average price.

The initial value of the restricted stock grant was $509,000, which has been amortized over the estimated performance period. The Company recorded the entire value as expense from the amortization of the restricted shares for the year ended December 31, 2016, including $254,391 for the six months ended June 30, 2016. The shares were valued using a Monte Carlo Simulation with a one-year life, 106.0% volatility and a risk free interest rate of 0.65%.

In May 2016, the Board of Directors approved the issuance of 1,100,453 restricted shares of the Company. These shares will be issued to the Chief Executive Officer upon vesting, which will be according to the following terms:

- 20% when the market price of the Company’s common stock trades at or above $0.30 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.40 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.50 for a specified period.

- 20% when the market price of the Company’s common stock trades at or above $0.60 for a specified period.

The initial value of the restricted stock grant was approximately $94,000, which was to be amortized over the estimated service period. In December 2016, the then Chief Executive Officer resigned from the Company; therefore, any recognized expense was reversed and the expense recognized by the Company during the year ended December 31, 2016 was $0. In December 2016, the Board of Directors modified the terms of this award in conjunction with the resignation of the then Chief Executive Officer to provide for an expiration date of December 2017. The Company revalued this award based on the new terms and determined the value of the award was approximately $18,000, which is being amortized over the estimated service period. The current period expense was insignificant. 

In September 2016, the Board of Directors approved the issuance of 1,650,680 restricted common shares of the Company. These shares will be issued to the then Vice President of Sales and Marketing upon vesting, which will be according to the following terms:

- 20% when the market price of the Company’s common stock trades at or above $0.30 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.40 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.50 for a specified period.

- 20% when the market price of the Company’s common stock trades at or above $0.60 for a specified period.

The initial value of the restricted stock grant was approximately $141,000, which was amortized over the estimated service period. Upon the termination of the then Vice President of Sales and Marketing on April 28, 2017, this grant was terminated and the Company reversed all previous expense and is no longer recording expense related to this award. The Company recorded income of $14,082 from the reversal of previous amortization of the unvested restricted shares for the three months ended June 30, 2017. The shares were valued using a Monte Carlo Simulation with a 6-year life, 92.0% volatility and a risk free interest rate of 1.35%.

In December 2016, the Board of Directors approved the issuance of 6,290,000 restricted common shares of the Company. These shares will be issued to members of the Board of Directors and certain executives and employees upon vesting, which will occur when the price per share of the Company’s common stock, measured and approved based upon a 30-day trading volume weighted average price (“VWAP”), is equal to at least $0.20 per share.

The initial value of the restricted stock grant was approximately $430,000, which is being amortized over the estimated service period. The Company recorded an expense of $35,800 from the amortization of the unvested restricted shares for the six months ended June 30, 2017. The shares were valued using a Monte Carlo Simulation with a 6-year life, 98.0% volatility and a risk free interest rate of 2.00%.

In June 2017, the Board of Directors approved the issuance of 1,000,000 restricted common shares of the Company. These shares will be issued to certain executives upon the Company meeting the following bench marks: 50% will vest when the price per share of the Company’s common stock, based upon a 30-day trading VWAP, is equal to at least $0.20 per share and 50% will vest when the price per share of the Company’s common stock, measured and approved based upon a 30-day trading VWAP, is equal to at least $0.35 per share. The current period expense was insignificant.

A summary of the Company’s restricted stock awards is presented below:

	Number of Shares			Weighted- Average Grant-Date Fair Value per Share
Unvested at January 1, 2017		12,691,084		$	0.08
Restricted stock granted		1,700,000			0.07
Restricted stock vested		—			—
Restricted stock forfeited		(1,920,680	)		0.07
Unvested at June 30, 2017		12,470,404		$	0.08

Options and warrants

During the six months ended June 30, 2017, the Company issued 3,437,500 shares of common stock in connection with the exercise of stock warrants to purchase 3,437,500 shares of common stock at an exercise price of $0.08 per share. During the six months ended June 30, 2016, the Company did not have any issuances or exercises of stock warrants. The Company recognized $7,500 of expense related to the vesting of outstanding options during the six months ended June 30, 2017.

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Segments

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Segments

NOTE 7 – Segments

Prior to the December 2016 acquisitions of WEBA, RS&T and the DOW Assets and through December 31, 2016, the Company operated as one segment. Effective January 1, 2107, we have two segments, Consumer and Industrial. Consumer’s principal business activity is the processing of waste glycol into high-quality recycled glycol products, specifically automotive antifreeze, and related specialty blended antifreeze, which we sell in the automotive and industrial end markets. We operate six processing and distribution centers located in the eastern region of the United States. Industrial’s principal business activity consists of two divisions: WEBA and RS&T. WEBA develops, manufactures and markets additive packages for the antifreeze/coolant, gas patch coolants and heat transfer industries throughout North America, and RS&T, operates a 14-20 million gallons per year ASTM E1177 EG-1 glycol re-distillation plant in West Virginia that processes waste glycol into virgin quality recycled glycol for sale to industrial customers worldwide.

The Company uses loss before provision for income taxes as its measure of profit/loss for segment reporting purposes. Loss before provision for income taxes by operating segment includes all operating items relating to the businesses, including inter segment transactions. Items that primarily relate to the Company as a whole are assigned to Corporate.

Inter segment eliminations present the adjustments for inter segment transactions to reconcile segment information to the Company’s consolidated financial statements.

Segment information, and the reconciliation to the Company’s consolidated financial statements, for the three months ended June 30, 2017, is presented below:

	Consumer			Industrial			Inter Segment Eliminations			Corporate			Total
Sales, net	$	1,647,263		$	1,608,502		$	(337,668	)	$	—		$	2,918,097
Cost of goods sold		1,262,853			1,516,058			(337,668	)		—			2,441,243
Gross profit		384,410			92,444			—			—			476,854
Total operating expenses		540,387			325,556			—			288,555			1,154,498
Loss from operations		(155,977	)		(233,112	)		—			(288,555	)		(677,644	)
Total other expenses		(6,133	)		(30,923	)		—			(186,329	)		(223,385	)
Loss before provision for income taxes	$	(162,110	)	$	(264,035	)	$	—		$	(474,884	)	$	(901,029	)

Segment information, and the reconciliation to the Company’s consolidated financial statements, for the six months ended June 30, 2017, is presented below:

	Consumer			Industrial			Inter Segment Eliminations			Corporate			Total
Sales, net	$	3,245,903		$	2,549,183		$	(586,668	)	$	—		$	5,208,418
Cost of goods sold		2,669,554			2,508,943			(586,668	)		—			4,591,829
Gross profit		576,349			40,240			—			—			616,589
Total operating expenses		1,008,889			579,351			—			617,929			2,206,169
Loss from operations		(432,539	)		(539,111	)		—			(617,929	)		(1,589,580	)
Total other expenses		(11,219	)		(30,923	)		—			(377,461	)		(419,603	)
Loss before provision for income taxes	$	(443,759	)	$	(570,034	)	$	—		$	(995,390	)	$	(2,009,183	)

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Notes Payable

6 Months Ended

Jun. 30, 2017

Notes Payable [Abstract]

Notes Payable

NOTE 8 – Notes Payable

Notes payable consist of the following:

