UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
x
☐
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2013
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________to ______________
Commission File Number 001-35436
TECNOGLASS INC.
(Exact Name of Registrant as Specified in Its Charter)
Cayman Islands
(State or Other Jurisdiction of Incorporation or Organization)
N/A
(I.R.S. Employer Identification Number)
Avenida Circunvalar a 100 mts de la Via 40
Barrio Las Flores, Barranquilla
Colombia
(Address of Principal Executive Offices)
(Zip Code)
(57)(5)3734000
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Ordinary Shares, par value $0.0001 per share
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.
Yes ☐ No x
Yes ☐ No x
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90
days.
Yes x No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to
be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files).
Yes x No ☐
Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K.
☐
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
definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☐
Non-accelerated filer ☐
(Do not check if a smaller reporting company)
Accelerated filer ☐
Smaller reporting company x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No x
As of June 28, 2013 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the ordinary shares
held by non-affiliates of the registrant was approximately $41,785,440 based on its last reported sales price of $9.93 on the NASDAQ Capital Market.
As of April 11, 2014, there were 24,310,363 ordinary shares, $0.0001 par value per share, outstanding.
Documents Incorporated by Reference: None.
TECNOGLASS INC.
FORM 10-K
TABLE OF CONTENTS
Business.
Risk Factors.
Unresolved Staff Comments.
Properties.
Legal Proceedings.
Mine Safety Disclosures.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
Selected Financial Data.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Quantitative and Qualitative Disclosures About Market Risk.
Financial Statements and Supplementary Data.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.
Controls and Procedures.
Other Information.
Directors, Executive Officers and Corporate Governance.
Executive Compensation.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Certain Relationships and Related Transactions, and Director Independence.
Principal Accounting Fees and Services.
PART I
PART II
Item 1.
Item 1A.
Item 1B.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Exhibits, Financial Statement Schedules.
1
1
13
13
13
13
14
15
15
17
17
22
22
22
23
26
27
27
32
35
38
43
44
44
FORWARD LOOKING STATEMENTS AND INTRODUCTION
All statements other than statements of historical fact included in this Annual Report on Form 10-K (this “Form 10-K”) including, without limitation,
statements under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business
strategy and the plans and objectives of management for future operations, are forward looking statements. When used in this Form 10-K, words such as
“anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions, as they relate to us or our management, identify forward looking statements.
Such forward looking statements are based on the beliefs of management, as well as assumptions made by, and information currently available to, our
management. Actual results could differ materially from those contemplated by the forward looking statements as a result of certain factors detailed in our
filings with the Securities and Exchange Commission. All subsequent written or oral forward looking statements attributable to us or persons acting on our
behalf are qualified in their entirety by this paragraph.
Unless the context otherwise requires:
·
·
·
·
references to the “Company” and to “we, ” “us” or “our” are to Tecnoglass Inc., a Cayman Islands exempted company, and its subsidiaries;
references to “Tecnoglass Holding” are to Tecno Corporation;
references to “TG” are to Tecnoglass S.A.; and
references to “ES” are to C.I. Energía Solar S.A. E.S. Windows.
Item 1.
Business.
Overview
PART I
We were originally formed under the name “Andina Acquisition Corporation” for the purpose of effecting a merger, share exchange, asset
acquisition, share purchase, recapitalization, reorganization or other similar business combination with one or more businesses or entities. On March 22,
2012, we consummated our initial public offering (the “IPO”), and on December 20, 2013, we consummated our initial business combination (the “Merger”),
whereby our wholly-owned subsidiary merged with and into Tecnoglass Holding. As a result of the Merger, Tecnoglass Holding and its indirect, wholly-
owned subsidiaries, TG and ES, became our direct and indirect subsidiaries. Accordingly, the business of Tecnoglass Holding and its subsidiaries became our
business. We are now a holding company operating through our direct and indirect subsidiaries.
The Merger was accounted for as a reverse acquisition with Tecnoglass Holding being considered the accounting acquirer in the Merger. For
accounting and financial purposes, we were treated as the acquired company, and Tecnoglass Holding was treated as the acquiring company. Accordingly,
historical information, including historical financial information and the historical description of our business, for periods and dates prior to December 20,
2013, include information for Tecnoglass Holding and its subsidiaries.
Our Business
General
We are a leading manufacturer of hi-spec, architectural glass and windows for the western hemisphere residential and commercial construction
industries, operating through our direct and indirect subsidiaries. Headquartered in Barranquilla, Colombia, we operate out of a 1.2 million square foot
vertically-integrated, state-of-the-art manufacturing complex that provides easy access to the Americas, the Caribbean, and the Pacific.
We sell our products to more than 800 customers in North, Central and South America. The United States accounted for approximately 36% and
38% of our combined revenues in 2013 and 2012, respectively, and Panama accounted for approximately 6% and 11% of our combined revenues in 2013 and
2012, respectively. Our tailored, high-end products are found on some of the world’s most distinctive properties, including the El Dorado Airport (Bogota),
Imbanaco Medical Center (Cali), Trump Plaza (Panama), Trump Tower (Miami), and The Woodlands (Houston).
1
TG. TG is a leading manufacturer of a variety of glass products installed primarily in commercial and residential buildings, including tempered
safety, double thermo-acoustic and laminated glass. TG products are installed in hotels, residential buildings, commercial and corporate centers, universities,
airports and hospitals in a variety of applications such as floating facades, curtain walls, windows, doors, handrails, interior and bathroom spatial dividers.
Approximately 38% of TG products are supplied to ES for installation in various products that ES manufactures, with the balance of TG products being sold
to customers throughout North, Central and South America.
TG also produces aluminum products such as profiles, rods, bars, plates and other hardware used in the manufacture of windows. In 2007, TG
established its Alutions plant in Barranquilla, Colombia for extrusion, smelting, painting and anodizing processes, and for exporting, importing and marketing
aluminum products. The Alutions plant contributes more than 90% of the raw materials needed for production of TG aluminum products.
Glass Magazine ranked TG as the second largest glass fabricator serving the U.S. market in 2013. We believe that it is the leading glass
transformation company in Colombia, capturing 40% of the market share in the country.
ES. ES is a leader in the production of high-end windows, with more than 29 years of experience in the glass and aluminum structure assembly
market in Colombia. ES designs, manufactures, markets and installs architectural systems for high, medium and low rise construction, glass and aluminum
windows and doors, office dividers and interiors, floating facades and commercial display windows.
To facilitate its participation in the international market, ES’s U.S. commercial ally located in Miami, ES Windows LLC (“ESW LLC”), a company
partially owned by Christian T. Daes and José M. Daes, who are also our executive officers and directors, opened two new exclusive distributors in Florida
aimed at international customers: AIP (Miami) and IFP (Fort Myers). ESW LLC is a member of the American Architectural Manufacturers Association, a
technical information center for the architecture industry with highest standards. ESW LLC sends project specifications and orders from its clients to ES, and
in turn, receives pricing quotes from ES which are conveyed to the client. ESW LLC does not install any of our products.
Based on our knowledge of the south Florida construction market, we believe that ES participated in 80% of the high rise building projects in South
Florida in the years leading up to the 2008 economic crises through the sale of its products to RC Aluminum Industries (“RC Aluminum”). ES also possesses
the requisite permits to commercialize hurricane windows in Miami-Dade County, Florida, one of the most demanding certifications in the world for
manufacturers of windows and window frames.
Through sales to customers such as National Enclosure Company (“NEC”) and Enclos Corp. (“Enclos”), ES has expanded its U.S. sales outside of
the Florida market for windows, into the high-tech market for curtain walls, a product that is in high demand and represents a new trend in architecture, and
floating facades. Due to the sophistication of these new products, ES believes that sales of curtain walls will generate higher margins as compared to
traditional window frames from walls or floor to ceiling windows. Curtain walls produced by ES are composed of “high performance” materials that are
produced by Alutions and TG with state of the art technology.
2
In Panama, ES sells products primarily to companies participating in large construction projects in the most exclusive areas of Panama City. For
example, ES products were supplied in the construction of the tallest building in Central and South America, The Point, as well as in the construction of other
modern hotels in the region such as Megapolis and The Trump. Based on ES’s knowledge of the construction market in Central America, we have entered
into one of the highest value window supply contracts in the hotel industry in Central America for the Hotel Soho with an estimated value of $9.0 million.
Competitive Strengths
Vertical Integration
We believe we are unique in vertically integrating the purchase of raw materials, the manufacture of glass and aluminum products and the
subsequent production of customized glass and windows for architectural and industrial settings. By vertically integrating these functions, we are able to price
our products competitively while maintaining strict quality control measures to guarantee the high quality of our products. Additionally, we benefit from
significant advantages in efficiency and time-to-market for new or customized products. This vertically integrated model provides attractive margins with
significant operating leverage.
Innovation
We have made significant investments in machinery and equipment in order to utilize the latest technology on our production lines, including a
recently completed approximately $27 million capital investment in land, warehouses and state-of-the-art glass making equipment thereby expanding our
manufacturing capacity. For certain of our products, we offer DuPont Sentryglas® laminated glass interlayers which are recognized as industry-leading
laminated glass solutions with five times the resistance strength of other materials available on the market. We also use a laminator and jumbo tempering oven
capable of producing extra-large slabs of laminated glass which are sought after in the high-end window market. These investments in machinery and
equipment, together with our highly trained labor force, allow us to offer state-of-the-art custom designed products quickly modified to meet customer
demands. We also have a staff of specialists dedicated to product design in order to meet customer specifications.
Superior Customer Service
In addition to manufacturing high quality products, our value proposition to our customers is based on industry-leading lead times, on-time delivery
and superior after-sale support. Through the coordinated efforts of our sales teams, product specialists, and field service teams, we deliver high quality service
to our customers, from the time the initial order is placed through the delivery and installation of our products. By providing an efficient flow of product from
order through delivery, our manufacturing processes allow us to deliver made-to-order products consistently on time, which we believe is an important
competitive strength.
3
Management Experience
José Daes, our chief executive officer, and Christian Daes, our chief operating officer, have more than 30 and 25 years of industry experience,
respectively. In addition, our executive management teams have worked together for many years at our operating subsidiaries. This long tenure in the
industry, and as a team, has enabled our management to build significant relationships with both clients and field level management. We believe that these
relationships, coupled with management’s strong technical expertise, create a significant competitive advantage.
Location
Our headquarters and manufacturing campus is located in Barranquilla, Colombia, which is strategically located near three major ports in
Barranquilla, Cartagena and Santa Marta. These ports, which are only two hours’ drive from each other, provide us with sea access to all major markets
globally.
High Barriers to Entry
Entry into many of the markets that we serve is limited due to the technical certifications required on high specification building projects. Our
success is due in large part to the breadth of our product offering and our reputation for delivering high quality, made-to-order architectural glass on time.
These factors are required to compete successfully for multimillion dollar projects typical of our business. Given the vertically-integrated nature of our
operations, including the aluminum extrusion products provided by TG, there is a more limited set of competitors and entry into these markets. In addition,
the equipment needed to operate in the glass and window industry is expensive, requiring a significant upfront capital investment.
Competitive pricing
We offer our customers highly competitive prices due to efficiencies realized from vertical integration and low labor costs. These competitive
advantages allow us great flexibility in pricing their components to be competitive in a variety of markets.
Strategy
We have identified the following items that we believe are important in advancing our business:
Continued investments in machinery and equipment with state-of-the-art technology
We spend approximately $1.7 million per year in designing and developing new products. Additionally, during 2013 we made approximately $10 million in
capital investments in warehouses and construction and $19 million investment in state-of-the-art glass making equipment, including jumbo tempering
machines capable of producing extra-large glass dimensions, thereby expanding our manufacturing capacity by over 50,000 square feet for TG and over
100,000 square feet for ES in order to double our combined capacity for the next three years.
4
Development of additional high value products
We have a demonstrated track record of developing new products and will continue to focus on capitalizing on new product opportunities in the
future. We constantly identify shifting global trends and growing marketplace needs, and design proposals to meet those needs. A feasibility and tuning
program, including testing at specialized laboratories in the U.S., is carried out before marketing a new product. One example is the development of “Thermal
Break” products, which consists of extruding two profiles of glass and binding them through a thermal insulator which provides the same structural resistance
of aluminum. Thermal Break products are designed for regions that endure extreme temperatures, such as Canada and the northern U.S.
Manufacture the highest quality products in the market through a rigorous quality assurance program
Our plants are organized internally by processes, each of which is independently and continually supervised by the Quality Assurance department.
The Quality Assurance department maintains rigorous oversight over energy, water, recyclable waste and process optimization indicators, in order to produce
high quality sustainable products. Approximately 30% of all our waste is recycled.
Continued vertical integration provides margin enhancement
We benefit from operating together under a combined facility, providing advantages in meeting customer and market needs and managing costs. By
continuing to expand our degree of vertical integration, we can further enhance productivity, create cost efficiencies and increase operating margins.
Leverage strength in Colombia market to further penetrate Latin America
With a strong base in Colombia, we have already successfully expanded into nearby geographies. Our glass products are featured in major
construction projects in Argentina, Aruba, Costa Rica, Panama and Puerto Rico. As the construction market throughout Latin America grows, we are
positioned to capture new growth in the markets we have currently penetrated, as well as in new high growth countries.
Leverage strength in Florida market to further penetrate U.S.
We believe we have an established and leading presence in the Florida construction market as providers of high value, impact-resistant glass
products. ES’s hurricane-proof products are certified in compliance with the stringent requirements of hurricane-proof windows in accordance with applicable
U.S. regulations. With a quality of product proven by our success and compliance in the impact-resistant market, we have successfully entered the U.S.
remodeling and replacement parts market. In addition, we have the opportunity to grow geographically in the U.S., particularly into other coastal markets on
the East Coast which are affected by hurricanes, significant temperature fluctuations and other extreme weather.
5
Maintain fast and reliable delivery to customers due to strategic location
From the Port of Barranquilla, products can be transported to Panama in one hour and to Houston and Miami within two hours by air, within two
days by sea to Panama and within four days by sea to Houston and Miami.
Penetrate additional markets
With a strong base in Colombia and Florida, we will seek to expand into further geographies, such as Asia and Europe. We believe the centralized
location of the Port of Barranquilla will aid in our expanding into such new markets.
Products
TG manufactures and sells the following products:
Laminated/Thermo-Laminated Glass — produced by bonding two glass sheets with an intermediate film in-between. As a safety feature, this product
fractures into small pieces if it breaks.
Thermo-Acoustic Glass — manufactured with two or more glass sheets separated by an aluminum or micro-perforated steel profile. This product has
a double-seal system that ensures the unit’s tightness, buffering noise and improving thermal control. This product serves as an excellent noise barrier, which
is used especially in zones close to airports, traffic or wherever there are unpleasant sounds.
Tempered Glass — glass subject to a tempering process through elevated temperatures resulting in greater superficial elasticity and resistance than
conventional glass.
Silk-Screened Glass — special paint is applied to glass using automatic machinery and numerical control which ensures paint homogeneity and an
excellent finish.
Curved Glass — produced by bending a flat glass sheet over a mold, using an automated heat process, which maintains the glass’ physical
properties.
Digital Print Glass — digital printing allows any kind of appearance required by the client, offering versatility to projects. T.
TG’s aluminum products sold through its Alutions brand include bars, plates, profiles, rods and tubes used primarily in the manufacture of
architectural glass settings including windows, doors, spatial separators and similar products.
ES manufactures and sells the following products:
Floating facades — act as a window screen hanging outside a building and are available in many technical specifications and profiles to define
colors, thickness, glass types, finishes, type of ventilation and design complements.
6
Windows and Doors — line of window and door products defined by the different types of glass finish, such as normal, impact resistant, hurricane-
proof, safety, soundproof and thermal, available in numerous structures, including fixed body, sliding, projecting and guillotine windows, sliding and
swinging doors.
Commercial display windows — commercial and interior display windows with a broad range of profiles, colors and crystal finishes. Products
combine functionality, aesthetics and elegance and are available in a broad range of structures and materials
Hurricane-proof windows — combine heavy-duty aluminum or vinyl frames with special laminated glass to provide protection from hurricane-force
winds up to 180 mph and wind-borne debris by maintaining their structural integrity and preventing penetration by impacting objects.
Automatic doors — exclusive representative in Colombia of Horton Automatics, a manufacturer of automatic doors including glass window systems.
Bathroom dividers — bathroom cubicle division systems, formed by combining glass panels, frames and doors.
Other — Polyvinyl structures and other components of architectural systems.
Brands and Trademarks
Our brands include Tecnoglass, ES Windows and Alutions. Our registered trademarks include “Alutions by Tecnoglass” with the accompanying logo
and “Alutions”. Tecnoglass and ES Windows are not registered as trademarks by us.
Sales, Marketing and Customer Service
Sales and marketing
Our sales strategy primarily focuses on attracting and retaining customers by consistently providing exceptional customer service, leading product
quality, and competitive pricing. Our customers also value their shorter lead times, knowledge of building code requirements and technical expertise, which
collectively generate significant customer loyalty. Our products are marketed using a combination of their internal sales representatives and independent sales
representatives and directly to distributors. Our internal sales representatives receive performance-based compensation based on sales and profitability
metrics. We primarily market our products based on product quality, outstanding service, shorter lead times and on-time delivery.
7
Customer Service
We believe that our ability to provide customers outstanding service quality serves as a strong competitive differentiator. Our customer relationships
are established and maintained through the coordinated efforts of our sales and production teams. We employ a team of highly seasoned professionals devoted
to addressing customer support with the goal of resolving any issue in a timely manner. In order to promote customer loyalty and employee development, we
developed ES Windows University with the primary objectives of training employees to be aware of client and supplier needs and familiarizing them with the
our strategic goals in order to improve the competitiveness, productivity and quality of all products and services offered.
Working Capital Requirements
Trade accounts receivable is our largest component of working capital, including receivables relating to contractual retention amounts that can be
outstanding throughout the project duration for large-scale architectural projects. Our inventory requirements are not significant since our products are made-
to-order rather than build-to-stock. As a result, inventory levels follow customer demand for products produced.
Customers
Our customers include architects, building owners, general contractors and glazing subcontractors in the commercial construction market. We have
over 800 customers. Of our 200 most representative customers, about 18% are located in North America, 15% in Central America and 67 % in South
America. Excluding revenue from related parties, no customer accounted for 10% or more of our net sales during 2013 or 2012.
Materials and Suppliers
Our primary manufacturing materials include glass, ionoplast, polyvinyl butyral, aluminum and vinyl extrusions. Although in some instances we
have agreements with our suppliers, these agreements are generally terminable by us or the supplier counterparties on limited notice. Typically, all of our
materials are readily available from a number of sources, and no supplier delays or shortages are anticipated.
We source raw materials and glass necessary to manufacture our products from a variety of domestic and foreign suppliers. Our main supplier of
glass is PPG Industries, located in Pittsburgh, Pennsylvania, one of the world’s leading producers of glass products. In 2013 and 2012, PPG supplied TG with
19% and 21% of its raw material requirements, respectively. Our main suppliers of aluminum are Danostro S.A.S., a Colombian company, and Mitsubishi
International Corporation.
Warranties
We offer product warranties which we believe are competitive for the markets in which our products are sold. The nature and extent of these
warranties depend upon the product. Our standard warranties are generally from five to ten years for architectural glass, curtain wall, laminated and tempered
glass, window and door products. In the event of a claim against a product for which we have received a warranty from the supplier, we pass the claim back to
the supplier.
8
Certifications
Among our many designations and certifications, TG has earned The Miami-Dade County Notice of Acceptance, one of the most demanding
certificates in the industry and a requirement to market hurricane-resistant glass in Florida. TG’s products comply with Miami-Dade county’s safety code
standards as its laminated anti-hurricane glass resists impact, pressure, water and wind. TG is also the only company in Latin America authorized by PPG
Industries and Guardian Industries to manufacture floating glass facades.
Our subsidiaries have received a number of other certifications from other national and international standard-setting bodies.
TG Certifications include:
·
·
·
·
·
·
·
·
·
NTC-1578
ASTM E774 1997
ISO 9001: 2008 Certificate of Quality Assurance
ISO 14001: 2004 Certificate of Environmental Management
Safety Glazing Certification Council (SGCC) for tempered and laminated glass: ANZI
Z97 1-2004
International Glass Certification Council (IGCC) for insulated glass: ASTM E774 – 97
Pittsburgh Plate Glass (PPG) certified supplier
Member of ACOLVISE (Colombia Association of Safety Glass Transformers)
ES Certifications include:
·
·
·
·
NTC-ISO 9001: 2008 Certificate of Quality Assurance
NTC-ISO 14001: 2004 Certificate of Environmental Management
Member of the American Architectural Manufacturers Association (AAMA)
Complies with Miami-Dade County’s stringent safety code regulations for hurricane-proof windows
Competitors
We have local competitors in Colombia as well as competitors in the markets internationally, in each of the glass, aluminum and finished products
sectors. Glass Technologia en Vidrios y Ventanas S.A., Arquicentro S.A., Industrias Lehner and Aluminum Estructural S.A. compete with us in Colombia in
the finished products market. Apogee Enterprises, Inc., PGT, Inc. and WinDoor Inc. compete with us in the U.S. in the finished products market. Golden
Glass Security, Vid-plex Universal S.A., Aluace Ltda and Laminados y Blindados compete with us locally in the glass and aluminum markets. Oldcastle, Inc.,
Trulite Inc., and PRL Glass Systems among others compete with us in the U.S. in the glass and aluminum products markets.
9
The key factors on which we and our competitors compete for business include: quality, price, reputation, breadth of products and service offerings,
and production speed. We face intense competition from both smaller and larger market players who compete against us in our various markets including
glass, window and aluminum manufacturing. As we attempt to expand into Asian markets, we face competition from local and regional Asian competitors
with low labor costs as well.
The principal methods of competition in the window and door industry are the development of long-term relationships with window and door
distributors and dealers, and the retention of customers by delivering a full range of high-quality customized products on demand with short turnaround times
while offering competitive pricing. The vertical integration of our operations, our geographic scope, low labor costs and economies of scale have helped our
subsidiaries consolidate their leading position in Colombia and bolstered their expansion in the U.S. and other foreign markets.
Sales and Marketing
We employ a limited number of in-house sales employees. Most of our sales and marketing efforts are handled by area sales representatives who
work on a commission basis.
We do not rely on significant traditional advertising expenditures to drive net sales. We have established and maintain credibility primarily through
the strength of our products, our customer service and quality assurance, the speed at which we deliver finished products and the attractiveness of our pricing.
Our advertising expenditures consist primarily of maintaining our subsidiaries’ websites.
Backlog
We had combined outstanding orders of $120 million as of December 31, 2013, as compared to $110 million as of December 31, 2012. Our backlog
is comprised mostly of ES’ contract sales for projects that can last up to several years until completion. Backlog grew less than sales between December 31,
2013 and December 31, 2012 as a result of an increase of sales in non-contract form, standard sales. We do not believe that backlog is indicative of our future
results of operations or prospects.
Government Regulations
We are subject to extensive and varied federal, state and local government regulation in the jurisdictions in which we operate, including laws and
regulations relating to our relationships with our employees, public health and safety and fire codes. Additionally, certain of the jurisdictions in which we
operate require that installation of doors and windows be approved by competent authorities that grant distribution licenses.
Although our business and facilities are subject to federal, state and local environmental regulation, environmental regulation does not have a
material impact on our operations.
10
Research and Development
During the years ended December 31, 2013 and December 31, 2012, we spent approximately $1.7 and $0.7 million in research and development.
During 2013 the design and production of new matrices for the extrusion of aluminum profiles for new products and improvements on existing ones
represented an increase of $1.0 million compared with the previous year.
Our commercial ally in the United States, ES Windows LLC bears significant costs related to the development of new products, since they pay for
the external tests than need to be performed on our products in order to comply with strict building codes. ESWindows LLC is fully permitted to
commercialize hurricane windows in the Miami-Dade County, Florida, which has one of the most demanding certifications in the world of window frames.
Employees
As of December 31, 2013, we had a total of 3,102 employees, with 2,031 employed directly by ES and 1,071 employed directly by TG, none of
whom is represented by a union. Most of our employees are hired through seven temporary staffing companies and are employed under one-year fixed-term
employment contracts. Management believes it has good relations with our employees. We provide ongoing training programs to our employees through the
self-established E.S. Windows University.
Company History
We were formed under the name “Andina Acquisition Corporation” as an exempted company incorporated in the Cayman Islands on September 21,
2011 in order to effect a merger, share exchange, asset acquisition, share purchase, recapitalization, reorganization or other similar business combination with
one or more businesses or entities.
On March 22, 2012, we closed our IPO of 4,000,000 units, with each unit consisting of one ordinary share and one warrant to purchase one ordinary
share at an exercise price of $8.00 per share. On March 30, 2012, we consummated the closing of the sale of an additional 200,000 units which were sold
subject to the underwriters’ over-allotment option. The 4,200,000 units sold in the IPO, including the units sold subject to the over-allotment option, were sold
at an offering price of $10.00 per unit, generating total gross proceeds of $42,000,000. Simultaneously with the consummation of the IPO, we consummated a
private placement of 4,800,000 warrants (“private warrants”) at a price of $0.50 per warrant and, to the underwriters, options to purchase an aggregate of
900,000 units at a price of $500,100, generating total proceeds of $2,900,100. After deducting the underwriting discounts and commissions and the offering
expenses, the total net proceeds to us were $43,163,000 (which included the $2,900,100 we received from the sale of warrants and the underwriters’ unit
purchase options), of which $42,740,000 was deposited into a trust account. The remaining proceeds of $423,000 became available to be used as working
capital to provide for business, legal and accounting due diligence on prospective business combinations and continuing general and administrative expenses.
The IPO was conducted pursuant to a registration statement on Form S-1 (Reg. No. 333-178061), that became effective on March 16, 2012.
11
From the consummation of our IPO until August 17, 2013, we were searching for a suitable target business to acquire. On August 17, 2013, we
entered into an agreement and plan of reorganization, pursuant to which agreement, as amended, we acquired Tecnoglass Holding, TG and ES as direct and
indirect subsidiaries. On December 20, 2013, we held an extraordinary general meeting of our shareholders, at which our shareholders approved the Merger
and other related proposals. On the same date, we closed the Merger and Tecnoglass Holding and its indirect, wholly-owned subsidiaries, TG and ES, became
our direct and indirect subsidiaries.
Tecnoglass Holding is a corporation formed under the laws of the Cayman Islands that was founded in 2014 in connection with the Merger. TG is a
corporation formed under the laws of Colombia that was founded in 1994 by Jose M. Daes, our Chief Executive Officer, and Christian T. Daes, our Chief
Operating Officer. ES is a corporation formed under the laws of Colombia that was founded in 1984 by Jose M. Daes and Christian Daes.
At the closing of the Merger, 2,251,853 of the 4,200,000 public shares sold in our IPO were converted to cash at a conversion price of approximately
$10.18 per share, or an aggregate of approximately $22.9 million of the approximately $42.7 million held in the trust account. As consideration for the
merger, we issued Energy Holding Corp., a holding company and sole shareholder of Tecnoglass Holding, of which former shareholders of TG and ES are the
sole shareholders, an aggregate of 20,567,141 ordinary shares, or approximately 87% of the outstanding ordinary shares. Energy Holding Corp. also has the
contractual right to receive an additional 3,000,000 ordinary shares, to be released upon the attainment of specified share price targets or targets based on our
EBITDA in the fiscal years ending December 31, 2014, 2015 or 2016.
In connection with the Merger, we changed our name to “Tecnoglass Inc.” We also changed our fiscal year end from February 28th to December 31st
in order to coincide with the fiscal year end of Tecnoglass Holding and its subsidiaries.
Additional Information About the Company
We maintain websites for our subsidiaries, TG and ES, which can be found at www.tecnoglass.com and www.energiasolarsa.com, respectively.
Although we do not have a website dedicated to Tecnoglass Inc., the corporate filings of Tecnoglass Inc., including our Annual Reports on Form 10-K, our
Quarterly Reports on Form 10-Q, our Current Reports on Form 8-K, our proxy statements and reports filed by our executive officers and directors under
Section 16(a) of the Securities Exchange Act, and any amendments to those filings, are available free of charge on the Investor Relations page of each of the
subsidiary websites, which are updated as soon as reasonably practicable after we electronically file (or furnish in certain cases) such material with the
Securities and Exchange Commission. We do not intend for information contained in either subsidiary website, including the Investor Relations pages, to be a
part of this Form 10-K.
12
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (or JOBS Act), and are eligible to take advantage of
certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. However, we
have irrevocably opted not to take advantage of one such exemption which would have allowed us an extended transition period for complying with new or
revised accounting standards. We are, and will continue to be, subject to the same new or revised accounting standards as other public companies that are not
emerging growth companies.
We could remain an emerging growth company until the last day of our fiscal year following March 22, 2017 (the fifth anniversary of the
consummation of our initial public offering). However, if our non-convertible debt issued within a three-year period or our total revenues exceed $1 billion or
the market value of our ordinary shares that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal
year, we would cease to be an emerging growth company as of the following fiscal year.
Item 1A.
Risk Factors.
Not Applicable.
Item 1B.
Unresolved Staff Comments.
Not Applicable.
Item 2.
Properties.
We own and operate a 1.2 million square foot manufacturing complex located in Barranquilla, Colombia. This manufacturing campus houses a glass
production plant, aluminum plant and window and facade assembly plant. The glass plant has four lamination machines with independent assembly rooms,
six specialized tempering furnaces and glass molding furnaces, a computer numerical-controlled profile bending machine, as well as five silk-screening
machines. The Alutions plant has an effective installed capacity of 1,000 tons per month and can create a variety of shapes and forms for windows, doors and
related products. We also own three natural gas power generation plants with a capacity of 1,750 kilowatts each which supply the electricity requirements of
the entire manufacturing complex and are supported by three emergency generators.
We believe that our existing properties are adequate for the current operating requirements of our business and that additional space will be available
as needed.
Item 3.
Legal Proceedings.
TG and Tecnoglass USA, Inc., a related party, are named in civil actions for wrongful death, negligence and negligent infliction of emotional distress
arising out of a workplace accident where a crate of glass fell and fatally crushed a worker during the unloading process. The case, Olga Conesa, as Personal
Representative of the Estate of Wilfredo Tour Fernandez, deceased, and Efrain Tour Roa v. Tecnoglass USA, Inc., Tecnoglass SA, Power Dispatch, Inc., and
Amaurys Alvarez, Case No. 11-26873 CA 31, is pending in the Circuit Court of the Eleventh Judicial Circuit in and for Miami-Dade County, Florida. Plaintiff
Olga Conesa is the widow of the worker and has filed the claim on behalf of the Estate, herself and her minor children. Plaintiff Efrain Tour Roa, the
decedent's son, also claims he was injured in the accident and is seeking compensatory damages. TG denies liability and intends to rigorously defend the
claim. Because the plaintiffs are only suing for non-economic damages (i.e., pain and suffering and loss of enjoyment of husband/father), the total maximum
exposure is difficult to predict. TG’s insurance carrier, AIG, is providing coverage to TG under a $3 million wasting policy, which means that the attorneys’
fees and expenses incurred during the defense of the claim reduce the amount of coverage available. The case is scheduled for the trial calendar in Miami-
Dade County beginning September 15, 2014.
13
TG is also a named defendant in In the matter of Diplomat Properties, Limited Partnership as assignee of Shower Concepts, Inc. v. Tecnoglass
Colombia, S.A. et al., Case No. CACE 11-02811(09), 17th Judicial Circuit in and for Broward County, Florida.Plaintiff Diplomat Properties, Limited
(“Diplomat”) has asserted a claim for indemnification against TG and Tecnoglass USA, a related party. The claim arises from the supplying of glass shower
doors to a hotel/spa in Broward County, Florida. Specifically, in 2006, Diplomat commenced arbitration against Shower Concepts, Inc. seeking damages for
breach of contract due to fractures in the installed glass shower doors. The claim was based upon a contract between Diplomat and Shower Concepts for the
sale and installation of glass shower and bath doors to be used by Diplomat in hotel that it owned. Shower Concepts chose not to defend against the breach of
contract claim and in 2007, the arbitrator rendered an award in the amount of approximately $2 million in favor of Diplomat and against Shower Concepts.