	June 30, 2017			December 31, 2016
2016 Secured Notes		354,893			396,562
2016 5% Related Party Unsecured Notes		—			1,000,000
2016 8% Related Party Unsecured Notes, net of unamortized debt discount of $177,328 and $351,744, respectively		1,632,672			1,458,256
2016 WEBA Seller Notes		2,650,000			2,650,000
Total notes payable		4,637,565			5,504,818
Less current portion		(1,718,496	)		(2,541,178	)
Long-term portion of notes payable	$	2,919,069		$	2,963,640

2016 Secured Notes

In January 2016, the Company entered into a secured promissory note with Ascentium Capital. In April 2016, the Company entered into secured promissory notes with Ascentium Capital. In July 2016, the Company entered into a secured promissory note with PACCAR Financial. In September 2016, the Company entered into a secured promissory note with PACCAR Financial. In November 2016, the Company entered into secured promissory notes with MHC Financial Services, Inc. (collectively, the “2016 Secured Notes”). The key terms of the 2016 Secured Notes include: (i) an aggregate principal balance of $437,000, (ii) interest rates ranging from 5.8% to 9.0%, and (iii) terms of 4-5 years. The 2016 Secured Notes are collateralized by vehicles and equipment.

2016 Related Party Unsecured Notes

5% Notes Issuance

On December 27, 2016, the Company entered into a subscription agreement (the “5% Notes Subscription Agreement”) by and between the Company and various funds managed by Wynnefield Capital. Pursuant to the 5% Notes Subscription Agreement, the Company offered and issued $1,000,000 in principal amount of 5% Senior Unsecured Promissory Notes (the “5% Notes”). The Company received $1,000,000 in gross proceeds from the offering. The 5% Notes were scheduled to mature on May 31, 2017 (the “5% Note Maturity Date”). The 5% Notes bore interest at a rate of 5% per annum due on the 5% Note Maturity Date or as otherwise specified by the 5% Notes. The 5% Notes contained standard events of default, including: (i) failure to repay the 5% Note when it is due at maturity; (ii) failure to pay any interest payment when due; (iii) failure to deliver financial statements on time; and (iv) other standard events of default. On April 17, 2017, the Company repaid the 5% Notes in full.

8% Notes Issuance

On December 27, 2016, the Company entered into subscription agreements (the “8% Notes Subscription Agreements”) by and between the Company and certain accredited investors. Pursuant to the 8% Notes Subscription Agreements, the Company offered and issued: (i) $1,810,000 in principal amount of 8% Senior Unsecured Promissory Notes (the “8% Notes”); and (ii) warrants (the “Warrants”) to purchase up to 5,656,250 shares of common stock of the Company (the “Common Stock”). The Company received $1,810,000 in gross proceeds from the offering of which $1,760,000 was received in 2016 and $50,000 was accrued as an other current asset at December 31, 2016 and received in 2017. The 8% Notes will mature on December 27, 2017 (the “8% Note Maturity Date”). The 8% Notes bear interest at a rate of 8% per annum due on the 8% Note Maturity Date or as otherwise specified by the 8% Note. The 8% Notes contain standard events of default, including: (i) failure to repay the 8% Note when it is due at maturity; (ii) failure to pay any interest payment when due; (iii) failure to deliver financial statements on time; and (iv) other standard events of default. The Company also incurred $26,872 of issuance costs, which were recorded as a debt discount and will be amortized as interest expense through the 8% Note Maturity Date. The Warrants are exercisable for an aggregate of 5,656,250 shares of Common Stock, beginning on December 27, 2016, and will be exercisable for a period of three years. The exercise price with respect to the warrants is $0.08 per share. The exercise price and the amount of shares of common stock issuable upon exercise of the warrants are subject to adjustment upon certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other similar issuances. On August 4, 2017, the Company redeemed $1,550,000 of the 8% Notes through the issuance of common shares of the Company’s stock as of the rights offering that closed on August 4, 2017. On August 10, 2017, the Company repaid the remaining $260,000 of 8% Notes through a combination of issuance of common shares of the Company’s stock and cash. See Note 12 for additional information.

The Company allocated the proceeds received to the 8% Notes and the warrants on a relative fair value basis at the time of issuance. The total debt discount is being amortized over the life of the 8% Notes to interest expense. Amortization expense during the six months ended June 30, 2017 was $174,421.

WEBA Seller Notes

In connection with the WEBA acquisition (see Note 4) the Company issued $2.65 million in 8% promissory notes (“Seller Notes”). The Seller Notes mature on December 27, 2021. The Seller Notes bear interest at a rate of 8% per annum payable on a quarterly basis in arrears. The Seller Notes contain standard default provisions, including: (i) failure to repay the Seller Note when it is due at maturity; (ii) failure to pay any interest payment when due; (iii) failure to deliver financial statements on time; and (iv) other standard events of default.

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Capital Lease

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

Capital Lease

NOTE 9 – Capital Lease

On April 13, 2017, the Company closed an amended sale-leaseback transaction with NFS Leasing, Inc. (“NFS”), wherein the Company sold $1,700,000 of certain operational equipment used in the Company’s glycol recovery and recycling operations (the “Equipment”) pursuant to a bill of sale and simultaneously entered into a master equipment lease agreement, as modified (the “Lease Agreement”) with NFS for the lease of the Equipment by the Company. Pursuant to the Lease Agreement, the lease term (the “Lease Term”) is 48 months commencing on May 1, 2017. There was no gain or loss associated with the sale-leaseback. During the Lease Term, the Company is obligated to make monthly rental payments of $44,720 to NFS. The agreements are effective as of March 31, 2017. At the conclusion of the Lease Term, the Company may repurchase the Equipment from NFS for $1. The Company has accounted for this transaction as a capital lease.

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Related Party Transactions

6 Months Ended

Jun. 30, 2017

Related Party Transactions [Abstract]

Related Party Transactions

NOTE 10 – Related Party Transactions

Vice President of U.S. Operations

The Vice President of U.S. Operations is the sole owner of BKB Holdings, LLC, which is the landlord of the property where GlyEco Acquisition Corp #5’s processing center is located. The Vice President of U.S. Operations also is the sole owner of Renew Resources, LLC, which provides services to the Company as a vendor.

	2017			2016
Beginning Balance as of January 1,	$	5,123		$	2,791
Monies owed to related party for services performed		61,818			47,219
Monies paid		(66,941	)		(51,807	)
Ending Balance as of June 30, payable (receivable)	$	—		$	(1,797	)

5% Notes

On December 27, 2016, we entered into debt agreements for an aggregate principal amount of $1,000,000 from the offering and issuance of 5% Notes to Wynnefield Partners I, Wynnefield Partners and Wynnefield Offshore, all of which are under the management of Wynnefield Capital, Inc. (“Wynnefield Capital”), an affiliate of the Company. The Company’s Chairman of the Board, Dwight Mamanteo, is a portfolio manager of Wynnefield Capital. See Note 8 for additional information.

8% Notes

On December 27, 2016, we entered into debt agreements for an aggregate principal amount of $1,810,000 from the offering and issuance of 8% Notes and warrants to purchase up to 5,656,250 shares of our common stock. The 8% Notes and warrants were sold to Dwight Mamanteo, our Chairman of the Board, Charles F. Trapp and Scott Nussbaum, members of the Board of Directors, Ian Rhodes, our Chief Executive Officer, Wynnefield Capital, an affiliate of the Company, and certain family members of Mr. Mamanteo and of Mr. Nussbaum. See Note 8 for additional information.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2017

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 11 – Commitments and Contingencies

Litigation

The Company may be party to legal proceedings in the ordinary course of business.  The Company believes that the nature of these proceedings (collection actions, etc.) are typical for a Company of our size and scope of operations. Litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. Below is an overview of a recently resolved legal proceeding, one pending legal proceeding, and one outstanding alleged claim.

On January 8, 2016, Acquisition Sub. #4 filed a civil action against Onyxx Group LLC in the Circuit Court of Hillsborough County, Florida. This civil action relates to an outstanding balance due from Onyxx Group LLC to Acquisition Sub. #4. In September 2016, the Company received a favorable judgment regarding this civil action in the amount of $95,000.

On March 22, 2016, Acquisition Sub. #4 filed a civil action against Encore Petroleum, LLC in the Superior Court of New Jersey Law Division, Hudson County. This civil action relates to an outstanding balance due from Encore Petroleum to Acquisition Sub. #4. This civil action is still pending.

The Company is also aware of one matter that involves an alleged claim against the Company, and it is at least reasonably possible that the claim will be pursued. The claim involves contracts with our former director and his related entities that provided services and was our landlord for the Company’s former processing facility in New Jersey. In this matter, the landlord of the Company’s formerly leased property claims back rent is due for property used by the Company outside of the scope of its lease agreement. During the quarter ended March 31, 2015, the former landlord denied the Company access to the New Jersey facility and prepared an eviction notice. The Company negotiated a payment in the amount of $250,000 to regain access to the facility, and reached an accord to negotiate with the landlord to resolve the outstanding issues by May 31, 2015. On December 28, 2015, the Company ultimately approved the termination of the lease agreements related to the New Jersey facility, thereby ceasing all operations at that particular facility. This termination was prompted by the former landlord’s demand for payment of approximately $2.3 million to maintain access to the facility. In September 2016, the Company reached an agreement with the landlord. The agreement required the Company to resolve certain environmental issues regarding the former processing facility and make certain payments to the landlord. The Company, the landlord and their related entities also agreed to a full and final settlement of existing and possible future claims between the parties. As of August 14, 2017, the Company believes it has addressed the environmental issues by removing and disposing of the waste from the facility and cleaning the storage tanks. Additionally, as of August 14, 2017, the Company has paid in full the agreed upon $335,000 payment to the landlord.

Environmental Matters

We are subject to federal, state, and local laws, regulations and ordinances relating to the protection of the environment, including those governing discharges to air and water, handling and disposal practices for solid and hazardous wastes, and occupational health and safety. It is management’s opinion that the Company is not currently exposed to significant environmental remediation liabilities or asset retirement obligations. However, if a release of hazardous substances occurs, or is found on one of our properties from prior activity, we may be subject to liability arising out of such conditions and the amount of such liability could be material.

The Company accrues for potential environmental liabilities in a manner consistent with accounting principles generally accepted in the United States; that is, when it is probable a liability has been incurred and the amount of the liability is reasonably estimable. The Company reviews the status of its environmental sites on a yearly basis and adjusts its reserves accordingly. Such potential liabilities accrued by the Company do not take into consideration possible recoveries of future insurance proceeds. The Company maintains insurance coverage for unintentional acts that result in environmental remediation liabilities up to $1 million per occurrence; $2 million in the aggregate, with an umbrella liability policy that doubles the coverage. These policies do, however, take into account the likely share other parties will bear at remediation sites. It would be difficult to estimate the Company’s ultimate level of liability due to the number of other parties that may be involved, the complexity of determining the relative liability among those parties, the uncertainty as to the nature and scope of the investigations and remediation to be conducted, the uncertainty in the application of law and risk assessment, the various choices and costs associated with diverse technologies that may be used in corrective actions at the sites, and the often quite lengthy periods over which eventual remediation may occur. Nevertheless, the Company does not currently believe that any claims, penalties or costs in connection with known environmental matters will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

The Company is aware of one environmental remediation issue related to our former leased property in New Jersey, which is currently subject to a remediation stemming from the sale of property by the previous owner in 2008 to the current landlord. To Management’s knowledge, the former landlord has engaged a licensed site remediation professional and had assumed responsibility for this remediation. In Management’s opinion the liability for this remediation is the responsibility of the former landlord. However, the former landlord has disputed this position and it is an open issue subject to negotiation. Currently, we have no knowledge as to the scope of the landlord’s former remediation obligation.

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Subsequent Events

6 Months Ended

Jun. 30, 2017

Subsequent Events [Abstract]

Subsequent Events

NOTE 12 – Subsequent Events

Recent Stock Issuances

Since June 30, 2017, the Company has issued an aggregate of 78,973 shares of common stock pursuant to the Company’s Equity Incentive Program.

Rights Offering

On August 10, 2017, the Company announced the closing of its rights offering, which expired on August 4, 2017, and raised aggregate gross proceeds of approximately $2.29 million, including $670,000 in cash and $1.62 million in redemption of previously issued notes, from the sale of 28.6 million shares of common stock at a price of $0.08 per share. The rights offering was made pursuant to a registration statement on Form S-1 (Reg. No. 333-215941) and prospectus on file with the Securities and Exchange Commission. The Company plans to use the net proceeds for general working capital purposes.

The Company also repaid the remaining 8% promissory notes issued in December 2016 through a combination of shares of its common stock at a per share price of $0.08 and cash. The Company issued 2,754,500 shares in exchange for a total of $220,360 in principal and interest and repaid the balance in cash in the full amount of $52,467. As a result of these transactions, the previously issued 8% notes have been repaid in full.

Warrants Exercise

Since June 30, 2017, the Company has issued 781,250 shares of common stock in connection with the exercise of warrants to purchase 781,250 shares of common stock with an exercise price of $0.08. For total proceeds of $62,500. These warrants were issued in connection with the 8% Notes.

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Basis of Presentation and Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2017

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all adjustments (consisting of normal recurring accruals) necessary for a fair presentation on an interim basis. The operating results for the six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2017.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted; however, management believes that the disclosures are adequate to make the information presented not misleading. This report should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, including the Company’s audited consolidated financial statements and related notes included therein.

Principles of Consolidation

Principles of Consolidation

These consolidated financial statements include the accounts of GlyEco, Inc., and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated as a result of consolidation.

Noncontrolling Interests

Noncontrolling Interests

The Company recognizes noncontrolling interests as equity in the consolidated financial statements separate from the parent company’s equity. Noncontrolling interests’ partners have less than 50% share of voting rights at any one of the subsidiary level companies. The amount of net income (loss) attributable to noncontrolling interests is included in consolidated net income (loss) on the face of the consolidated statements of operations. Changes in a parent entity’s ownership interest in a subsidiary that do not result in deconsolidation are treated as equity transactions if the parent entity retains its controlling financial interest. The Company recognizes a gain or loss in net income (loss) when a subsidiary is deconsolidated. Such gain or loss is measured using the fair value of the noncontrolling equity investment on the deconsolidation date. Additionally, operating losses are allocated to noncontrolling interests even when such allocation creates a deficit balance for the noncontrolling interest partner.