The award was confirmed by the Circuit Court and, on July 23, 2008, a final judgment for breach of contract was entered against Shower Concepts. No
appeal of the decision was made. On August 11, 2009, Shower Concepts assigned its rights under the contract to Diplomat. On November 9, 2011, Diplomat
initiated the underlying action against the Tecnoglass entities and co-defendant, Guardian Industries Corp. The complaint asserted various claims which were
dismissed with prejudice. The only remaining claim against the Tecnoglass entities is common law indemnification. TG denies liability and asserts that
Shower Concepts was at fault and that as a joint tortfeasor, it cannot sue for indemnity. A trial date has not yet been set for this case.
Item 4.
Mine Safety Disclosures.
Not Applicable.
14
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
Currently, our ordinary shares are listed on the NASDAQ Capital Market under the symbol TGLS, and our warrants are quoted on the OTCQB
marketplace under the symbol TGLSW.
Until January 2014, our warrants were listed on the NASDAQ Capital Market. Prior to the Merger, the trading symbols of our ordinary shares and
warrants were ANDA and ANDAW, respectively. From March 2012 through November 2013, our units, sold in our IPO and described elsewhere in this Form
10-K, were traded on the NASDAQ Capital Market under the symbol ANDAU. However, as a condition to the Merger, we separated the units into their
component securities (one ordinary share and one warrant) on a mandatory basis and the units ceased public trading.
The following table sets forth the high and low sales prices for our ordinary shares and warrants for the periods indicated since our ordinary shares
and warrants commenced trading on May 10, 2012.
Period*
Fiscal 2014:
First Quarter
Fiscal 2013:
Fourth Quarter
Third Quarter
Second Quarter
First Quarter
Fiscal 2012:
Fourth Quarter
Third Quarter
Second Quarter**
Ordinary Shares
Warrants
High
Low
High
Low
$
$
$
$
$
$
$
$
11.15 $
8.50 $
2.95 $
1.08
10.40 $
10.23 $
10.00 $
10.00 $
12.66 $
9.85 $
10.00 $
8.15 $
9.93 $
9.90 $
9.87 $
9.80 $
9.60 $
9.50 $
1.45 $
0.60 $
0.25 $
0.27 $
0.25 $
0.25 $
0.40 $
0.45
0.18
0.15
0.13
0.13
0.21
0.25
* Prior to consummation of the Merger, our fiscal year end was February 28th. We changed our fiscal year end to December 31st in connection with the
Merger and all periods are stated on a December 31st year end.
** Period Commences May 10, 2012.
15
Holders
As of April 11, 2014, there were 319 holders of record of our ordinary shares and 18 holders of record of our warrants.
Dividends
We have not paid any dividends on our ordinary shares to date. The payment of any dividends is within the discretion of our board of directors. It is
the present intention of the board of directors to retain all earnings for use in the business operations and, accordingly, the board does not anticipate declaring
any dividends in the foreseeable future. The payment of dividends in the future, if any, will be contingent upon our revenues and earnings, if any, capital
requirements and our general financial condition.
Use of Proceeds
On November 18, 2011, we filed a registration statement on Form S-1 (File No. 333- 178061) for our IPO, which was declared effective on March
16, 2012. We paid a total of $1,260,000 in underwriting discounts and $477,000 for other costs and expenses related to the IPO. Of the remaining proceeds
from the IPO, we placed $39,840,000, plus $2,900,000 from a simultaneous private placement, in a trust account to be used to effectuate our initial business
combination. The remaining $423,000 became available to be used, and was used, as working capital to provide for business, legal and accounting due
diligence on prospective business combinations and continuing general and administrative expenses.
Upon consummation of the Merger, we paid from the trust account (i) approximately $2.2 million to EarlyBirdCapital, Inc. and Morgan Joseph
TriArtisan LLC for assisting us in structuring and negotiating the Merger and rendering merger and acquisition advisory services to us, (iii) approximately $1
million for legal fees and expenses, (iii) approximately $22,900,000 to our shareholders who elected to convert their ordinary shares to cash upon
consummation of the Merger and (iv) approximately $700,000 for other miscellaneous expenses in connection with consummating the Merger. The remaining
proceeds of approximately $15.9 million will be used by us for our working capital needs.
Purchases of Equity Securities by Issuer and Affiliates
Period*
December 2013
Total number of
ordinary shares
purchased
2,251,853
Average price paid
per ordinary share
Approximately
$10.18
Total number of
ordinary shares
purchased as part
of publicly
announced
repurchase plan
Approximate
dollar value of
ordinary shares
that may yet be
purchased under
the plan
2,251,853(1) $
0
* Each period covers the full calendar month indicated. There were no repurchases made in omitted months.
16
(1) In connection with the Extraordinary General Meeting of Shareholders held on December 20, 2013 and as required by our second amended and restated
memorandum and articles of association, public holders of our ordinary shares were granted the right to convert their ordinary shares to cash at a conversion
price of approximately $10.18 per share. The right to convert ordinary shares expired at the Extraordinary General Meeting of Shareholders. All shares
converted in connection with the Merger were cancelled by us, and are no longer issued and outstanding.
Item 6.
Selected Financial Data.
Not Applicable.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF TECNOGLASS AND ES
The following discussion of the Company’s financial condition and results of operations should be read in conjunction with the Company’s
consolidated financial statements and notes to those statements included in this Form 10-K. This discussion contains forward-looking statements that involve
risks and uncertainties. Please see the section entitled “Forward-Looking Statements and Introduction” in this Form 10-K.
Overview
The Company is a holding company operating through its indirect, wholly-owned subsidiaries: TG, which manufactures, transforms, markets and
exports a variety of glass products since 1994 and established the Alutions plant in 2007 for aluminum products, and ES, a leader in the production of high-
end windows and architectural glass systems. We have more than 30 years’ experience in the glass and aluminum structure assembly market in Colombia.
TG manufactures both glass and aluminum products. Its glass products include tempered glass, laminated glass, thermo-acoustic glass, curved glass,
silk-screened glass, acoustic glass and digital print glass. Its Alutions plant produces mill finished, anodized, painted aluminum profiles and rods, tubes, bars
and plates. Alutions’ operations include extrusion, smelting, painting and anodizing processes, and exporting, importing and marketing aluminum products.
The services portfolio of ES includes design, manufacture, marketing and installation of architectural systems for high, medium and low rise
construction, glass and aluminum windows and doors, office dividers and interiors, floating facades and commercial display windows. ES has participated in
80% of the High Rise Building projects in South Florida through a strategic alliance with RC Aluminum.
17
ES also signed an agreement with AM Craft for the distribution of PVC products and obtained the Step Up program with Broward Housing
Authority in charge of Sales in the Caribbean Islands.
Through sales to customers such as NEC and Enclos Corp, ES has expanded its US sales outside of the Florida market, entering into high-tech
markets for curtain walls, giving ES a niche market access since this product is in high demand and marks a new trend in architecture. It is a very
sophisticated product and therefore garners high margins for ES, far superior to the traditional window frames from walls or floor to ceiling. These products
involve high performance materials that are produced by Alutions and TG with state of the art technology.
In Panama, ES sells products primarily to companies participating in large construction projects in the most exclusive areas of the city. For example,
ES products were supplied in the construction of the tallest building in Central and South America, The Point, as well as in the construction of the most
modern hotels in the region such as Megapolis and The Trump. Based on ES’s knowledge of the construction market in Central America, ES has entered into
one of the highest value window supply contracts in the hotel industry in Central America for the Hotel Soho with an estimated value of $9.0 million in
supplied products.
ES has also consolidated its position in the Latin American market in recent years to become one of the most important players in the region.
How the Company Generates Revenue
TG manufactures both glass and aluminum products. Its glass products include tempered glass, laminated glass, thermo-acoustic glass, curved glass,
silk-screened glass, and digital print glass as well as mill finished, anodized, painted aluminum profiles and produces rods, tubes, bars and plates.
Window production lines are defined depending on the different types of windows: normal, impact resistant, hurricane-proof, safety, soundproof and
thermal. ES produces fixed body, sliding windows, projecting windows, guillotine windows, sliding doors and swinging doors. ES produces façade products
which include: floating facades, automatic doors bathroom dividers and commercial display windows.
TG sells to over 300 customers using several sales teams based out of Colombia to specifically target regional markets in South, Central and North
America. TG has sales representatives in the United States to address that market specifically. In addition, TG has approximately 10 free-lance sales
representatives in North America.
ES sells its products through four main offices/sales teams based out of Colombia, Peru, Panama and the US. The Colombia sales team is the largest
sales group, which has deep contacts throughout the construction industry. The Colombia sales team markets both ES’s products as well as installation
services. The Peruvian office is responsible for South American sales, excluding Colombia. Its sales forces in Panama and the US are not via subsidiaries but
arms-length agreements with sales representatives. ES has two types of sales operations: Contract sales, which are the high-dollar, specifically-tailored
customer projects; and Standard Form Sales.
18
Liquidity and Cash Flow
During the years ended in December 31, 2013 and 2012, $10.7 million and $(7.3) million were generated and used from operations and $8.4 million
and $9.2 million were generated from debt.
On December 20, 2013 as a result of the reverse merger described in Item 1 to this Form 10-K, $42.7 million were released from the Company’s
trust fund. Holders of 2,251,853 ordinary shares of the Company issued in its IPO exercised their rights to convert those shares to cash for approximately
$22.9 million. The Company also entered into subscription agreements with two investors to purchase 649,382 ordinary shares for an aggregate of $6.6
million. After approximately $3.9 million in transaction expenses, these transactions generated $22.5 million for working capital and general corporate
purposes in December 2013.
As a subsequent event, on March 5, 2014, the Company entered into a subscription agreement with an affiliate of A. Lorne Weil, the Company’s
Non-Executive Chairman of the Board, pursuant to which such affiliate agreed to purchase an aggregate of 95,693 ordinary shares of the Company for
$1,000,000, or approximately $10.45 per share, representing a slight premium to the closing price of the ordinary shares immediately prior to the execution of
the subscription agreement. The transaction closed on March 14, 2014.
As of December 31, 2013 and 2012, the Company had cash and cash equivalents of approximately $2.9 million and $2.1 million, respectively.
The Company expects that its cash flow from operations, proceeds from borrowings under the company’s lines of credit, and proceeds from the
reverse merger will be its primary sources of liquidity and will be sufficient to fund the Company’s cash requirements for the next twelve months.
Additionally, the Company could receive up to $90.2 million from the exercise of warrants and unit purchase options comprised of: up to $40 million
upon the exercise of all of the insider warrants and working capital warrants, up to $9.4 million upon the exercise of the unit purchase options, up to $7.2
million upon the exercise of the warrants underlying such unit purchase options and up to $33.6 million upon the exercise of the warrants issued in the
Company’s IPO. Any amounts received from such exercises will be used for working capital and other general corporate purposes.
Capital Resources
The Company transforms glass and aluminum which requires significant investments in state of the art technology. During the years ended
December 31, 2013 and 2012, the Company made investments primarily in building and construction, and machinery and equipment in the amount of $26.5
million and $25.9 million.
19
Results of Operations
Net operating revenues
Cost of sales
Operating expenses
Selling expenses
Administrative expenses
Total operating expenses
Operating income
Non-operating revenues and expenses (net)
Income tax provision
Net income (loss)
For the Years ended
December 31,
2013
2012
183,294
127,875
17,287
10,862
28,149
27,270
3,738
8,696
22,312
130,324
95,451
11,756
12,138
23,894
10,979
1,864
3,223
5,892
Comparison of years ended December 31, 2013 and December 31, 2012
The Company’s net operating revenues increased from $130 million in 2012 to $183 million in 2013, or 40%. The increase mostly was driven by
planning strategies designed to increase participation in the U.S. market.
The increase is partially due to high quality, reliability, and competitive prices which allowed the Company to further penetrate its existing markets.
Sales increase in the U.S. market has accounted for an $17.6 million increase. The increase is also partially due to a diversification of markets within the
country since the Company’s sales in the U.S. have historically been in the South Florida region and is now expanding to other regions of the United States.
Additionally, the Company has increased market share in the national market with timely delivery, competitive prices, and high quality. Excluding related
party sales, sales in Colombia grew by $38.5 million, which represents a 61% increase.
Costs of sales increased $33 million from 2012 to 2013. Purchase of raw materials grew by $21.5 million, or 40%, in direct relation with the increase
in sales. The cost of direct labor did not experience significant growth. During previous years the cost of direct labor had grown faster than sales, because
there is a lag between when new employees are hired and the company benefits fully from the new hires as most employees at the Company undergo
extensive training which usually takes several months. Indirect costs of manufacturing grew $8.7 million. The increase in indirect cost of manufacturing is
below the growth level for sales since many of these are fixed costs. Increases were mostly experienced in purchases of natural gas because of increased price
and shipping charges.
20
Selling and Administrative Expenses increased 18%, or $4.3 million, from 2012 to 2013. The increase was comprised of an increase in Selling
Expenses of $5.5 million due to increases in the cost of shipping, insurance and personnel offset by a decrease in administrative expenses of $1.3 million
comprised mostly due decrease in rent expense.
An extraordinary gain in non-operating income of $7.6 million arose from the decrease in the fair value of the Warrants liability.
As a result of the foregoing, net income increased 278% from $5.9 million in 2012 to $22.3 million in 2013.
Operating activities
Net cash used in operating activities was $10.7 million, and $(7.3) million during years ended December 31, 2013 and 2012, respectively. Major
uses of cash are as follows:
Payments to Suppliers and Employees
Taxes
December 31,
2013
December 31,
2012
121.3
2.7
83.1
2.3
Increases in payments to suppliers and employees are a direct consequence of the increase in cost of sales in line with the increase of sales.
Major differences between our net income and cash provided by operating activities are primarily depreciation, along with the timing differences
between when we recognize revenues and expenses and when those revenues and expenses are collected or paid.
Investing activities
On December 20, 2013, the Company raised $22.3 million in a reverse merger with Andina Acquisition Corporation.
Financing activities
Our net cash used in financing activities was $8.4 million, $9.2 million during the years ended December 31, 2013 and 2012, respectively.
Off-Balance Sheet Arrangements
We did not have any off-balance sheet arrangements as of December 31, 2013.
21
Contractual Obligations
Future contractual obligations represent an impact to future cash flows as shown in the table for the period ending December 31:
Contractual Obligations
Long Term Debt Obligations
Capital Lease Obligations
Total
TOTAL
48,254
17,833
66,087
Less than
1 year
Payments Due by Period
1-3
years
3-5
years
More than
5 years
14,850
3,141
17,991
24,098
6,060
30,158
8,321
3,426
11,747
985
5,206
6,191
The above financial liabilities do not include future interest to be paid on this debt, as such rates are variable. The average interest rate is
approximately 9.4% and 9.5% per annum for long term debt and capital lease obligations respectively and can vary up or down in accordance with money
market rates in Colombia.
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 8.
Financial Statements and Supplementary Data.
This information appears following Item 15 of this Report and is included herein by reference.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosures.
Crowe Horwath CO S.A. (“Crowe”), an independent registered public accounting firm, audited the consolidated financial statements for each of TG
and ES at December 31, 2012 and 2011, and for each of the two years in the period ended December 31, 2012 (independently for each company). Upon
consummation of the Merger, Marcum LLC (“Marcum”) was selected as the auditor for the Company, including its subsidiaries.
Crowe’s report on the consolidated financial statements for each of TG and ES at December 31, 2012 and 2011, and for each of the two years in the
period ended December 31, 2012, did not contain an adverse opinion or disclaimer of opinion, nor were such reports qualified or modified as to uncertainty,
audit scope, or accounting principles. During the period of Crowe’s engagement by each of TG and ES, and the subsequent interim period preceding Crowe’s
dismissal, there were no disagreements with Crowe on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or
procedure, which if not resolved to the satisfaction of Crowe, would have caused it to make a reference to the subject matter of the disagreement(s) in
connection with its reports covering such periods. In addition, no “reportable events,” as defined in Item 304(a)(1)(v) of Regulation S-K, occurred within the
period of Crowe’s engagement and the subsequent interim period preceding Crowe’s dismissal.