The Company provides either in the consolidated statements of stockholders’ equity, if presented, or in the notes to consolidated financial statements, a reconciliation at the beginning and the end of the period of the carrying amount of total equity (net assets), equity (net assets) attributable to the parent, and equity (net assets) attributable to the noncontrolling interest that separately discloses:

(1)	Net income or loss
(2)	Transactions with owners acting in their capacity as owners, showing separately contributions from and distributions to owners.
(3)	Each component of other comprehensive income or loss

Operating Segments

Operating Segments

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing the performance of the segment. Operating segments may be aggregated into a single operating segment if the segments have similar economic characteristics, among other criteria. Prior to the December 2016 acquisitions of WEBA, RS&T and the DOW Assets and through December 31, 2016, the Company operated as one segment. As of January 1, 2017 we have two operating segments, Consumer and Industrial.

Use of Estimates

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported revenues and expenses during the reporting periods. Because of the use of estimates inherent within the financial reporting process, actual results may differ significantly from those estimates.  Significant estimates include, but are not limited to, items such as the allowance for doubtful accounts, the value of share-based compensation and warrants, the allocation of the purchase price in the Company’s acquisitions, the recoverability of property, plant and equipment, goodwill, other intangibles and their estimated useful lives, contingent liabilities, and environmental and asset retirement obligations. Due to the uncertainties inherent in the formulation of accounting estimates, it is reasonable to expect that these estimates could be materially revised within the next year.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue when (1) delivery of product has occurred or services have been rendered, (2) there is persuasive evidence of a sale arrangement, (3) selling prices are fixed or determinable, and (4) collectability from the customer (individual customers and distributors) is reasonably assured. Revenue consists primarily of revenue generated from the sale of the Company’s products. This generally occurs either when the Company’s products are shipped from its facility or delivered to the customer when title has passed. Revenue is recorded net of estimated cash discounts. The Company estimates and accrues an allowance for sales returns at the time the product is sold. To date, sales returns have not been material. Shipping costs passed to the customer are included in net sales. 

Costs

Costs

Cost of goods sold includes all direct material and labor costs and those indirect costs of bringing raw materials to sale condition, including depreciation of equipment used in manufacturing and shipping and handling costs. Selling, general, and administrative costs are charged to operating expenses as incurred. Research and development costs are expensed as incurred, are included in operating expenses and were insignificant in 2017 and 2016. Advertising costs are expensed as incurred.

Accounts Receivable

Accounts Receivable

Accounts receivable are recognized and carried at the original invoice amount less an allowance for expected uncollectible amounts. Inherent in the assessment of the allowance for doubtful accounts are certain judgments and estimates including, among others, the customer’s willingness or ability to pay, the Company’s compliance with customer invoicing requirements, the effect of general economic conditions and the ongoing relationship with the customer. Accounts with outstanding balances longer than the payment terms are considered past due. We do not charge interest on past due balances. The Company writes off trade receivables when all reasonable collection efforts have been exhausted. Bad debt expense is reflected as a component of general and administrative expenses in the consolidated statements of operations. The allowance for doubtful accounts totaled $105,185 and $80,207 as of June 30, 2017 and December 31, 2016, respectively.

Inventories

Inventories

Inventories are reported at the lower of cost or net realizable value. The cost of raw materials, including feedstocks and additives, is determined on an average unit cost of the units in a production lot. Work-in-process represents labor, material and overhead costs associated with the manufacturing costs at an average unit cost of the units in the production lot. Finished goods represents work-in-process items with additive costs added. The Company periodically reviews its inventories for obsolete or unsalable items and adjusts its carrying value to reflect estimated realizable values.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment is stated at cost. The Company provides for depreciation on the cost of its equipment using the straight-line method over an estimated useful life, ranging from three to twenty years, and zero salvage value. Expenditures for repairs and maintenance are charged to expense as incurred.

For purposes of computing depreciation, the useful lives of property, plant and equipment are as follows:

Leasehold improvements	Lesser of the remaining lease term or 5 years
Machinery and equipment	3-15 years

Business Combinations

Business Combinations

The Company accounts for business combinations by recognizing the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair values on the acquisition date. The purchase price allocation process requires management to make significant estimates and assumptions, especially with respect to intangible assets, estimated contingent consideration payments and pre-acquisition contingencies. Examples of critical estimates in valuing certain of the intangible assets the Company has acquired or may acquire in the future include but are not limited to:

● future expected cash flows from product sales, other customer contracts, and

● discount rates utilized in valuation estimates.

Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. Additionally, any change in the fair value of the acquisition-related contingent consideration subsequent to the acquisition date, including changes from events after the acquisition date, such as changes in our estimates of relevant revenue or other targets, will be recognized in earnings in the period of the estimated fair value change. A change in fair value of the acquisition-related contingent consideration or the occurrence of events that cause results to differ from our estimates or assumptions could have a material effect on the consolidated financial position, statements of operations or cash flows in the period of the change in the estimate.

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Intangible assets that we acquire are recognized separately if they arise from contractual or other legal rights or if they are separable and are recorded at fair value less accumulated amortization. We analyze intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be recoverable. We review the amortization method and period at least at each balance sheet date. The effects of any revision are recorded to operations when the change arises. We recognize impairment when the estimated undiscounted cash flow generated by those assets is less than the carrying amounts of such assets. The amount of impairment is the excess of the carrying amount over the fair value of such assets. The Company’s management believes there is no impairment of long-lived assets as of June 30, 2017. However, market conditions could change or demand for the Company’s products could decrease, which could result in future impairment of long-lived assets

Goodwill is recorded as the excess of (i) the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquired over the (ii) fair value of the net identifiable assets acquired. We do not amortize goodwill; however, we annually, or whenever there is an indication that goodwill may be impaired, evaluate qualitative factors to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform the two-step quantitative goodwill impairment test. The Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it. Should the sum of the expected future net cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be recognized. The impairment loss would be calculated as the amount by which the carrying value of the assets exceeds fair value. Any future increases in fair value would not result in an adjustment to the impairment loss that may be recorded in our consolidated financial statements. Our test of goodwill impairment includes assessing qualitative factors and the use of judgment in evaluating economic conditions, industry and market conditions, cost factors, and entity-specific events, as well as overall financial performance. Based on our analysis, no impairment loss of goodwill was recorded in 2017 and 2016 as the carrying amount of the reporting unit’s assets did not exceed the estimated fair value determined.

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Property, plant and equipment, purchased intangibles subject to amortization and patents and trademarks, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized in the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be disposed of would be separately presented in the consolidated balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposal group classified as held-for-sale would be presented separately in the appropriate asset and liability sections of the consolidated balance sheet, if material.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

The Company has adopted the framework for measuring fair value that establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements).

The three levels of inputs that may be used to measure fair value are as follows:

● Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date;

● Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data; and

● Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions that market participants would use in pricing an asset or liability. Valuation is generated from model-based techniques with the unobservable assumptions reflecting our own estimate of assumptions that market participants would use in pricing the asset or liability.

Cash, restricted cash, accounts receivable, accounts payable and accrued expenses, amounts due to related parties and current portion of capital lease obligations and notes payable are reflected in the consolidated balance sheets at their estimated fair values primarily due to their short-term nature. As to long-term capital lease obligations and notes payable, carrying values approximate fair value since the estimated fair values are based on borrowing rates currently available to the Company for loans with similar terms and maturities. 

Deferred Financing Costs, Debt Discount and Detachable Debt-Related Warrants

Deferred Financing Costs, Debt Discount and Detachable Debt-Related Warrants

Costs incurred in connection with debt are deferred and recorded as a reduction to the debt balance in the accompanying condensed consolidated balance sheets. The Company amortizes debt issuance costs over the expected term of the related debt using the effective interest method. Debt discounts related to the relative fair value of warrants issued in conjunction with the debt are also recorded as a reduction to the debt balance and amortized over the expected term of the debt to interest expense using the effective interest method.

Net Loss Per Share Calculation

Net Loss per Share Calculation

The basic net loss per common share is computed by dividing the net loss available to common shareholders by the weighted average number of shares outstanding during a period. Diluted loss per common share is computed by dividing the net loss available to common shareholders by the weighted average number of common shares outstanding plus potentially dilutive securities. The Company’s potentially dilutive securities outstanding are not shown in a diluted net loss per share calculation because their effect in both 2017 and 2016 would be anti-dilutive. At June 30, 2017, these potentially dilutive securities included warrants of 7,879,374 and stock options of 7,622,437 for a total of 15,501,811.  At June 30, 2016, these potentially dilutive securities included warrants of 8,266,137 and stock options of 10,461,618 for a total of 18,727,755. 

Income Taxes

Income Taxes

The Company accounts for its income taxes in accordance with Financial Accounting Standard Board (“FASB”) Accounting Standards Codification (“ASC”) 740, “Income Taxes,” which requires recognition of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period that includes the enactment date. An allowance for the deferred tax asset is established if it is more likely than not that the asset will not be realized. 

Share-based Compensation

Share-based Compensation

All share-based payments to employees and non-employee directors, including grants of employee stock options, are expensed based on their estimated fair values at the grant date, in accordance with ASC 718. Compensation expense for share-based payments to employees and directors is recorded over the vesting period using the estimated fair value on the date of grant, as calculated by the Company using the Black-Scholes-Merton (“BSM”) option-pricing model or the Monte Carlo Simulation. For awards with only service conditions that have graded vesting schedules, compensation cost is recorded on a straight-line basis over the requisite service period for the entire award, unless vesting occurs earlier. For awards with market conditions, compensation cost is recorded on the accelerated attribution method over the derived service period.

Non-employee share-based compensation is accounted for based on the fair value of the related stock or options, using the BSM, or the fair value of the goods or services on the measurement date, whichever is more readily determinable.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements that are of significance, or potential significance to the Company, except as discussed below.

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”). This updated guidance supersedes the current revenue recognition guidance, including industry-specific guidance. The updated guidance introduces a five-step model to achieve its core principal of the entity recognizing revenue to depict the transfer of goods or services to customers at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The updated guidance is effective for interim and annual periods beginning after December 15, 2016, and early adoption is not permitted. In July 2015, the FASB decided to delay the effective date of ASU 2014-09 until December 15, 2017. The FASB also agreed to allow entities to choose to adopt the standard as of the original effective date. The Company has not yet selected a transition method and is currently assessing the impact the adoption of ASU 2014-09 will have on its condensed consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases”, which requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. ASU 2016-02 is effective for reporting periods beginning after December 15, 2018 with early adoption permitted. While the Company is still evaluating ASU 2016-02, the Company expects the adoption of ASU 2016-02 to have a material effect on the Company’s consolidated financial condition due to the recognition of the lease rights and obligations as assets and liabilities. The Company is currently assessing the impact of the adoption of ASU 2016-02 will have on its condensed consolidated financial statements and disclosures.

In January 2017, the FASB, issued ASU No. 2017-04, “Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment” which simplifies the accounting for goodwill impairment by eliminating Step 2 of the current goodwill impairment test.  Goodwill impairment will now be the amount by which the reporting unit’s carrying value exceeds its fair value, limited to the carrying value of the goodwill. ASU 2017-04 is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted for any impairment tests performed after January 1, 2017. The Company has not yet decided if it will early adopt the provisions in this ASU for its annual goodwill impairment test during 2017.

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Inventories (Tables)

6 Months Ended

Jun. 30, 2017

Inventory Disclosure [Abstract]

Schedule of inventories

The Company’s total inventories were as follows:

	June 30,		December 31,
	2017		2016
Raw materials	$	460,651	$	221,088
Work in process		34,528		172,142
Finished goods		1,032,623		251,292
Total inventories	$	1,527,802	$	644,522

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Acquisitions, Goodwill and Other Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2017

Business Combinations [Abstract]

Schedule acquisition date fair value

The total acquisition date fair value of the consideration transferred and to be transferred is estimated at approximately $6.1 million, as follows:

Cash payment to the WEBA Sellers at closing	$	150,000
Common Stock issuance to the WEBA Sellers		562,500
Promissory notes to the WEBA Sellers		2,650,000
Contingent cash consideration to the WEBA Sellers		1,745,023
Income tax benefit		1,030,000
Total acquisition date fair value	$	6,137,523

Summary of estimated fair values of assets acquired and liabilities assumed

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date.

Cash	$	172,950
Accounts receivable		342,151
Loan receivable from RS&T		500,000
Property and equipment		8,720
Customer list		470,000
Intellectual property		880,000
Trade name		390,000
Non complete agreement		835,000
Total identifiable assets acquired		3,598,821
Accounts payable and accrued expenses		190,527
Total liabilities assumed		190,527
Total identifiable assets less liabilities assumed		3,408,294
Goodwill		2,729,229
Net assets acquired	$	6,137,523

Summary of Pro Forma Financial Information

The unaudited pro forma results presented include amortization charges for intangible assets and eliminations of intercompany transactions.

	For the			For the
	Three Months Ended			Six Months Ended
	June 30, 2016			June 30, 2016
Total revenues	$	1,795,502		$	3,777,955
Net loss	$	(1,033,464	)	$	(1,933,637	)

Schedule of intangible assets

The components of goodwill and other intangible assets related to the WEBA SPA, along with various other business combinations are as follows:

		Gross Balance at					Net Balance at							Net Balance at
	Estimated	December 31,		Accumulated			December 31,				Accumulated			June 30,
	Useful Life	2016		Amortization			2016		Additions		Amortization			2017
Finite live intangible assets:
Customer list and tradename	5 years	$	987,500	$	(26,296	)	$	961,204	$	—	$	(126,171	)	$	861,329
Non-compete agreements	5 years		1,199,000		(246,000	)		953,000		—		(365,900	)		833,100
Intellectual property	10 years		880,000		—			880,000		—		(44,000	)		836,000
Total intangible assets		$	3,066,500	$	(272,296	)	$	2,794,204	$	—	$	(536,071	)	$	2,530,429
Goodwill	Indefinite	$	3,693,083	$	—		$	3,693,083	$	129,500	$	—		$	3,822,583

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Property, Plant and Equipment (Tables)

6 Months Ended

Jun. 30, 2017

Property, Plant and Equipment [Abstract]

Schedule of property, plant and equipment

The Company’s property, plant and equipment were as follows:

	June 30,			December 31,
	2017			2016
Machinery and equipment	$	4,329,412		$	4,154,305
Leasehold improvements		262,476			126,598
Accumulated depreciation		(1,060,572	)		(927,909	)
		3,531,316			3,352,994
Construction in process		384,578			304,845
Total property, plant and equipment, net	$	3,915,894		$	3,657,839