22
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation required by Rule 13a-15 of the Securities Exchange Act of 1934 under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Tecnoglass, Inc.
“disclosure controls and procedures” and “internal control over financial reporting” as of the end of the period covered by this Annual Report. Based on this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, because of the material weaknesses in our internal control over financial
reporting described below, our disclosure controls and procedures as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
were not effective. Notwithstanding the material weaknesses in our internal control over financial reporting as of December 31, 2013 described below, we
believe that the consolidated financial statements contained in this report present our financial condition, results of operations, and cash flows for the fiscal
years covered thereby in all material respects. To address the material weaknesses in our internal control over financial reporting described below the
Company performed additional manual procedures and analysis and other post-closing procedures in order to prepare the consolidated financial statements
included in this Annual Report on Form 10-K.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rules
13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. Under the supervision and with the participation of our management,
including our chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO) of 2013.
This Form 10-K does not include an attestation report of our independent registered certified public accounting firm regarding internal control over
financial reporting. Management’s report was not subject to attestation by our independent registered certified public accounting firm pursuant to the
Sarbanes-Oxley Act of 2002, as amended, and the rules of the SEC promulgated thereunder, which permit the Company to provide only management’s report
in this Annual Report.
A company’s internal control over financial reporting includes policies and procedures that: (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that
receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company, and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could
have a material effect on the financial statements.
23
In accordance with the internal control reporting requirements of the Securities and Exchange Commission management used the criteria set forth in the
Internal Control—Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) of 2013 to make its
assessment. The COSO framework summarizes each of the components of a company’s internal control system, including the: (i) control environment,
(ii) risk assessment, (iii) information and communication, and (iv) monitoring (collectively, the “entity-level controls”), as well as a company’s control
activities (“process-level controls”).
Management’s evaluation of the design and operating effectiveness of our internal controls over financial reporting identified material weaknesses
resulting from design and operating deficiencies in the internal control system. A “material weakness” is defined as a significant deficiency or combination of
significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be
prevented or detected. A “significant deficiency” is defined as a control deficiency, or combination of control deficiencies, that adversely affects the
Company’s ability to initiate, authorize, record, process, or report external financial data reliably in accordance with generally accepted accounting principles
such that there is more than a remote likelihood that a misstatement of the Company’s annual or interim financial statements that is more than inconsequential
will not be prevented or detected.
Management identified the following material weaknesses in our internal control over financial reporting as of December 31, 2013:
24
Entity-Level Control – We have not established effective internal controls for the timely identification of significant, non-routine, unusual, or complex events
or transactions, inclusive of significant related party transactions and for policies related to management evaluation of certain accounting estimates.
Financial Closing and Reporting Process - We have not established adequate policies and procedures related to accounting and closing practices for interim
and annual financial reporting, including sufficient knowledge required for accounting and financial reporting per the requirements of accounting principles
generally accepted in the United States as well as periodic filing requirements with the SEC.
Revenue Accounting – We have not developed adequate internal controls over revenue recognition related to fixed price contract revenue in accordance with
the percentage completion method.
Management’s Plan to Remediate Material Weaknesses
Management will be taking the following steps to remediate the remaining material weaknesses as follows:
· Hiring a sufficient number of full-time personnel with the requisite background, education and experience in our finance department
· Implementing more stringent policies and procedures regarding revenue accounting and oversight of contractual arrangements
· Conducting formal revenue recognition training sessions for key accounting and sales personnel
· Implementing formal procedures for the consistent processing of and accounting for fixed asset transactions, including a formal review process
· Implementing formal procedures for estimating valuation allowances for inventory, including a formal review process
· Implementing a standard financial statement reporting process, such as an accounting and close check-list, and a formal reporting package, to be
used by all departments in order for them to report information accurately, timely and in a standard format to our finance department
· Improving the documentation, communication, and periodic review of our accounting policies throughout our domestic and international locations
for consistency with general accepted accounting principles
· Implementing a formalized accounting policy that addresses the appropriate procedures for significant, non-routine, unusual, or complex events or
transactions
· Increased management oversight by creating a new Disclosure Committee comprised of senior managers with responsibility for responding to
issues raised during the financial reporting process
25
· Improving the interim and annual review and reconciliation process for certain key balance sheet accounts
· Enhancing the training and education for our international finance and accounting personnel and new hires to our finance team
· Automating certain key internal controls that are currently performed manually
Changes in Internal Control Over Financial Reporting
For the fiscal year ended December 31, 2013, there has been no change in our internal control over financial reporting that has materially affected, or
is reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
Other Information.
None.
26
Item 10.
Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers
Our current directors and executive officers are as follows:
PART III
Name
José M. Daes
Christian T. Daes
Joaquin Fernandez
A. Lorne Weil
Samuel R. Azout
Juan Carlos Vilariño
Martha (Stormy) L. Byorum
Julio A. Torres
Age
53
49
53
63
54
51
59
46
Position
Chief Executive Officer and Director
Chief Operating Officer and Director
Chief Financial Officer
Non-Executive Chairman of the Board
Director
Director
Director
Director
José M. Daes has served as our chief executive officer and a director since December 2013. Mr. Daes has over 30 years’ experience starting and
operating various businesses in Colombia and the U.S. Mr. Daes has served as chief executive officer of ES since its inception in 1984, responsible for all
aspects of ES’s operations. Mr. Daes began his career in textiles, importing textiles from Japan to Colombia and later owned and operated an upscale clothing
store with multiple locations in Miami. Mr. Daes is the older brother of Christian T. Daes, our chief operating officer and a director.
We believe Mr. Daes is well-qualified to serve as a member of our board of directors due to his operational experience with ES and TG and his
knowledge of the industry within which they operate.
Christian T. Daes has served as our chief operating officer and a director since December 2013. Mr. Daes has served as the chief executive officer of
Tecnoglass since its inception in 1994, responsible for all aspects of Tecnoglass’s operations. Mr. Daes’s philanthropic activities include founding the
Tecnoglass-ES Windows Foundation, which promotes local development, health and social programs in Barranquilla, Colombia. Mr. Daes is the younger
brother of José M. Daes, our chief executive officer and a director.
We believe Mr. Daes is well-qualified to serve as a member of our board of directors due to his operational experience with ES and TG and his
knowledge of the industry within which they operate.
27
Joaquín F. Fernández has served as our chief financial officer since December 2013 and the chief financial officer for TG and ES since 2007. He
has also served as a director of ES since January 2002. Mr. Fernández oversees the gathering, reporting, presentation and interpretation of the historical
financial information for us and our subsidiaries, as well as implementation of financial strategy for us. Prior to joining TG and ES, Mr. Fernández worked at
fuel distribution, outsourcing, and public service companies.
A. Lorne Weil has served as a member of our board of directors and non-executive chairman of the board since our inception. He has also served as a
director of Sportech Plc, one of the largest suppliers and operators of pools/tote (often also referred to as pari-mutuel) betting in the world, since October
2010. From October 1991 to November 2013, Mr. Weil served as chairman of the board of Scientific Games Corporation, a supplier of technology-based
products, systems and services to gaming markets worldwide, and served as its chief executive officer from April 1992 until November 2013. Mr. Weil also
served as president of Scientific Games from August 1997 to June 2005. From 1979 to November 1992, Mr. Weil was president of Lorne Weil, Inc., a firm
providing strategic planning and corporate development services to high technology industries. Previously, Mr. Weil was vice president of corporate
development at General Instrument Corporation, working with wagering and cable systems.
We believe Mr. Weil is well-qualified to serve as a member of our board of directors due to his extensive business experience in strategic planning
and corporate development, his contacts he has fostered throughout his career, as well as his operational experience.
Samuel R. Azout has served on our board of directors since December 2013 and on the board of TG since February 2009. Since March 2013, Mr.
Azout has served as an investment manager for Abacus Real Estate. From January 2012 to March 2013, Mr. Azout served as the chief executive officer of the
National Agency for Overcoming Extreme Poverty in Colombia, an organization formed by the government of Colombia to assist families in poverty. From
September 2008 to January 2012, Mr. Azout was the senior presidential advisor for Social Prosperity, employed by the administration of the President of
Colombia. Prior to this, Mr. Azout served as chief executive officer of Carulla Vivero S.A., the second largest retailer in Colombia, for 10 years, until he led
its sale to Grupo Exito in 2006.
We believe Mr. Azout is well-qualified to serve as a member of our board of directors due to his contacts and business relationships in Colombia.
Juan Carlos Vilariño has served on our board of directors since December 2013, on the board of TG since November 1995 and on the board of ES
since March 1997. Mr. Vilariño has worked as the general manager of various business highway concession consortiums in Colombia including the Malla
Vial del Atlántico Highway Concession Consortium since 1993 and the Barranquilla-Ciénaga Highway Concession consortium since 1999. Mr. Vilariño
began his career as the assistant vice president in the general consulting department of Finance Corporation of the North, S.A. We believe Mr. Vilariño is
well-qualified to serve as a member of our board of directors due to his contacts and business relationships in Colombia.
28
Martha (Stormy) L. Byorum has served as a member of our board of directors since November 2011. Ms. Byorum is founder and chief executive
officer of Cori Investment Advisors, LLC (Cori Capital), a financial services entity that was most recently (January 2005 through August 2013) a division of
Stephens Inc., a private investment banking firm founded in 1933. Ms. Byorum was also an executive vice president of Stephens Inc. from January 2005 until
August 2013. From March 2003 to December 2004, Ms. Byorum served as chief executive officer of Cori Investment Advisors, LLC, which was spun off
from VB&P in 2003. Ms. Byorum co-founded VB&P in 1996 and served as a Partner until February 2003. Prior to co-founding VB&P in 1996, Ms. Byorum
had a 24-year career at Citibank, where, among other things, she served as chief of staff and chief financial officer for Citibank’s Latin American Banking
Group from 1986 to 1990, overseeing $15 billion of loans and coordinating activities in 22 countries. She was later appointed the head of Citibank’s U.S.
Corporate Banking Business and a member of the bank’s Operating Committee and a Customer Group Executive with global responsibilities.
Ms. Byorum is a Life Trustee of Amherst College and a chairman of the finance committee of the board of directors of Northwest Natural Gas, a
large distributor of natural gas services in the Pacific Northwest.
We believe Ms. Byorum is well-qualified to serve as a member of the board of directors due to her operational experience with Cori Capital
Advisors, VB&P and Citibank and her financial background, which includes having served on the audit committees of four publicly-traded companies.
Julio A. Torres has served on our board of directors since October 2011. He previously served as our co-chief executive officer from October 2011
through January 2013. Since March 2008, Mr. Torres has served as managing director of Nexus Capital Partners, a private equity firm. From April 2006 to
February 2008, Mr. Torres served with the Colombian Ministry of Finance acting as director general of public credit and the treasury. From June 2002 to
April 2006, Mr. Torres served as managing director of Diligo Advisory Group, an investment banking firm. From September 1994 to June 2002, Mr. Torres
served as vice president with JPMorgan Chase Bank.
We believe Mr. Torres is well-qualified to serve as a member of our board of directors due to his operational experience with Nexus Capital Partners,
his work with the Colombian government and his extensive contacts he has fostered while working at Nexus Capital Partners, JPMorgan Chase Bank and in
the Colombian government.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our officers, directors and persons who own more than ten percent of a registered class
of our equity securities to file reports of ownership and changes in ownership with the Securities and Exchange Commission. Officers, directors and ten
percent shareholders are required by regulation to furnish us with copies of all Section 16(a) reports they file. Based solely on a review of such reports
received by us and written representations from certain reporting persons that no Form 5s were required for those persons, we believe that, during the fiscal
year ended December 31, 2013, all reports required to be filed by our officers, directors and persons who own more than ten percent of a registered class of
our equity securities were filed on a timely basis except for the following: (i) Forms 3 for each of Jose M. Daes, Christian T. Daes, Samuel Azout, Juan Carlos
Vilarino and Joaquin Fernandez, each filed separately on March 18 , 2014, (ii) a Form 3 filed jointly by Energy Holding Corporation and Alberto Velilla
Becerra filed on April 15, 2014 and (ii) a Form 4 for Joaquin Fernandez filed on April 15, 2014.
29
Code of Ethics
In March 2012, we adopted a code of ethics that applies to all of our executive officers, directors and employees. The code of ethics codifies the
business and ethical principles that govern all aspects of our business. We will provide, without charge, upon request, copies of our code of ethics. Requests
for copies of our code of ethics should be sent in writing to TG Inc., Avenida Circunvalar a 100 mts de la Via 40, Barrio Las Flores, Barranquilla, Colombia,
Attn: Corporate Secretary.
Corporate Governance
Audit Committee
We have a standing audit committee of the board of directors, which consists of Martha L. Byorum, Samuel R. Azout and Julio Torres, with Martha
L. Byorum serving as chairman. Each of the members of the audit committee is independent under the applicable NASDAQ listing standards.
The audit committee has a written charter, a copy of which was filed with our Definitive Proxy Statement on Schedule 14A filed with the SEC on
December 4, 2013. The purpose of the audit committee is to appoint, retain, set compensation of, and supervise our independent accountants, review the
results and scope of the audit and other accounting related services and review our accounting practices and systems of internal accounting and disclosure
controls. The audit committee’s duties, which are specified in the audit committee charter, include, but are not limited to:
reviewing and discussing with management and the independent auditor the annual audited financial statements, and recommending to the
board whether the audited financial statements should be included in our Form 10-K;
discussing with management and the independent auditor significant financial reporting issues and judgments made in connection with the
preparation of our financial statements;
discussing with management major risk assessment and risk management policies;
·
· monitoring the independence of the independent auditor;
·
verifying the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible
for reviewing the audit as required by law;
reviewing and approving all related-party transactions;
inquiring and discussing with management our compliance with applicable laws and regulations;
·
·
·
·
30
·
·
·
·
pre-approving all audit services and permitted non-audit services to be performed by our independent auditor, including the fees and terms
of the services to be performed;
appointing or replacing the independent auditor;
determining the compensation and oversight of the work of the independent auditor (including resolution of disagreements between
management and the independent auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or related
work; and
establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting
controls or reports which raise material issues regarding its financial statements or accounting policies
Financial Experts on Audit Committee
The audit committee will at all times be composed exclusively of “independent directors,” as defined for audit committee members under the
NASDAQ listing standards and the rules and regulations of the Securities and Exchange Commission, who are “financially literate,” as defined under
NASDAQ’s listing standards. NASDAQ’s listing standards define “financially literate” as being able to read and understand fundamental financial
statements, including a company’s balance sheet, income statement and cash flow statement. The board of directors has determined that Martha Byorum
satisfies NASDAQ’s definition of financial sophistication and also qualifies as an “audit committee financial expert” as defined under rules and regulations of
the Securities and Exchange Commission.
Nominating Committee
We have a standing nominating committee, which consists of A. Lorne Weil, Martha L. Byorum, Samuel R. Azout and Juan Carlos Vilariño, with A.
Lorne Weil serving as chairperson. Each member of the nominating committee is an “independent director” as defined under NASDAQ listing standards.
Pursuant to its written charter, a copy of which was filed with our Definitive Proxy Statement on Schedule 14A filed with the SEC on December 4, 2013, our
nominating committee is responsible for overseeing the selection of persons to be nominated to serve on our board of directors.
Guidelines for Selecting Director Nominees
The nominating committee considers persons identified by its members, management, shareholders, investment bankers and others. Currently, the
guidelines for selecting nominees, which are specified in the nominating committee charter, generally provide that persons to be nominated:
·
·
should have demonstrated notable or significant achievements in business, education or public service;
should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a
range of skills, diverse perspectives and backgrounds to its deliberations; and
31
·
should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the
shareholders.
The nominating committee will consider a number of qualifications relating to management and leadership experience, background and integrity and
professionalism in evaluating a person’s candidacy for membership on the board of directors. The nominating committee may require certain skills or
attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience
and makeup of its members to obtain a broad and diverse mix of board members. The nominating committee does not distinguish among nominees
recommended by shareholders and other persons.
There have been no material changes to the procedures by which shareholders may recommend nominees to the nominating committee.
Compensation Committee
We have a standing compensation committee consisting of Julio Torres, Samuel R. Azout and Juan Carlos Vilariño, with Julio Torres serving as
chairperson. Pursuant to the compensation committee charter, a copy of which was filed with our Definitive Proxy Statement on Schedule 14A filed with the
SEC on December 4, 2013, the compensation committee oversees our compensation and employee benefit plans and practices, including our executive,
director and other incentive and equity-based compensation plans. The specific responsibilities of the compensation committee include making
recommendations to the board regarding executive compensation of our executive officers and non-employee directors, administering our 2013 Long-Term
Incentive Equity Plan, and preparing and reviewing compensation-related disclosure, including a compensation discussion and analysis and compensation
committee report (if required), for our filings with the Securities and Exchange Commission.
Item 11.
Executive Compensation.
Overview
Our policies with respect to the compensation of our executive officers are administered by our board in consultation with our compensation
committee. Our compensation policies are intended to provide for compensation that is sufficient to attract, motivate and retain executives of outstanding
ability and potential and to establish an appropriate relationship between executive compensation and the creation of shareholder value. To meet these goals,
the compensation committee is charged with recommending executive compensation packages to our board.
Prior to consummation of the Merger in December 2013, none of our executive officers or directors received compensation for services rendered to
us. No compensation or fees of any kind, including finders, consulting or other similar fees, were paid to any of our initial shareholders, including our officers
and directors, or any of their respective affiliates, prior to, or for any services they rendered in order to effectuate, the consummation of the initial business
combination.
32
Summary Compensation Table
The following table summarizes the total compensation for the years ended December 31, 2013 and 2012 of each of our named executive officers.
Our named executive officers include: B. Luke Weil, Julio Torres and Luis Eduardo Robayo Salom, each of whom previously served as our chief executive
officer during the year ended December 31, 2013; Jose M. Daes, our current chief executive officer; and Christian T. Daes and Joaquin Fernández, our two
most highly compensated executive officers for the fiscal year ended December 31, 2013 other than our current chief executive officer.
Name and principal position
B. Luke Weil (1)
Former Chief Executive Officer
Julio Torres (2)
Former Co-Chief Executive Officer
Luis Eduardo Robayo Salom (2)
Former Co-Chief Executive Officer
Jose M. Daes (3)
Chief Executive Officer
Christian T. Daes (4)
Chief Operating Officer
Joaquin Fernández (5)
Chief Financial Officer
Year
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
$
$
$
$
$
$
Salary
Bonus
Total
—
—
—
—
—
—
720,000 $
720,000 $
720,000 $
720,000 $
120,000
105,808 $
—
—
—
—
—
—
100,000 $
100,000 $
100,000 $
100,000 $
- $
4,514 $
—
—
—
—
—
—
820,000
820,000
820,000
820,000
120,000
110,322
33
(1) Mr. Weil served as the chief executive officer from January 2013 to December 2013. Mr. Weil resigned as chief executive officer in connection with the
Merger. Mr. Weil is the son of A. Lorne Weil, our non-executive chairman of the board.
(2) Messrs. Torres and Salom served as co-chief executive officers from October 2011 to January 2013.
(3) Mr. Daes was appointed chief executive officer in December 2013 in connection with the merger. Mr. Daes also serves as chief executive officer of ES.
Compensation information for 2012 and 2013 includes amounts paid to Mr. Daes in his capacity as chief executive officer of ES prior to the Merger.
(4) Mr. Daes was appointed chief operating officer in December 2013 in connection with the merger. Mr. Daes also serves as chief executive officer of
Tecnoglass. Compensation information for 2012 and 2013 includes amounts paid to Mr. Daes in his capacity as chief executive officer of Tecnoglass
prior to the Merger.
(5) Mr. Fernández was appointed chief financial officer in December 2013 in connection the merger. Mr. Fernández also serves as chief financial officer of
Tecnoglass and ES. Compensation information for 2012 and 2013 includes amounts paid to Mr. Fernández in his capacity as chief financial officer of
Tecnoglass and ES prior to the Merger.
Compensation Arrangements with Named Executive Officers
At present, we do not have employment agreements in place for our current executive officers. We have determined to continue the compensation
arrangements that were in place for each Messrs. Daes and Daes with ES and Tecnoglass, respectively, providing for an annual base salary of $720,000, and
to provide an annual base salary to Mr. Fernández equal to approximately $150,000 going forward. Our compensation committee may determine to award a
discretionary cash bonus to such executive officers as has been awarded in the past by Tecnoglass and ES, and may also determine to award to such executive
officers share options, share appreciation rights or other awards under our 2013 Long-Term Equity Incentive Plan. We anticipate continuing these
compensation arrangements until we enter into employment agreements with our executive officers. Upon entry into employment agreements with our
executive officers, we will file a Current Report on Form 8-K to disclose the material terms of such agreements.
Equity Awards at Fiscal Year End
As of December 31, 2013, we had not granted any share options, share appreciation rights or any other awards under long-term incentive plans to
any of our executive officers.
Director Compensation
For the year ended December 31, 2013, we did not compensate any of our directors for their service on the board. However, we did reimburse our
directors for out-of-pocket expenses incurred by them in connection with activities on our behalf such as identifying potential target businesses and
performing due diligence on suitable business combinations.
34
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information as of April 11, 2014 regarding the beneficial ownership of our ordinary shares by:
·
·
·
Each person known to be the beneficial owner of more than 5% of our outstanding ordinary shares;
Each director and each named executive officer; and
All current executive officers and directors as a group.
Unless otherwise indicated, we believe that all persons named in the table have sole voting and investment power with respect to all ordinary shares
beneficially owned by them. The percentage of beneficial ownership is calculated based on 24,310,363 ordinary shares outstanding as of April 11, 2014.
Shares which an individual or group has a right to acquire within 60 days pursuant to the exercise or conversion of options, warrants or other similar
convertible or derivative securities are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are
not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table.
Name and Address of Beneficial Owner(1)
Directors and Named Executive Officers
Jose M. Daes
Chief Executive Officer and Director
Christian T. Daes
Chief Operating Officer and Director
Samuel R. Azout
Director
Juan Carlos Vilarino
Director
Joaquin F. Fernandez
Chief Financial Officer
A. Lorne Weil
Chairman of the Board
Julio A. Torres
Director
Martha L. Byorum
Director
B. Luke Weil
Former Chief Executive Officer
Luis Eduardo Robayo Salon
Former Chief Executive Officer
All directors and executive officers as a group (8 persons)
Five Percent Holders:
Energy Holding Corporation
David Sandberg
304 Park Avenue South, 11th Floor
New York, NY 10010
Polar Securities Inc.
401 Bay Street, Suite 1900
PO Box 19
Toronto, Ontario M5H 2Y4
Canada
35
Amount and Nature
of Beneficial
Ownership
Approximate
Percentage
of
Beneficial
Ownership
0(2)
0(2)
0
0
0%
0%
0%
0%
20,567,141(3)
84.6%
10,000(4)
172,000(5)
205,000(5)
1,116,000(6)
165,000(5)
*
*
*
4.6%
*
20,567,141(3)
84.6%
1,855,114(7)
7.6%
1,260,648(8)
5.2%
* Less than 1%
(1)
(2)
(3)
(4)
Unless otherwise indicated, the business address of each of the individuals is Avenida Circunvalar a 100 mts de la Via 40, Barrio Las Flores,
Barranquilla, Colombia.
Does not include shares held by Energy Holding Corporation, in which this person has an indirect ownership interest.
Represents all ordinary shares held by Energy Holding Corporation, of which Messrs. Fernandez and Alberto Velilla Becerra are directors and may
be deemed to share voting and dispositive power over such shares. Does not include the shares that may be issued to Energy Holding Corporation
upon achievement of certain share price and earnings targets.
Represents shares held by LWEH LLC, of which Mr. Weil is the operating manager. Does not include 253,000 ordinary shares held by Child’s Trust
f/b/o Francesca Weil u/a dated March 4, 2010 and 253,000 ordinary shares held by Child’s Trust f/b/o Alexander Weil u/a dated March 4, 2010,
irrevocable trusts established for the benefit of Mr. Weil’s children. Does not include 95,693 ordinary shares and 473,337 ordinary shares issuable
upon exercise of 473,337 private warrants held by The A. Lorne Weil 2006 Irrevocable Trust - Family Investment Trust, of which Mr. Weil, his
spouse and his descendants are beneficiaries but over which Mr. Weil does not exercise voting or dispositive power.
(5)
Includes 125,000 ordinary shares issuable upon the exercise of 125,000 private warrants held by such reporting person, which became exercisable
upon consummation of our initial business combination. Does not include ordinary shares held by LWEH LLC, of which the individual is a member.
36
(6)
(7)
(8)
Includes (i) 148,000 ordinary shares held by Mr. Weil, (ii) 168,000 ordinary shares held by Child Trust f/b/o B. Luke Weil u/a dated March 4, 2010
and (iii) 800,000 ordinary shares issuable upon the exercise of 800,000 private warrants held by Mr. Weil, which warrants became exercisable upon
consummation of our initial business combination.
Includes (i) 224,538 ordinary shares held by The Red Oak Fund, LP (“Red Oak”), (ii) 710,292 ordinary shares issuable upon the exercise of warrants
held by Red Oak, (iii) 40,416 ordinary shares issuable upon exercise of unit purchase options (and the underlying warrants) held by Red Oak, (iv)
205,581 ordinary shares held by Pinnacle Opportunities Fund, LP (“Pinnacle”), (v) 637,282 ordinary shares issuable upon the exercise of warrants
held by Pinnacle and (vi) 37,004 ordinary shares issuable upon exercise of unit purchase options (and the underlying warrants) held by Pinnacle. Mr.
Sandberg is the controlling member of Red Oak Partners, LLC, the general partner of Red Oak and a managing member of Pinnacle Partners LLC,
the general partner of Pinnacle, and accordingly may be deemed to beneficially own the ordinary shares held by Red Oak and Pinnacle. Information
was derived from an Amendment No. 1 to Schedule 13G filed on February 13, 2014.
Includes (i) 2,470 ordinary shares issuable upon the exercise of warrants held by North Pole Capital Master Fund (“North Pole”), (ii) 55,067 ordinary
shares held by Altaris Offshore (“AO”), (iii) 51,625 ordinary shares issuable upon the exercise of warrants held by AO, (iv) 594,315 ordinary shares
held by Altaris Offshore Levered (“AOL”) and (v) 557,171 ordinary shares issuable upon exercise of warrants held by AOL. Polar Securities serves
as investment advisor to North Pole, AO and AOL. Information was derived from an Amendment No. 2 to Schedule 13G filed on January 27, 2014.
Equity Compensation Plans
Equity compensation plans approved by security holders
Equity compensation plans not approved by security holders
Category
Total
Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
—
—
—
—
—
—
Number of securities remaining
available for future issuance
under equity compensation plans
(excluding securities reflected in
column (a))
1,593,917
—
1,593,917
37
On December 20, 2013, our shareholders approved our 2013 Long-Term Equity Incentive Plan (“2013 Plan”). Under the 2013 Plan, 1,593,917
ordinary shares are reserved for issuance in accordance with the plan’s terms to eligible employees, officers, directors and consultants. As of December 31,
2013, no awards had been made under the 2013 Plan.
Item13. Certain Relationships and Related Transactions, and Director Independence.
Related Transactions
Pre-Merger Related Transactions of the Company
Prior to our IPO, A. Lorne Weil advanced to us an aggregate of $100,000 to cover expenses related to the IPO. The loan was payable without interest
on the earlier of (i) November 8, 2012, (ii) the consummation of our IPO or (iii) the date on which we determined not to proceed with the IPO. We paid this
loan using proceeds of our IPO not placed in trust.
In May 2012, our initial shareholders forfeited an aggregate of 100,000 shares since the underwriters in our IPO did not exercise their over-allotment
option in full. We recorded the aggregate fair value of the shares forfeited to treasury shares and a corresponding credit to additional paid-in capital based on
the difference between the fair market value of the ordinary shares forfeited and the price paid for such repurchased shares. The repurchased shares were
immediately cancelled, resulting in the retirement of the treasury shares and a corresponding charge to additional paid-in capital.
Certain of the initial shareholders, including our former chief executive officers and former and certain current directors, and other persons
purchased private warrants from us on a private placement basis simultaneously with the consummation of our IPO, for an aggregate purchase price of
$2,400,000. The funds from such purchase were deposited into the trust account simultaneously with the consummation of our IPO. The private warrants are
identical to the warrants underlying the units sold in our IPO, except that they are exercisable for cash or on a cashless basis, at the holder’s option, and will
are not redeemable by us, in each case so long as such warrants are held by the initial purchasers or their permitted transferees.
On May 20, 2013, the A. Lorne Weil 2006 Irrevocable Trust — Family Investment Trust, a trust of which A. Lorne Weil, his spouse and his
descendants are among the beneficiaries, loaned us $100,000 to meet our working capital needs pending our initial business combination. This loan was
evidenced by a promissory note payable upon consummation of our initial business combination, in cash without interest, or, at the holder’s discretion and
upon approval by our shareholders (which was obtained in connection with the Merger), by conversion into warrants at a price of $0.50 per warrant. This note
was converted into 200,000 warrants upon consummation of the Merger.
38
Pre-Merger Related Transactions of Tecnoglass and ES
TG
In the fiscal year ended December 31, 2013 prior to the Merger, transactions with TG shareholders resulted in TG generating $39,209,282 in
revenues exclusively comprised of sales to ES which was a shareholder of TG leading up to the merger and $5,853,178 in accounts receivables. Transactions
with directors resulted in $22,000 in accounts receivable. TG also paid its directors $517,000 in salaries.
In the fiscal year ended December 31, 2012, transactions with TG shareholders resulted in TG generating $28,294,000 in revenues and $25,076,000
in accounts receivables. TG also purchased equipment from its shareholders of $16,000 and paid its directors $483,000 in salaries.
ES
In the fiscal year ended December 31, 2013 prior to the Merger, transactions with ES shareholders resulted in ES generating $244,000 in revenues,
$147,000 in accounts receivables and $17,270,828 in accounts payables. ES also purchased equipment from its shareholders $5,276,000. Transactions with its
directors resulted in $2,000 in accounts receivables and $22,000 in revenues. ES paid its directors $775,000 in salaries.
In the fiscal year ended December 31, 2012, transactions with ES shareholders resulted in ES generating $30,000 in revenues, $461,000 in accounts
receivables and $25,076,000 in accounts payables. ES also purchased equipment from its shareholders $29,086,000. Transactions with its directors resulted in
$109,000 in accounts receivables and $4,000 in revenues. ES also paid its directors $638,000 in salaries.
E.S. Windows, LLC
The majority of shares of ESW LLC, a Florida limited liability company, are owned by Jose Daes, Christian Daes and Evelyn Daes. ESW LLC acts
as one of ES’s importers and distributors in the U.S. ESW LLC sends project specifications and orders from its clients to ES, and in turn, receiving pricing
quotes from ES which are conveyed to the client. ESW LLC does not install any of our products. ESW LLC’s ownership is as follows: 30% of its
membership interests are held by Jose Daes, 20% of its membership interests are held by Christian Daes, 10% of its membership interests are held by Evelyn
Daes, and the remaining 40% of membership interests are held by two Panamanian companies unaffiliated with the Daes family. Sales to ESW LLC
amounted to $28.9 million and $19.6 million during the years ended in December 31, 2013 and December 31, 2012.
Merger Consideration
Energy Holding Corporation, the sole shareholder of Tecnoglass Holding whose shareholders are all of the former shareholders of Tecnoglass and
ES, received 20,567,141 ordinary shares in consideration of all of the outstanding and issued ordinary shares of Tecnoglass Holding. Energy Holding
Corporation may not sell or transfer its shares until December 20, 2014, subject to certain limited exceptions.