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Stockholders' Equity (Tables)

6 Months Ended

Jun. 30, 2017

Stockholders' Equity

Schedule of common stock issued

Summary:

	Shares of Number of Common Stock Issued		Value
Share-based compensation		1,610,586	$	176,363

Summary of restricted stock awards

A summary of the Company’s restricted stock awards is presented below:

	Number of Shares			Weighted- Average Grant-Date Fair Value per Share
Unvested at January 1, 2017		12,691,084		$	0.08
Restricted stock granted		1,700,000			0.07
Restricted stock vested		—			—
Restricted stock forfeited		(1,920,680	)		0.07
Unvested at June 30, 2017		12,470,404		$	0.08

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Segments (Tables)

6 Months Ended

Jun. 30, 2017

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

Segment information, and the reconciliation to the Company’s consolidated financial statements, for the three months ended June 30, 2017, is presented below:

	Consumer			Industrial			Inter Segment Eliminations			Corporate			Total
Sales, net	$	1,647,263		$	1,608,502		$	(337,668	)	$	—		$	2,918,097
Cost of goods sold		1,262,853			1,516,058			(337,668	)		—			2,441,243
Gross profit		384,410			92,444			—			—			476,854
Total operating expenses		540,387			325,556			—			288,555			1,154,498
Loss from operations		(155,977	)		(233,112	)		—			(288,555	)		(677,644	)
Total other expenses		(6,133	)		(30,923	)		—			(186,329	)		(223,385	)
Loss before provision for income taxes	$	(162,110	)	$	(264,035	)	$	—		$	(474,884	)	$	(901,029	)

Segment information, and the reconciliation to the Company’s consolidated financial statements, for the six months ended June 30, 2017, is presented below:

	Consumer			Industrial			Inter Segment Eliminations			Corporate			Total
Sales, net	$	3,245,903		$	2,549,183		$	(586,668	)	$	—		$	5,208,418
Cost of goods sold		2,669,554			2,508,943			(586,668	)		—			4,591,829
Gross profit		576,349			40,240			—			—			616,589
Total operating expenses		1,008,889			579,351			—			617,929			2,206,169
Loss from operations		(432,539	)		(539,111	)		—			(617,929	)		(1,589,580	)
Total other expenses		(11,219	)		(30,923	)		—			(377,461	)		(419,603	)
Loss before provision for income taxes	$	(443,759	)	$	(570,034	)	$	—		$	(995,390	)	$	(2,009,183	)

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Notes Payable (Tables)

6 Months Ended

Jun. 30, 2017

Notes Payable [Abstract]

Schedule of notes payable

Notes payable consist of the following:

	June 30, 2017			December 31, 2016
2016 Secured Notes		354,893			396,562
2016 5% Related Party Unsecured Notes		—			1,000,000
2016 8% Related Party Unsecured Notes, net of unamortized debt discount of $177,328 and $351,744, respectively		1,632,672			1,458,256
2016 WEBA Seller Notes		2,650,000			2,650,000
Total notes payable		4,637,565			5,504,818
Less current portion		(1,718,496	)		(2,541,178	)
Long-term portion of notes payable	$	2,919,069		$	2,963,640

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Related Party Transactions (Tables)

6 Months Ended

Jun. 30, 2017

Vice President of U.S. Operations [Member]

Related Party Transaction [Line Items]

Schedule of related party transations

The Vice President of U.S. Operations also is the sole owner of Renew Resources, LLC, which provides services to the Company as a vendor.

	2017			2016
Beginning Balance as of January 1,	$	5,123		$	2,791
Monies owed to related party for services performed		61,818			47,219
Monies paid		(66,941	)		(51,807	)
Ending Balance as of June 30, payable (receivable)	$	—		$	(1,797	)

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Basis of Presentation and Summary of Significant Accounting Policies (Details)

6 Months Ended

Jun. 30, 2017

Machinery And Equipment [Member] | Minimum [Member]

Useful life

3 years

Machinery And Equipment [Member] | Maximum [Member]

Useful life

15 years

Leasehold improvements [Member]

Useful life

5 years

Descripion of useful lives

Lesser of the remaining lease term or 5 years 

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Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative)	6 Months Ended
	Jun. 30, 2017 USD ($) Number shares	Jun. 30, 2016 shares	Dec. 31, 2016 USD ($)
Number of operating segement | Number	2
Allowance for doubtful accounts | $	$ 105,185		$ 80,207
Number of potentially dilutive securities	15,501,811	18,727,755
Salvage value of property, plant and equipment | $	$ 0
Warrant [Member]
Number of potentially dilutive securities	7,879,374	8,266,137
Employee Stock Option [Member]
Number of potentially dilutive securities	7,622,437	10,461,618

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Inventories (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Inventory Disclosure [Abstract]
Raw materials	$ 460,651	$ 221,088
Work in process	34,528	172,142
Finished goods	1,032,623	251,292
Total inventories	$ 1,527,802	$ 644,522

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Acquisitions, Goodwill and Other Intangible Assets (Details) - WEBA [Member]	Dec. 27, 2016 USD ($)
Cash payment to the WEBA Sellers at closing	$ 150,000
Common stock issuance to the WEBA Sellers	562,500
Promissory notes to the WEBA Sellers	2,650,000
Contingent cash consideration to the WEBA Sellers	1,745,023
Income tax benefit	1,030,000
Total acquisition date fair value	$ 6,137,523

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Acquisitions, Goodwill and Other Intangible Assets (Details 1) - USD ($)	Jun. 30, 2017	Dec. 31, 2016	Dec. 27, 2016	Dec. 31, 2015
Goodwill	$ 3,822,583	$ 3,693,083		$ 3,693,083
WEBA [Member]
Cash			$ 172,950
Accounts receivable			342,151
Loan receivable from RS&T			500,000
Property and equipment			8,720
Total identifiable assets acquired			3,598,821
Accounts payable and accrued expenses			190,527
Total liabilities assumed			190,527
Total identifiable assets less liabilities assumed			3,408,294
Goodwill			2,729,229
Net assets acquired			6,137,523
Customer Lists [Member] | WEBA [Member]
Intangible assets			470,000
Intellectual Property [Member] | WEBA [Member]
Intangible assets			880,000
Trade Names [Member] | WEBA [Member]
Intangible assets			390,000
Non-Compete Agreements [Member] | WEBA [Member]
Intangible assets			$ 835,000

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Acquisitions, Goodwill and Other Intangible Assets (Details 2) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2016
Business Combinations [Abstract]
Total revenues	$ 1,795,502	$ 3,777,955
Net loss	$ (1,033,464)	$ (1,933,637)

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Acquisitions, Goodwill and Other Intangible Assets (Details 3) - USD ($)	6 Months Ended	12 Months Ended
	Jun. 30, 2017	Dec. 31, 2016
Finite live intangible assets
Gross	$ 2,794,204	$ 3,066,500
Additions
Accumulated Amortization	(536,071)	(272,296)
Net	2,530,429	2,794,204
Goodwill
Gross	3,693,083	3,693,083
Additions	129,500
Accumulated Amortization
Net	3,822,583	$ 3,693,083
Customer List And Tradename [Member]
Finite live intangible assets
Estimated Useful Life		5 years
Gross	961,204	$ 987,500
Additions
Accumulated Amortization	(126,171)	(26,296)
Net	861,329	$ 961,204
Non-Compete Agreements [Member]
Finite live intangible assets
Estimated Useful Life		5 years
Gross	953,000	$ 1,199,000
Additions
Accumulated Amortization	(365,900)	(246,000)
Net	833,100	$ 953,000
Intellectual Property [Member]
Finite live intangible assets
Estimated Useful Life		10 years
Gross	880,000	$ 880,000
Additions
Accumulated Amortization	(44,000)
Net	$ 836,000	$ 880,000