39
Energy Holding Corporation also has the contractual right to receive an additional 3,000,000 ordinary shares, to be released upon the attainment of
specified share price targets or targets based on our EBITDA in the fiscal years ending December 31, 2014, 2015 or 2016. The following table sets forth the
targets and the number of earnout shares issuable to Tecnoglass Holding shareholders upon the achievement of such targets:
Fiscal year ending 12/31/14
Fiscal year ending 12/31/15
Fiscal year ending 12/31/16
Ordinary
Share
Price Target
EBITDA Target
Number of Earnout
Shares
$ 12.00 per share $
$ 13.00 per share $
$ 15.00 per share $
Minimum Maximum Minimum Maximum
500,000
1,000,000
1,500,000
30,000,000 $
35,000,000 $
40,000,000 $
36,000,000
40,000,000
45,000,000
416,667
875,000
1,333,333
If either the ordinary share target or the maximum EBITDA target is met in any fiscal year, Energy Holding Corporation receives the maximum
number of earnout shares indicated for the year. In the event the ordinary share target is not met but the combined company’s EBITDA falls within the
minimum and maximum EBITDA target for a specified year, the number of earnout shares to be issued will be interpolated between such targets. In the event
neither the ordinary share target nor the minimum EBITDA target is met in a particular year, but a subsequent year’s share price or EBITDA target is met,
Energy Holding Corporation will earn the earnout shares for the previous year as if the prior year’s target had been met.
Joaquin Fernandez and Alberto Velilla Becerra are directors of Energy Holding Corporation. Jose Daes and Christian Daes are shareholders of
Energy Holding Corporation.
Registration Rights
Our initial shareholders, Energy Holding Corporation, holders of the private warrants and warrants issued upon conversion of the promissory note
(described above) (and all underlying securities), are entitled to registration rights pursuant to an agreement entered into on December 20, 2013. The holders
of a majority of these securities are entitled to make up to two demands that we register such securities, and have certain “piggy-back” registration rights with
respect to registration statements filed subsequent to our consummation of the merger. Pursuant to the agreement, we will bear the expenses incurred in
connection with the filing of any such registration statements. All such securities were included on our Registration Statement on Form S-3 filed on February
11, 2014, which has not yet been declared effective.
40
Transfer Agreements in connection with Merger
On December 19, 2013, we entered into an agreement with an affiliate of A. Lorne Weil, our non-executive chairman of the board, and a third party
shareholder pursuant to which the third party shareholder agreed to use commercially reasonable efforts to purchase up to 1,000,000 ordinary shares in the
open market and agreed that it would not seek conversion or redemption of any such purchased shares in connection with the Merger. This third party
shareholder and its affiliates purchased an aggregate of 985,896 ordinary shares pursuant to this agreement. Pursuant to the agreement, Mr. Weil’s affiliate
transferred to the third party shareholder and its affiliates an aggregate of 2,167,867 private warrants. Additionally, EarlyBirdCapital, Inc., our financial
advisor, transferred to the third party shareholder and its affiliates certain unit purchase options, each to purchase one ordinary share and one warrant to
purchase one ordinary share. We agreed to file a registration statement with the Securities and Exchange Commission covering the resale of the warrants and
shares underlying the warrants, as well as the unit purchase options and underlying securities, transferred to the shareholder and its affiliates, which such
registration statement was filed on February 11, 2014. In the event the registration statement is not declared effective by June 1, 2014, we will be required to
pay the shareholder and its affiliates a cash penalty of $0.20 per security transferred to them for each month until the registration statement has been declared
effective.
Also on December 19, 2013, we entered into subscription agreements with two investors pursuant to which such investors agreed to purchase an
aggregate of 649,382 ordinary shares at $10.18 per Share, or an aggregate of $6,610,709. In connection with this purchase, the affiliate of Mr. Weil transferred
an aggregate of 608,796 private warrants to such investors. We agreed to file a registration statement with the Securities and Exchange Commission covering
the resale of the warrants and shares underlying the warrants, transferred to these investors, which such registration statement was filed on February 11, 2014,
and agreed to use our best efforts to have such registration statement declared effective by the Securities and Exchange Commission as soon as possible.
Indemnification Agreements
Effective March 5, 2014, we entered into indemnification agreements with each of our executive officers and members of our board of directors. The
indemnification agreements supplement our Third Amended and Restated Memorandum and Articles of Association and Cayman Islands law in providing
certain indemnification rights to these individuals. The indemnification agreements provide, among other things, that we will indemnify these individuals to
the fullest extent permitted by Cayman Islands law and to any greater extent that Cayman Islands law may in the future permit, including the advancement of
attorneys' fees and other expenses incurred by such individuals in connection with any threatened, pending or completed action, suit or other proceeding,
whether of a civil, criminal, administrative, regulatory, legislative or investigative nature, relating to any occurrence or event before or after the date of the
indemnification agreements, by reason of the fact that such individuals is or were our directors or executive officers, subject to certain exclusions and
procedures set forth in the indemnification agreements, including the absence of fraud or willful default on the part of the indemnitee and, with respect to any
criminal proceeding, that the indemnitee had no reasonable cause to believe his conduct was unlawful.
41
Private Placement with Affiliate of A. Lorne Weil
On March 5, 2014, we entered into a subscription agreement with an affiliate of A. Lorne Weil, our Non-Executive Chairman of the Board, pursuant
to which such affiliate agreed to purchase an aggregate of 95,693 ordinary shares at an aggregate price of $1,000,000, or approximately $10.45 per share,
representing a slight premium to the closing price of our ordinary shares immediately prior to the execution of the subscription agreement. The closing of the
purchase took place on March 14, 2014. We have agreed to file a registration statement covering the resale of these shares by July 14, 2014.
Related Person Policy
Our Code of Ethics requires us to avoid, wherever possible, all related party transactions that could result in actual or potential conflicts of interests,
except under guidelines approved by the board of directors (or the audit committee). Related-party transactions are defined as transactions in which (1) the
aggregate amount involved will or may be expected to exceed $120,000 in any calendar year, (2) we or any of our subsidiaries are a participant, and (3) any
(a) executive officer, director or nominee for election as a director, (b) greater than 5% beneficial owner of our ordinary shares, or (c) immediate family
member, of the persons referred to in clauses (a) and (b), has or will have a direct or indirect material interest (other than solely as a result of being a director
or a less than 10% beneficial owner of another entity). A conflict of interest situation can arise when a person takes actions or has interests that may make it
difficult to perform his or her work objectively and effectively. Conflicts of interest may also arise if a person, or a member of his or her family, receives
improper personal benefits as a result of his or her position.
Our audit committee, pursuant to its written charter, is responsible for reviewing and approving related-party transactions to the extent we enter into
such transactions. The audit committee will consider all relevant factors when determining whether to approve a related party transaction, including whether
the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third-party under the same or similar circumstances
and the extent of the related party’s interest in the transaction. No director may participate in the approval of any transaction in which he is a related party, but
that director is required to provide the audit committee with all material information concerning the transaction. Additionally, we require each of our directors
and executive officers to complete an annual directors’ and officers’ questionnaire that elicits information about related party transactions.
These procedures are intended to determine whether any such related party transaction impairs the independence of a director or presents a conflict
of interest on the part of a director, employee or officer.
42
Director Independence
We adhere to the NASDAQ listing standards in determining whether a director is independent. Our board of directors consults with its counsel to
ensure that the board’s determinations are consistent with those rules and all relevant securities and other laws and regulations regarding the independence of
directors.
The NASDAQ listing standards define an “independent director” as a person, other than an executive officer of a company or any other individual
having a relationship which, in the opinion of the issuer’s board of directors, would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. Consistent with these considerations, we have affirmatively determined that Messrs. Weil, Azout, Vilariño, Torres and Ms.
Byorum qualify as independent directors. Our independent directors have regularly scheduled meetings at which only independent directors are present.
Item 14.
Principal Accounting Fees and Services.
The firm of Marcum LLP acts as our independent registered public accounting firm. Prior to the Merger, Crowe Horwath CO S.A. acted as the
independent registered public accounting firm of Tecnoglass and ES. During 2013, the Company paid $137,000 to Crowe Horwath CO S.A for audit and
audit related fees.
Audit Committee Approval
Our audit committee pre-approved all the services performed by Marcum LLP. In accordance with Section 10A(i) of the Securities Exchange Act of
1934, before we engage our independent accountant to render audit or non-audit services on a going-forward basis, the engagement will be approved by our
audit committee.
43
Item 15.
Exhibits, Financial Statement Schedules.
PART IV
(a)
The following documents are filed as part of this Form 10-K:
(1)
Consolidated Financial Statements:
Report of Independent Registered Public Accounting Firms
Balance Sheets
Statements of Operations
Statements of Changes in Shareholders’ Equity
Statements of Cash Flows
Notes to Financial Statements
(2)
Financial Statement Schedules:
None.
(3)
The following exhibits are filed as part of this Form 10-K:
Exhibit
No.
2.1
3.1
4.1
4.2
4.3
4.4
Description
Agreement and Plan of Reorganization dated as of August 17,
2013 and as amended November 6, 2013, by and among the
Company, Andina Merger Sub, Inc., Tecnoglass S.A., C.I. Energía
Solar S.A. E.S. Windows and Tecno Corporation
Included
By Reference
Form
Schedule 14A December 4, 2013
Filing Date
Third Amended and Restated Memorandum and Articles of
By Reference
Schedule 14A December 4, 2013
Association.
Specimen Ordinary Share Certificate.
Specimen Warrant Certificate.
Warrant Agreement between Continental Stock Transfer & Trust
By Reference
By Reference
By Reference
S-1/A
S-1/A
8-K
January 23, 2012
December 28, 2011
March 22, 2012
Company and the Company.
Form of First Unit Purchase Option issued to EarlyBirdCapital,
By Reference
S-1/A
March 12, 2012
Inc.
44
Exhibit
No.
4.5
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
21
24
Description
Form of Second Unit Purchase Option issued to EarlyBirdCapital,
Included
By Reference
Form
S-1/A
Filing Date
March 7, 2012
Inc.
Form of Escrow Agreement between the Company, Continental
Stock Transfer & Trust Company and the Initial Shareholders.
Amended and Restated Registration Rights Agreement among the
Company, the Initial Shareholders and Energy Holding
Corporation.
By Reference
S-1/A
March 12, 2012
By Reference
8-K
December 27, 2013
Advisory Services Agreement between the Company and Morgan
By Reference
10-K/A
June 17, 2013
Joseph TriArtisan LLC
Promissory Note issued to A. Lorne Weil 2006 Irrevocable Trust –
By Reference
10-K
June 13, 2013
Family Investment Trust
Indemnity Escrow Agreement dated as of December 20, 2013, by
and among the Company, Representative, Committee and
Continental Stock Transfer and Trust Company.
Additional Shares Escrow Agreement dated as of December 20,
2013, by and among the Company, Representative, Committee
and Continental Stock Transfer and Trust Company.
By Reference
8-K
December 27, 2013
By Reference
8-K
December 27, 2013
Form of Lock-Up Agreement between the Company and Energy
By Reference
8-K
August 22, 2013
Holding Corporation
2013 Long-Term Incentive Equity Plan
Form of Subscription Agreement
Form of Warrant/UPO Transfer Agreement
Form of Indemnification Agreement
List of subsidiaries.
Power of Attorney (included on signature page of this Form 10-
By Reference
By Reference
Herewith
By Reference
Herewith
Herewith
K).
Schedule 14A December 4, 2013
December 19, 2013
8-K
8-K
March 6, 2014
45
Exhibit
No.
31
32
Description
Certification of Principal Executive Officer and Principal
Financial and Accounting Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
Included
Herewith
Form
Filing Date
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Herewith
101.INS
XBRL Instance Document
101.SCH
XBRL Taxonomy Extension Schema
101.CAL
XBRL Taxonomy Extension Calculation Linkbase
101.DEF
101.LAB
XBRL Taxonomy Extension Definition Linkbase
XBRL Taxonomy Extension Label Linkbase
To be filed by
Amendment
To be filed by
Amendment
To be filed by
Amendment
To be filed by
Amendment
To be filed by
Amendment
46
Pursuant to the requirements of the Section 13 or 15 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized on the 16th day of April, 2014.
TECNOGLASS INC.
SIGNATURES
/s/ Joaquin Fernandez
By:
Name: Chief Financial Officer
Title:
Chief Financial Officer (Principal
Financial and Accounting Officer)
POWER OF ATTORNEY
The undersigned directors and officers of Tecnoglass Inc. hereby constitute and appoint Jose Daes and Joaquin Fernandez with full power to act as our true
and lawful attorney-in-fact with full power to execute in our name and behalf in the capacities indicated below, this annual report on Form 10-K and any and
all amendments thereto and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, and hereby ratify and confirm all that such attorneys-in-fact, or any of them, or their substitutes shall lawfully do or cause to be done by virtue
hereof.
In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
Name
/s/ Jose M. Daes
Jose M. Daes
/s/ Christian T. Daes
Christian T. Daes
/s/ Joaquin Fernandez
Joaquin Fernandez
/s/ A. Lorne Weil
A. Lorne Weil
/s/ Samuel R. Azout
Samuel R. Azout
Title
Chief Executive Officer (Principal
Executive Officer)
Date
April 16, 2014
Chief Operating Officer
April 16, 2014
Chief Financial Officer (Principal
Financial and Accounting Officer)
April 16, 2014
Director (Non-Executive Chairman)
April 16, 2014
Director
April 16, 2014
47
Name
/s/ Juan Carlos Vilarino
Juan Carlos Vilarino
/s/ Martha Byorum
Martha Byorum
/s/ Julio A. Torres
Julio A. Torres
Title
Director
Director
Director
48
Date
April 16, 2014
April 16, 2014
April 16, 2014
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
TECNOGLASS INC.
Audited Financial Statements:
Report of Independent Registered Public Accounting Firms
Consolidated Balance Sheets at December 31, 2013 and 2012
Consolidated Statements of Income and Comprehensive Income for the Years Ended December 31, 2013 and 2012
Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 2013 and 2012
Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
Notes to Consolidated Financial Statements
49
Page
50
52
53
55
54
56
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Audit Committee of the
Board of Directors and Shareholders
of Tecnoglass, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Tecnoglass, Inc. and Subsidiaries (the “Company”) as of December 31, 2013, and the
related consolidated statements of income and comprehensive income, shareholders’ equity and cash flows for the year then ended. These financial statements
are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Tecnoglass,
Inc. and Subsidiaries, as of December 31, 2013, and the consolidated results of its operations and its cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
/s/ Marcum LLP
Marcum LLP
Irvine, CA
April 16, 2014
50
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Tecnoglass Inc.:
Crowe Horwath CO S.A.
Member Crowe Horwath International
Carrera 53 No 82-86, Of 601 Barranquilla, Colombia
NIT 830.000.818-9
57.5.385.1888 MAIN
barranquilla@crowehorwath.com.co
www.crowehorwath.com.co
INDEPENDENT AUDITORS’ REPORT
Barranquilla, April 14, 2014
To the Shareholders and Board of Directors
C.I. Energia Solar S.A. ESWindows
We have audited the accompanying consolidated balance sheet of C.I. Energia Solar S.A. ESWindows as of December 31, 2012, and the related consolidated
statement of operations for the year ended December 31, 2012. C.I. Energia Solar S.A. ESwindows’ management is responsible for this consolidated
statement that will be included in the Company’s consolidated financial statements for the year ending as of December 31, 2012. Our responsibility is to
express an opinion on the consolidated balance sheet and statement of operations as of, and for the year ended December 31, 2012 that are included in the
company’s financial statements based on our audit.
We conducted our audit of the consolidated balance sheet and statement of operation for 2012 in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. Our audit consisted of a review of the company’s consolidation of the financial statements
of C.I. Energia Solar S.A. ESWindows and Tecnoglass S.A., for which we have issued our reports dated November 6, 2013.
Our audit also included obtaining management representations regarding material subsequent events and representations from the successor audit firm about
whether, as a result of their audit, they are aware of items that would have a material effect in the financial statements previously audited by us. We believe
that our audit provide a reasonable basis for our opinion.
In our opinion, the consolidated balance sheet and statement of operations referred to above present fairly, in all material respects, the financial position of
C.I. Energia Solar S.A. ESWindows. as of December 31, 2012, and the results of its operations for the year ended December 31, 2012 in conformity with
accounting principles generally accepted in the United States of America.
/s/ CROWE HORWATH CO S.A.
CROWE HORWATH CO S.A.