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Acquisitions, Goodwill and Other Intangible Assets (Details Narrative) - StockPurchase Agreement [Member] - GlyEco Acquisition Corp. #3 [Member]	Dec. 27, 2016 USD ($)
Purchase consideration	$ 150,000
Purchase consideration subject to earn out provision	2,500,000
Promissory Notes	2,650,000
Earn-out payments liability recorded at fair value	1,745,023
Fair value of consideration transferred	$ 6,100,000
Minimum [Member]
Useful life of intangible assets acquired	5 years
Maximum [Member]
Useful life of intangible assets acquired	10 years

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Property, Plant and Equipment (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Accumulated depreciation	$ (1,060,572)	$ (927,909)
Property, plant and equipment before construction in process	3,531,316	3,352,994
Construction in process	384,578	304,845
Total property, plant and equipment, net	3,915,894	3,657,839
Machinery And Equipment [Member]
Property, plant and equipment before construction in process	4,329,412	4,154,305
Leasehold improvements [Member]
Property, plant and equipment before construction in process	$ 262,476	$ 126,598

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Stockholders' Equity (Details)	6 Months Ended
	Jun. 30, 2017 USD ($) shares
Stockholders' Equity
Share-based compensation (in shares) | shares	1,610,586
Share-based compensation, value | $	$ 176,363

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Stockholders' Equity (Details 1)	6 Months Ended
	Jun. 30, 2017 $ / shares shares
Number of Shares
Unvested at beginning | shares	12,691,084
Restricted stock granted | shares	1,700,000
Restricted stock vested | shares
Restricted stock forfeited | shares	(1,920,680)
Unvested at end | shares	12,470,404
Weighted Average Grant-Date Fair Value per Share
Unvested at beginning | $ / shares	$ 0.08
Restricted stock granted | $ / shares	0.07
Restricted stock vested | $ / shares
Restricted stock forfeited | $ / shares	0.07
Unvested at end | $ / shares	$ 0.08

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Stockholders' Equity (Details Narrative)	1 Months Ended	3 Months Ended	4 Months Ended	6 Months Ended
	Feb. 13, 2017 Number $ / shares shares	Mar. 31, 2017 $ / shares shares	May 11, 2017 $ / shares shares	Jun. 30, 2017 $ / shares shares	Dec. 31, 2016 $ / shares shares
Preferred stock, authorized				40,000,000	40,000,000
Preferred stock, par value (in dollars per share) | $ / shares				$ 0.0001	$ 0.0001
Preferred stock, shares outstanding				0	0
Common stock, outstanding				131,204,275	126,156,189
Common stock, authorized				300,000,000	300,000,000
Common stock, par value (in dollars per share) | $ / shares				$ 0.0001	$ 0.0001
Series AA Preferred Stock [Member]
Preferred stock, authorized				3,000,000
Equity Incentive Program [Member] | Two Employees [Member]
Number of employees | Number	2
Number of common stock issued	160,000
Share price (in dollars per share) | $ / shares	$ 0.125
Equity Incentive Program [Member] | Employees [Member]
Number of common stock issued		115,503		195,039
Share price (in dollars per share) | $ / shares		$ 0.12		$ 0.10
Equity Incentive Program [Member] | Three accredited investors [Member]
Number of common stock issued			3,437,500
Share price (in dollars per share) | $ / shares			$ 0.08
FY2017 Director Compensation Plan [Member] | Six Directors [Member]
Number of common stock issued		512,498		627,546
Director Compensation Plan [Member] | Six Directors [Member]
Share price (in dollars per share) | $ / shares		$ 0.12		$ 0.098

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Stockholders' Equity (Details Narrative 1) - USD ($)

1 Months Ended

6 Months Ended

12 Months Ended

Sep. 30, 2016

May 31, 2016

Feb. 29, 2016

Jun. 30, 2017

Jun. 30, 2016

Dec. 31, 2016

Jan. 31, 2016

Apr. 09, 2015

Jan. 31, 2015

Volatility rate

100.00%

Risk free interest rate

1.90%

One Accredited Investor [Member]

Share price (in dollars per share)

$ 0.0001

Options and Warrants [Member]

Expense related to the vesting of outstanding

$ 7,500

Share price (in dollars per share)

$ 0.08

Value of restricted stock grant

$ 3,437,500

Performance Market Based Stock Awards Dated February 2016 [Member]

Number of restricted shares issued, new issue

3,301,358

Amortization of unvested restricted shares

11,756

$ 11,697

Value of restricted stock grant

$ 198,000

Method used

Monte Carlo Simulation.

Expected term (in years)

6 years

Volatility rate

91.00%

Risk free interest rate

1.34%

Value of award

$ 18,000

Description of vesting rights

The restricted shares will vest according to the following terms:

- 20% when the market price of the Company’s common stock trades at or above $0.30 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.40 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.50 for a specified period.

- 20% when the market price of the Company’s common stock trades at or above $0.60 for a specified period.

Performance Market Based Stock Awards Dated February 2016 [Member] | President [Member]

Number of restricted shares issued, new issue

1,100,453

Performance Market Based Stock Awards Dated February 2016 [Member] | Chief Financial Officer [Member]

Number of restricted shares issued, new issue

2,200,905

Restricted Shares [Member] | Vice President of U.S. Operations [Member]

Number of restricted shares issued, new issue

1,650,680

Amortization of unvested restricted shares

14,082

Value of restricted stock grant

$ 141,000

Method used

Monte Carlo Simulation.

Expected term (in years)

6 years

Volatility rate

92.00%

Risk free interest rate

1.35%

Description of vesting rights

- 20% when the market price of the Company’s common stock trades at or above $0.30 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.40 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.50 for a specified period.

- 20% when the market price of the Company’s common stock trades at or above $0.60 for a specified period.

Restricted Shares [Member] | Chief Executive Officer [Member]

Number of restricted shares issued, new issue

1,100,453

Value of restricted stock grant

$ 94,000

Share based compensation

0

Value of award

18,000

Description of vesting rights

- 20% when the market price of the Company’s common stock trades at or above $0.30 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.40 for a specified period.

- 30% when the market price of the Company’s common stock trades at or above $0.50 for a specified period.

- 20% when the market price of the Company’s common stock trades at or above $0.60 for a specified period.

Restricted Shares [Member] | Director [Member]

Number of restricted shares issued, new issue

940,595

Share price (in dollars per share)

$ 2

Amortization of unvested restricted shares

35,800

Value of restricted stock grant

$ 430,000

Method used

Monte Carlo Simulation.

Expected term (in years)

6 years

Volatility rate

98.00%

Risk free interest rate

2.00%

Restricted Shares [Member] | Former Interim Chief Executive Officer [Member]

Number of restricted shares issued, new issue

6,290,000

Performance Market Based Stock Awards [Member]

Amortization of unvested restricted shares

$ 7,698

$ 41,854

Value of restricted stock grant

$ 38,000

Method used

Monte Carlo Simulation.

Expected term (in years)

6 years

Volatility rate

88.00%

Risk free interest rate

1.79%

Performance Stock Awards January 2016 [Member]

Number of restricted shares issued, new issue

6,281,250

Share price (in dollars per share)

$ 0.12

Value of restricted stock grant

$ 509,000

Share based compensation

$ 254,391

Method used

Monte Carlo Simulation.

Expected term (in years)

1 year

Volatility rate

106.00%

Risk free interest rate

0.65%

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Segments (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016	Jun. 30, 2017	Jun. 30, 2016
Sales, net	$ 2,918,097	$ 1,313,863	$ 5,208,418	$ 2,756,761
Cost of goods sold	2,441,243		4,591,829
Gross profit	476,854	(66,604)	616,589	70,767
Total operating expenses	1,154,498	978,912	2,206,169	1,916,947
Loss from operations	(677,644)	(1,045,516)	(1,589,580)	(1,846,180)
Total other income (expenses)	223,385	(7,799)	419,603	(3,240)
Loss before provision for income taxes	(901,029)	$ (1,037,717)	(2,009,183)	$ (1,842,940)
Consumer [Member]
Sales, net	1,647,263		3,245,903
Cost of goods sold	1,262,853		2,669,554
Gross profit	384,410		576,349
Total operating expenses	540,387		1,008,889
Loss from operations	(155,977)		(432,539)
Total other income (expenses)	(6,133)		(11,219)
Loss before provision for income taxes	(162,110)		(443,759)
Industrial [Member]
Sales, net	1,608,502		2,549,183
Cost of goods sold	1,516,058		2,508,943
Gross profit	92,444		40,240
Total operating expenses	325,556		579,351
Loss from operations	(233,112)		(539,111)
Total other income (expenses)	(30,923)		(30,923)
Loss before provision for income taxes	(264,035)		(570,034)
Corporate [Member]
Sales, net	(337,668)		(586,668)
Cost of goods sold	(337,668)		(586,668)
Gross profit
Total operating expenses
Loss from operations
Total other income (expenses)
Loss before provision for income taxes
InterSegmentsEliminations [Member]
Sales, net
Cost of goods sold
Gross profit
Total operating expenses	288,555		617,929
Loss from operations	(288,555)		(617,929)
Total other income (expenses)	(186,329)		(377,461)
Loss before provision for income taxes	$ (474,884)		$ (995,390)

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Notes Payable (Details) - USD ($)	Jun. 30, 2017	Dec. 31, 2016
Total notes payable	$ 4,637,565	$ 5,504,818
Less current portion	(1,718,496)	(2,541,178)
Long-term portion of notes payable	2,919,069	2,963,640
2016 Secured Note [Member]
Total notes payable	354,893	396,562
2016 5% Related Party Unsecured Notes Member [Member]
Total notes payable		1,000,000
2016 8% Related Party Unsecured Notes Member [Member]
Total notes payable	1,632,672	1,458,256
2016 WEBA Seller Notes [Member]
Total notes payable	$ 2,650,000	$ 2,650,000

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Notes Payable (Details Narrative) - USD ($)				1 Months Ended	6 Months Ended		12 Months Ended
	Aug. 10, 2017	Aug. 04, 2017	Dec. 27, 2016	Sep. 30, 2016	Jun. 30, 2017	Jun. 30, 2016	Dec. 31, 2016
Gain on settlement						$ (15,000)	$ 15,000
Debt discount							26,872
Gross proceeds from offering							1,760,000
Accrued offering							$ 50,000
Amortization expense					174,416
Redeemption of shares		$ 1,550,000
Issuance of common stock for cash	$ 260,000					$ 2,936,792
2016 Secured Note [Member] | Minimum [Member] | Ascentium Capital [Member] | GlyEco Acquisition Corp. #5 [Member]
Interest rate							5.80%
Debt terms				4 years
2016 Secured Note [Member] | Maximum [Member] | Ascentium Capital [Member] | GlyEco Acquisition Corp. #5 [Member]
Interest rate							9.00%
Debt terms				5 years
GlyEco Acquisition Corp. #5 [Member] | 2016 Unsecured Note [Member] | 5% Notes Subscription Agreement [Member]
Principal balance			$ 1,000,000
Maturity date			May 31, 2017
GlyEco Acquisition Corp. #1 [Member] | 2016 Unsecured Note [Member] | 5% Notes Subscription Agreement [Member]
Principal balance			$ 1,810,000
Maturity date			Dec. 27, 2017
Exercise value of warrants			$ 5,656,250
Exercise price of warrants			$ 0.08

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Capital Lease (Details Narrative)	Apr. 13, 2017 USD ($)
Debt Disclosure [Abstract]
Sale of equipment	$ 1,700,000
Monthly rental payments	$ 44,720

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Related Party Transactions (Details) - Vice President of U.S. Operations [Member] - USD ($)	6 Months Ended
	Jun. 30, 2017	Jun. 30, 2016
Due from Related Parties, Current [Roll Forward]
Beginning Balance	$ 5,123	$ 2,791
Monies owed to related party for services performed	61,818	47,219
Monies paid, net	(66,941)	(51,807)
Ending Balance		$ (1,797)

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Related Party Transactions (Details Narrative) - GlyEco Acquisition Corp. #1 [Member] - 2016 Unsecured Note [Member] - 5% Notes Subscription Agreement [Member]	Dec. 27, 2016 USD ($)
Principal balance	$ 1,000,000
Principal balance	1,810,000
Exercise value of warrants	$ 5,656,250

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Commitments and Contingencies (Details Narrative) - USD ($)				6 Months Ended
	Mar. 22, 2016	Jan. 08, 2016	Dec. 28, 2015	Jun. 30, 2017	Aug. 15, 2017	Dec. 31, 2016
Negotiated payment				$ 250,000
Demand for payment to maintain access to the facility			$ 2,300,000
Payment to landlord					$ 335,000
Maximum [Member]
Environmental remediation liabilities						$ 2,000,000
Minimum [Member]
Environmental remediation liabilities						$ 1,000,000
GlyEco Acquisition Corp. #4 [Member] | LitigationCaseSignificantOutstanding1Member
Name of the plantiff	Encore Petroleum, LLC.
Domicile of litigation	Superior Court of New Jersey Law Division, Hudson County.
GlyEco Acquisition Corp. #4 [Member] | Litigation Case Significant Outstanding [Member]
Litigation settlement amount		$ 95,000
Name of the plantiff		Onyxx Group LLC.
Domicile of litigation		Circuit Court of Hillsborough County, Florida.

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Subsequent Events (Details Narrative) - Subsequent Event [Member] - USD ($)		6 Months Ended
	Aug. 10, 2017	Jun. 30, 2017
Rights offering expiration date	Aug. 04, 2017
Gross proceeds	$ 2,290,000	$ 62,500
Cash	670,000
Redemption of previously issued notes	1,620,000
Sale of common stock	$ 28,600,000
Price per share	$ 0.08
Shares issued in exchange of principal and interest	2,754,500
Repayment of amount	$ 220,360
Common stock issued in connection with warrants (In shares)		781,250
Warrants value		$ 781,250
Exercise price		$ 0.08
Equity Incentive Program [Member]
Number common stock issued		78,973