/s/ William Garcia Perez
William Garcia Perez
Audit Partner
51
Tecnoglass Inc. and Subsidiaries
Consolidated Balance Sheets
(in thousands, except share and per share data)
Assets
Current assets
Cash
Restricted cash
Due from transfer agent
Subscription receivable
Investments
Trade accounts receivable, net
Unbilled receivables on uncompleted contracts
Due from related parties
Advances and other receivables
Deferred income taxes
Inventories
Prepaid expenses
Total current assets
Property, plant and equipment, net
Investments
Other assets
Total assets
Liabilities and shareholders´ equity
Current liabilities
Short-term debt and current portion of long-term debt
Note payable to shareholder
Accounts payable and accrued expenses
Taxes payables
Deferred income taxes
Labor liabilities
Accrued liabilities and provisions
Current portion of customer advances on uncompleted contracts
Total current liabilities
Warrant liability
Customer advances on uncompleted contracts
Long-term debt
Total liabilities
Commitments and contingencies
$
$
$
December 31,
2013
2012
2,866 $
3,633
15,908
6,611
1,353
59,010
11,640
19,058
13,165
2,321
24,181
824
160,570
87,382
-
262
248,214 $
29,720 $
80
37,682
4,847
6,698
6
994
28,470
108,497
18,280
8,220
48,097
183,094
2,135
-
-
-
2,675
37,431
873
5,294
16,796
75
21,559
1,606
88,444
63,032
1,198
1,344
154,018
7,125
-
25,807
4,063
-
25
1,714
17,867
56,601
-
-
50,130
106,731
Shareholders' equity
Preferred shares, $0.0001 par value, 1,000,000 shares authorized, 0 shares issued and outstanding at December 31,
2013 and 2012
Ordinary shares, $0.0001 par value, 100,000,000 shares authorized, 24,214,670 and 20,567,141shares issued and
outstanding at December 31, 2013 and 2012, respectively
Legal reserves
Additional paid capital
Retained earnings (accumulated deficit)
Cumulative translation adjustment
Total shareholders´ equity
Total liabilities and shareholders´ equity
$
-
-
2
1,367
40,693
18,488
4,570
65,120
248,214 $
2
1,367
44,219
(3,824)
5,523
47,287
154,018
The accompanying notes are an integral part of these consolidated financial statements.
52
Tecnoglass Inc. and Subsidiaries
Consolidated Statements of Income and Comprehensive Income
(in thousands, except share and per share data)
Operating revenues
Cost of sales
Gross profit
Operating expenses:
Selling
General and administration
Operating expenses net
Operating income
Change in fair value of warrant liability
Non-operating revenues
Interest expense
Income before taxes
Income tax provision
Net income
Comprehensive income:
Net income
Foreign currency translation adjustments
Total comprehensive income
Basic income per share
Diluted income per share
Basic weighted average common shares outstanding
Diluted weighted average common shares outstanding
Years ended December 31,
2013
2012
$
183,294 $
127,875
55,419
17,287
10,862
28,149
130,324
95,451
34,873
11,756
12,138
23,894
27,270
10,979
7,626
3,998
(7,886)
31,008
8,696
22,312 $
22,312 $
(953)
21,359 $
1.08 $
1.08 $
-
3,649
(5,513)
9,115
3,223
5,892
5,892
6,262
12,154
0.29
0.29
20,677,067
20,567,141
20,714,275
20,567,141
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
53
Tecnoglass Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)
Years Ended December 31,
2013
2012
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
$
22,312 $
Provision for bad debts
Provision for obsolete inventory
Depreciation and amortization
Change in fair value of warrant liability
Deferred income taxes
Changes in operating assets and liabilities:
Receivables
Deferred income taxes
Inventories
Prepaid expenses
Other assets
Accounts payable and accrued expenses
Taxes payable
Labor liabilities
Accrued liabilities and provisions
Related parties
Advances from customers
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments
Proceeds from sale of property and equipment
Cash acquired from Andina Acquisition Corporation
Purchase of investments
Acquisition of property and equipment
Restricted cash
CASH USED IN INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from debt
Repayments of debt
CASH PROVIDED BY FINANCING ACTIVITIES
Effect of exchange rate changes on cash and cash equivalents
NET INCREASE (DECREASE) IN CASH
CASH — Beginning of year
CASH — End of year
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year for:
Interest
Taxes
NON-CASH INVESTING AND FINANCING ACTIVITES:
Assets acquired under capital lease
265
1,483
7,238
(7,626)
4,513
(20,891)
98
(6,143)
646
1,002
(11,216)
1,151
(16)
(598)
375
18,141
10,734
3,222
-
3
(107)
(20,001)
(3,746)
(20,629)
21,237
(12,865)
8,372
5,892
283
-
7,668
-
496
(13,297)
(21)
(5,229)
(903)
(119)
2,677
(626)
(31)
40
-
(4,113)
(7,283)
3,451
13,793
-
(1,278)
(25,938)
-
(9,972)
57,767
(48,590)
9,177
2,254
5,650
731
2,135
2,866 $
(2,428)
4,563
2,135
7,303 $
4,183 $
5,555
2,441
17,686 $
7,163
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
54
Tecnoglass, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
For the Years Ended December 31, 2013 and 2012
(in thousands, except share data)
Balance at January 1, 2012
Dividends paid in stock
Foreign currency translation
Net income
Balance at December 31, 2012
Outstanding ordinary shares of Andina
Acquisition at the time of the exchange
Recapitalization of Andina Acquisition
accumulated deficit
Foreign currency translation
Net income
Balance at December 31, 2013
Preferred Shares, $0.0001
Par Value
Shares
Amount
-
-
-
-
-
-
-
-
-
-
$
$
-
-
-
-
-
-
-
-
-
-
Ordinary Shares, $0.0001
Par Value
Shares
20,567,141
$
Amount
Additional
Paid in
Capital
Legal
Reserve
Retained
Earnings
(Accumulated
Deficit)
Accumulated
Other
Comprehensive
Loss
Total
Shareholders'
Equity
2
$
42,702
$
1,367
$
(9,716) $
(739) $
33,616
-
-
-
20,567,141
3,647,529
-
-
-
-
-
-
2
-
-
-
-
1,517
-
-
-
-
-
-
-
5,892
6,262
-
1,517
6,262
5,892
44,219
1,367
(3,824)
5,523
47,287
35,351
(38,877)
-
-
-
-
-
-
(38,877)
38,877
-
22,312
-
-
(953)
(3,526)
-
(953)
-
22,312
24,214,670
$
2
$
40,693
$
1,367
$
18,488
$
4,570
$
65,120
The accompanying notes are an integral part of these consolidated financial statements.
55
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Note 1. Organization and Business Operations
Tecnoglass Inc. was incorporated in the Cayman Islands on September 21, 2011 under the name “Andina Acquisition Corporation” (“Andina”) as a blank
check company. Andina’s registration statement for its initial public offering (the “Public Offering”) was declared effective on March 16, 2012. Andina
consummated the Public Offering, the private placement of warrants and the sale of options to the Underwriters on March 22, 2012, receiving proceeds, net of
transaction costs, of $43,163, of which $42,740 was placed in a trust account.
Andina’s objective was to acquire, through a merger, share exchange, asset acquisition, share purchase recapitalization, reorganization or other similar
business combination, one or more operating businesses. As discussed below, Andina entered into a merger transaction on December 20, 2013 between Tecno
Corporation (“Tecnoglass Holding”) as parent of Tecnoglass S.A. (“TG”) and C.I. Energía Solar S.A. E.S. Windows (“ES”). The surviving entity was
renamed to Tecnoglass Inc. (The “Company”).
The Company manufactures hi-specification, architectural glass and windows for the global residential and commercial construction industries. Currently the
Company offers design, production, marketing, and installation of architectural systems for buildings of high, medium and low elevation size. Products
include windows and doors in glass and aluminum, office partitions and interior divisions, floating façades and commercial window showcases. The
Company sells to more than 800 customers in North, Central and South America, and exports almost half of its production to foreign countries.
To fund its working capital requirements, the Company expects that the cash flow of the acquired companies will provide sufficient liquidity to meet its
current operating requirements. The Company believes that the investments made by the operating companies TG and ES in their technology, infrastructure,
and sales staff will generate cash flows sufficient to cover its working capital needs and other ongoing needs for capital. The Company’s cash requirements
include funding sales and production, paying interest expense and other operating expenses, including taxes, and investing in its technology infrastructure.
Note 2. Reverse Merger
The Company entered into an Agreement and Plan of Reorganization (the “Merger Agreement”) as of August 17, 2013. Pursuant to the Merger Agreement,
on the closing date of December 20, 2013 (the “Closing”), the former Tecnoglass Holding shareholders, through an intermediary entity, received, as
consideration for all ordinary shares of Tecnoglass Holding they held: (i) an aggregate of 20,567,141 ordinary shares of the Company, par value $0.0001 per
share (“Ordinary Shares”) at the Closing; and (ii) up to an aggregate of 3,000,000 additional Ordinary Shares (“Earnout Shares”) of the Company to be
released after the Closing as described below.
At the Closing, the Company had 3,647,529 ordinary shares outstanding with a net tangible book value of ($3,526). The net tangible book value consisted of
a stock subscription receivable aggregating $6,610, amount due from the transfer agent of $15,909, liabilities of $139 and a warrant liability of $25,906. The
balance due from the transfer agent is net of $22.9 million paid, from the proceeds of $42.7 million held in the trust account, to the holders of 2,251,853
public shares electing not to participate in the business combination. In addition, transaction expenses of approximately $3.9 million were also paid. The
balance of $15.9 is available for working capital and is classified on the accompanying balance sheet as Due From Transfer Agent. The funds were received
from the Transfer Agent in January 2014.
56
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Prior to the business combination the Company entered into subscription agreements with two investors pursuant to which such investors purchased 649,382
ordinary shares of for an aggregate price of $6,610. As of December 31, 2013 such amount has been classified as a subscription receivable. The proceeds
were received in January 2014.
The Merger Agreement was accounted for as a reverse merger and recapitalization where Tecnoglass Holding was the acquirer and TGI was the acquired
company. Accordingly, the historical financial statements presented are the consolidated financial statements of Tecnoglass Holding. The ordinary shares and
the corresponding capital amounts of the Company pre-merger have been retroactively restated as ordinary shares reflecting the exchange ratio in the merger.
The Earnout Shares have been issued and placed in escrow to be released to the former shareholders of Tecnoglass Holding’s upon the achievement of
specified share price targets or targets based on Tecnoglass Holding’s net earnings before interest income or expense, income taxes, depreciation, amortization
and any expenses arising solely from the Merger charged to income (“EBITDA”) in the fiscal years ending December 31, 2014, 2015 or 2016. The following
table sets forth the targets and the number of Earnout Shares issuable to the former shareholders of Tecnoglass Holding’s upon the achievement of such
targets:
Ordinary Share
Price Target
EBITDA Target
Number of Earnout Shares
Fiscal year ending 12/31/14
Fiscal year ending 12/31/15
Fiscal year ending 12/31/16
$12.00 per share $
$13.00 per share $
$15.00 per share $
Minimum Maximum Minimum Maximum
500,000
1,000,000
1,500,000
416,667
875,000
1,333,333
30,000 $
35,000 $
40,000 $
36,000
40,000
45,000
If either the ordinary share target or the maximum EBITDA target is met in any fiscal year, the former shareholders of Tecnoglass Holding’s receive the
maximum number of Earnout Shares indicated for the year.
In the event the ordinary share target is not met but the combined company’s EBITDA falls within the minimum and maximum EBITDA target for a specified
year, the number of Earnout Shares to be issued will be interpolated between such targets.
In the event neither the ordinary share target nor the minimum EBITDA target is met in a particular year, but a subsequent year’s share price or EBITDA
target is met, the former shareholders of Tecnoglass Holding’s will earn the Earnout Shares for the previous year as if the prior year’s target had been met.
The Company and the former shareholders of Tecnoglass Holdings have agreed to indemnify and hold harmless the other for their inaccuracies or breaches of
the representations and warranties or for the non-fulfillment or breach of any covenant or agreement contained in the Merger Agreement and for certain other
matters. To provide a fund for payment to the Company with respect to its post-closing rights to indemnification under the Merger Agreement, an aggregate
of 890,000 of the Ordinary Shares issuable to the Tecnoglass Holding shareholders were placed in escrow with an independent escrow agent at closing. The
escrow fund will be the sole remedy for the Company for its rights to indemnification under the Merger Agreement. On the date that is the earlier of (i) 30
days after the date on which the Company has filed its Annual Report on Form 10-K for its 2014 fiscal year or (ii) June 30, 2015, the shares remaining in such
escrow fund will be released to the former shareholders of Tecnoglass Holding’s except for any shares subject to pending claims and certain other matters.
57
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
On December 19, 2013 prior to the Merger, the Company entered into subscription agreements with two investors pursuant to which such investors agreed to
purchase an aggregate of 649,382 ordinary shares at $10.18 per Share, or an aggregate of $6,610,709.
Note 3. Summary of Significant Accounting Policies
Foreign Currency Translation
The consolidated financial statements are presented in United States Dollars, the reporting currency. The functional currency of the Company’s operations in
Colombia is the Colombian Peso (COP). The financial statements of the Company’s foreign operations are prepared in the functional currency. In accordance
with Accounting Standards Codification (ASC) ASC 830-30 Translation of Financial Statements, the Statements of Income and Comprehensive Income
prepared in the functional currency are translated using average exchange rates for the respective periods. Assets and liabilities on the Balance Sheets are
translated into the reporting currency using rates of exchange at the end of the period and the related translation adjustments are recorded as a separate
component of Accumulated Other Comprehensive Income. Transaction and remeasurement gains or losses resulting from foreign currency transactions are
recorded in the consolidated statement of operations.
Basis of Presentation and Use of Estimates
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of
America (“US GAAP”) and pursuant to the accounting and disclosure rules and regulations of the United States Securities and Exchange Commission (SEC).
The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets and liabilities,
revenues and expenses, and related disclosures of contingent assets and liabilities at the date of the Company’s financial statements. Actual results may differ
from these estimates under different assumptions or conditions. Based on information known before these financial statements were available to be issued,
there are no estimates included in these statements for which it is reasonably possible that the estimate will change in the near term up to one year from the
date of these financial statements and the effect of the change will be material. Estimates included in these financial statements relate to the collectability of
account receivable, the valuation of inventories, estimated earnings on uncompleted contracts, useful lives and potential impairment of long-lived assets and
valuation of derivative financial instruments.
The accompanying financial statements present the consolidated results of Tecnoglass Inc. (“TGI”) and its wholly-owned subsidiaries Tecnoglass S. A.
(“TG”) and Energía Solar ES Windows S.A (“ES”). All significant intercompany transactions and balances have been eliminated. Below is a summary of the
total company sales including intercompany eliminations:
Energía Solar S.A. Sales
Tecnoglass S.A. Sales
Total Energía Solar S.A. and Tecnoglass S.A.
Less: Intercompany Sales Elimination
Consolidated Sales
105,057
117,678
222,735
(39,441)
183,294
The results of TGI, as the acquired company in the reverse merger, have been included for the period after the reverse merger on December 20, 2013 to the
reporting date December 31, 2013.
58
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Revenue Recognition
The Company generates revenue from manufactured product sales. The Company manufactures both glass and aluminum products. Its glass products include
tempered glass, laminated glass, thermo-acoustic glass, curved glass, silk-screened glass, acoustic glass and digital print glass. Aluminum profiles offered by
the Company include mill finish, anodized, painted profiles, rods, tubes, bars and plates. The Company also generates revenues from sales and installations of
windows and façades. Window production lines are defined depending on the different types of windows: normal, impact resistant, hurricane-proof, safety,
soundproof and thermal. The Company produces fixed body, sliding windows, projecting windows, guillotine windows, sliding doors and swinging doors.
The Company produces façade products which include: floating facades, automatic doors bathroom dividers and commercial display windows.
Revenue is recognized when (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the fees are fixed and determinable, and (iv)
collectability of the sale is reasonably assured. All revenue is recognized net of discounts, returns and allowances.
Revenues recognized in advance of amounts billable pursuant to contracts terms are recorded as unbilled receivables on uncompleted contracts in the
accompanying consolidated balance sheet based on work performed and costs to date. Unbilled receivables on uncompleted contracts are billable upon
various events, including the attainment of performance milestones, delivery of product and/or services, or completion of the contract.
Payments received from customers in advance of delivery are recorded as advances from customers at the time payment is received.
Product Sales
The Company requires that all of its product sales to be supported by evidence of a sale transaction that clearly indicates the selling price to the customer,
shipping terms and payment terms. Evidence of an arrangement consists of a contract or purchase order approved by the customer.
The Company recognizes revenue when goods are shipped, which is “FOB shipping point.” Delivery to the customer is deemed to have occurred when the
customer takes title to the product. Generally, title passes to the customer upon shipment, but could occur when the customer receives the product based on
the terms of the agreement with the customer.
The selling prices of all goods that the Company sells are fixed, and agreed to with the customer, prior to shipment. Selling prices are generally based on
established list prices. The Company does not customarily permit its customers to return any of its products for monetary refunds or credit against completed
or future sales.
Contract Sales
Revenues from fixed price contracts are recognized using the percentage-of-completion method, measured by the percentage of costs incurred to date to total
estimated costs for each contract. Such contracts provide that the customer accept completion of progress to date and compensate the Company for services
rendered, which may be measured in terms of units installed, hours expended or some other measure of progress. Revisions to cost estimates as contracts
progress have the effect of increasing or decreasing expected profits each period. Provisions for anticipated losses are recorded in the period in which they
become determinable. No provisions have been recorded for losses on uncompleted contracts for the years ended December 31, 2013 and 2012.
59
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Standard Form Sales
The Company recognizes revenue for standard form sales once the installation is complete. Standard form sales are customer sales comprising low value
installations that are of short duration.
A standard form agreement is executed between the Company and its customer. Services are performed by the Company during the installation process. The
price quote is determined by the Company, based on the requested installation, and approved by the customer before the Company proceeds with the
installation. The customer’s credit worthiness and payment capacity is evaluated before the Company will proceed with the initial order process.
Shipping and Handling Costs
The Company classifies amounts billed to customers related to shipping and handling in sale transactions as product revenues. Shipping and handling costs
incurred are recorded in cost of product revenues. For the years ended December 31, 2013 and 2012, the Company recorded revenue related to shipping and
handling costs of $ 7.0 million and $5.9 million, respectively.
Sales Tax and Value Added Taxes
The Company accounts for sales taxes and value added taxes imposed on its goods and services on a net basis – value added taxes paid for goods and services
purchased is netted against value added tax collected from customers and the net amount is paid to the government. The current value added tax rate in
Colombia for all of the Company’s products is 16%. A municipal industry and commerce tax (ICA) sales tax of 0.7% is payable on all of the Company’s
products sold in the Colombian market.
Cash and Cash Equivalents
All liquid investments with an original maturity of three months or less when purchased are considered to be cash equivalents. Cash equivalents are stated at
cost, which approximates market value. At December 31, 2013 the Company had no cash equivalents.
Concentration of Credit Risk
Financial instruments which potentially subject the Company to credit risk consist primarily of cash and trade accounts receivable. The Company mitigates its
cash risk by maintaining its cash deposits with major financial institutions in Colombia and the Cayman Islands. At times the balances held at financial
institutions in Colombia may exceed the Colombia government insured limits of the Ministerio de Hacienda y Credito Publico. The Company has not
experienced such losses in such accounts. As discussed below, the Company mitigates its risk to trade accounts receivable by performing on-going credit
evaluations of its customers.
60
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Trade Accounts Receivable
Trade accounts receivable are recorded net of allowances for cash discounts for prompt payment, doubtful accounts, and sales returns. Estimates for cash
discounts and sales returns are based on contractual terms, historical trends and expectations regarding the utilization rates for these programs.
The Company’s policy is to reserve for uncollectible accounts based on its best estimate of the amount of probable credit losses in its existing accounts
receivable. The Company periodically reviews its accounts receivable to determine whether an allowance for doubtful accounts is necessary based on an
analysis of past due accounts and other factors that may indicate that the collectability of an account may be in doubt. Other factors that the Company
considers include its existing contractual obligations, historical payment patterns of its customers and individual customer circumstances, and a review of the
local economic environment and its potential impact on the collectability of accounts receivable. Account balances deemed to be uncollectible are charged to
the allowance for doubtful accounts after all means of collection have been exhausted and the potential for recovery is considered remote.
Inventories
Inventories, which consist primarily of purchased and processed glass, aluminum, parts and supplies held for use in the ordinary course of business, are
valued at the lower of cost or market. Cost is determined using a weighted-average method. Inventory consisting of certain job specific materials not yet
installed are valued using the specific identification method.
Reserves for excess or slow-moving inventories are updated based on historical experience of a variety of factors including sales volume and levels of
inventories at the end of the period. The Company’s reserve for excess or slow-moving inventories at December 31, 2013 and 2012 amounted to
approximately $1,438 and $0, respectively.
Property, Plant and Equipment
Property, plant and equipment are recorded at cost. Significant improvements and renewals that extend the useful life of the asset are capitalized. Repairs and
maintenance are charged to expense as incurred. When property is retired or otherwise disposed of, the cost and related accumulated depreciation are removed
from the accounts and any related gains or losses are included in income as a reduction to or increase in selling, general and administrative expenses.
Depreciation is computed on a straight-line basis, based on the following estimated useful lives:
Machinery and equipment
Furniture and fixtures
Office equipment and software
Vehicles
10 years
10 years
5 years
5 years
61
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Long Lived Assets
The Company periodically reviews the carrying values of its long lived assets when events or changes in circumstances would indicate that it is more likely
than not that their carrying values may exceed their realizable values, and record impairment charges when considered necessary.
When circumstances indicate that impairment may have occurred, the Company tests such assets for recoverability by comparing the estimated undiscounted
future cash flows expected to result from the use of such assets and their eventual disposition to their carrying amounts. If the undiscounted future cash flows
are less than the carrying amount of the asset, an impairment loss, measured as the excess of the carrying value of the asset over its estimated fair value, is
recognized. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party
independent appraisals, as considered necessary.
Common Stock Purchase Warrants
The Company classifies as equity any warrants contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-
cash settlement or settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that
(i) require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or
(ii) gives the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).
The Company assesses classification of its common stock purchase warrants and other freestanding derivatives, if any, at each reporting date to determine
whether a change in classification between assets and liabilities is required.
Warrant liability
The Company accounts for the 4,200,000 warrants issued in connection with the Public Offering, 4,800,000 warrants issued in connection with the Private
Placement, and 200,000 working capital warrants issued upon conversion of a promissory note at the closing of the Merger. In accordance with the guidance
contained in ASC 815-40-15-7D whereby under that provision the warrants do not meet the criteria for equity treatment and are recorded as a liability.
Accordingly, the Company classifies the warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. This
liability is subject to re-measurement at each balance sheet date until exercised or expired, and any change in fair value is recognized in the Company’s
consolidated statement of operations.
The fair value of the warrant liability was determined by the Company using the Binomial Lattice pricing model. This model is dependent upon several
variables such as the instrument’s expected term, expected strike price, expected risk-free interest rate over the expected instrument term, the expected
dividend yield rate over the expected instrument term and the expected volatility of the Company’s stock price over the expected term. The expected term
represents the period of time that the instruments granted are expected to be outstanding. The expected strike price is based upon a weighted average
probability analysis of the strike price changes expected during the term as a result of the down round protection. The risk-free rates are based on U.S.
Treasury securities with similar maturities as the expected terms of the options at the date of valuation. Expected dividend yield is based on historical trends.
The Company measures volatility using a blended weighted average of the volatility rates for a number of similar publicly-traded companies
62
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The inputs to the model were as follows:
Stock Price
Dividend Yield
Risk-free rate
Expected Term
Expected Volatility
December 31, 2013
December 20, 2013
$
$
8.55
N/A
0.78%
2.97
44.69
10.18
N/A
0.70%
3.00
44.71
The table below provides a reconciliation of the beginning and ending balances for the warrant liability measured using significant unobservable inputs (Level
3):
Balance - December 20, 2013
Fair value adjustment
Balance - December 31, 2013
Stock-Based Compensation
$
$
25,906
(7,626)
18,280
The Company accounts for share-based awards exchanged for employee services at the estimated grant date fair value of the award. At December 31, 2013
and 2012, no share-based awards had been granted to employees.
Derivative Financial Instruments
The Company records all derivatives on the balance sheet at fair value, regardless of the purpose or intent for holding them. The Company has not designated
its derivatives as hedging instruments, therefore, the Company does not designate them as fair value or cash flow hedging instruments. The accounting for
changes in fair value of the derivatives is recorded within earnings.
Advertising Costs
Advertising costs are expensed as they are incurred and are included in general and administrative expenses. Advertising costs for the years ended December
31, 2013 and 2012 amounted to approximately $383 and $255, respectively.
Income Taxes
The Company’s operations in Colombia are subject to the taxing jurisdiction of the Republic of Colombia. TGI and Tecnoglass Holding are subject to the
taxing jurisdiction of the Cayman Islands. All periods prior to 2012 are no longer subject to examination by taxing authorities in Colombia.
The Company accounts for income taxes under the asset and liability model (ASC 740 “Income Taxes”) and recognizes deferred tax assets and liabilities for
the expected impact of differences between the financial statements and tax bases of assets and liabilities and for the expected future tax benefit to be derived
from tax loss and tax credit carry forwards. A valuation allowance is established when management determines that it is more likely than not that all or a
portion of deferred tax assets will not be realized.
63
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold
and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company
believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material
changes to its financial position. Based on the Company’s evaluation, it has been concluded that there are no significant uncertain tax positions requiring
recognition in the Company’s consolidated financial statements. The Company records interest and penalties, if any, as a component of income tax expense.
Earnings Per Share
Basic earnings per share is computed by dividing net income by the weighted-average number of ordinary shares outstanding during the period, excluding the
effects of any potentially dilutive securities. Income per share assuming dilution would give effect to dilutive options, warrants, and other potential ordinary
shares outstanding during the period. The calculation of the weighted-average number of ordinary shares includes 20,567,141 recapitalized shares, assumed to
be outstanding as of the beginning of each period, and 3,647,529 ordinary shares of Andina Acquisition outstanding at the time of the merger. The
computation of basic and diluted income per share for the year ended December 31, 2013 excludes the effect of Unit Purchase Options to purchase 900,000
units (consisting of one warrant and one ordinary share) because their inclusion would be anti-dilutive.
The Company considered the effect of warrants to purchase 9,200,000 ordinary shares in the calculation of diluted income per share, which resulted in 37,208
shares of dilutive securities for the year ended December 31, 2013. This effect had no impact on diluted income per share.
Comprehensive Income (Loss)
Other comprehensive income (loss) includes all changes in stockholders’ equity during a period from non-owner sources and is reported in the consolidated
statement of stockholders’ equity. To date, other comprehensive income (loss) consists of changes in accumulated foreign currency translation adjustments
during the years.
Loss Contingencies
The Company recognizes contingent losses that are both probable and estimable. In this context, the Company defines probability as circumstances under
which events are likely to occur. In regards to legal costs, the Company records such costs as incurred.
Recent Accounting Pronouncements
In July 2012, the FASB issued ASU No. 2012-02, “Intangibles-Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment”
(ASU 2012-02), allowing entities the option to first assess qualitative factors to determine whether it is necessary to perform the quantitative impairment test.
If the qualitative assessment indicates it is more-likely-than-not that the fair value of an indefinite-lived intangible asset is less than its carrying amount, the
quantitative impairment test is required. Otherwise, no testing is required. ASU 2012-02 is effective for the Company in the period beginning January 1, 2013.
The adoption of this update did not have a material impact on the consolidated financial statements but may have an impact in future periods.
64
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other
Comprehensive Income” (“ASU 2013-02”). ASU 2013-02 is intended to improve the reporting of reclassifications out of accumulated other comprehensive
income. Accordingly, an entity is required to report the effect of significant reclassifications out of accumulated other comprehensive income on the
respective line items in net income if the amount being reclassified is required under GAAP to be reclassified in its entirety to net income. For other amounts
that are not required under GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other
disclosures required under GAAP that provide additional detail about those amounts. The amendments in this ASU supersede the presentation requirements
for reclassifications out of accumulated other comprehensive income in ASU 2013-05 and ASU 2013-12. ASU 2013-02 is effective for reporting periods
beginning after December 15, 2012. The Company adopted ASU 2013-02 effective January 1, 2013 and the adoption did not have an impact on the
Company’s consolidated financial statements but may have an impact in future periods.
Note 4. Fair Value of Financial Instruments
The carrying amounts of cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses, approximate their fair values due to their short-
term nature, as they are receivable or payable upon demand. Amounts shown for debt approximate fair value as applicable interest rates are at current market
rates.
The carrying amounts of the Company’s financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and advances from
customers approximate their fair value due to their relatively short-term maturities. The Company bases its fair value estimate for long term debt obligations
on its internal valuation that all debt is floating rate debt based on current interest rates in Colombia.
65
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Note 5. Trade Accounts Receivable
Trade accounts receivable consists of the following:
Trade accounts receivable
Less: Allowance for doubtful accounts
December 31,
2013
59,413 $
(403)
59,010 $
2012
37,704
(273)
37,431
$
$
The changes in allowances for doubtful accounts for the years ended December 31, 2013 and 2012 are as follows:
Balance at beginning of year
Provision for bad debts
Deductions and write-offs
Balance at end of year
Note 6. Advances and Other Receivables
Advances to Suppliers and Loans
Prepaid Income Taxes and Social Contributions
Employee Receivables
Other Creditors
December 31,
2013
2012
273 $
265
(135)
403 $
December 31,
2013
2012
8,310 $
2,281 $
374 $
2,200 $
13,165 $
169
283
(179)
273
10,479
2,705
69
3,543
16,796
$
$
$
$
$
$
$
Included in advances to suppliers and loans is a loan to Finsocial, a company that makes loans to public school system teachers. At December 31, 2013 and
2012 the loan balances were $4,308 and $3,570 respectively
Note 7. Inventories
Inventories is comprised of the following:
Raw materials
Work in process
Finished goods
Stores and spares
Packing material
Less: inventory allowances
December 31,
2013
17,121 $
3,243
2,741
2,404
110
25,619
(1,438)
24,181 $
2012
16,619
2,643
573
1,622
102
21,559
-
21,559
$
$
66
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Note 8. Property, Plant and Equipment, Net
Property, plant and equipment consist of the following:
Building
Machinery and equipment
Office equipment and software
Vehicles
Furniture and fixtures
Total property, plant and equipment
Accumulated depreciation and amortization
Net value of property and equipment
Land
Total property, plant and equipment, net
December 31,
2013
2012
$
$
34,710 $
61,539
3,221
1,193
1,888
102,551
(27,403)
75,148
12,234
87,382 $
33,891
47,585
1,773
885
2,872
87,006
(26,802)
60,204
2,828
63,032
Depreciation and amortization expense, inclusive of capital lease amortization, for the years ended December 31, 2013 and 2012 amounted to $7,238 and
$7,668, respectively.
Note 9. Long-Term Debt
Long-term debt is comprised of the following:
Obligations under borrowing arrangements
Less: Current portion of long-term debt and other current borrowings
Long-term debt
67
December 31,
2013
77,817 $
(29,720)
48,097 $
2012
57,255
(7,125)
50,130
$
$
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
At December 31, 2013, the Company owes approximately $77,817 under its various borrowing arrangements with several banks in Colombia and Panama
including obligations under various capital leases as discussed below. The bank obligations have maturities ranging from six months to 10 years that bear
interest at rates ranging from 5.6% to 10.2%. These loans are generally secured by substantially all of the Company’s accounts receivable and/or inventory.
Certain obligations include covenants and events of default including requirements that the Company maintain a minimum debt to EBITDA ratio, a minimum
debt service ratio, total debt to total assets ratio and sales growth ratios.
The Company was not in compliance with certain financial covenants as of December 31, 2013 for its financial obligations with Banco Colpatria. In April
2014, the bank confirmed with the Company it would take no actions to accelerate payments, increase interest, or any other actions as a result of the non-
compliance with the covenants against the Company and is currently working with the Company to redefine such financial covenants to better reflect the
operations of the Company.
Maturities of long-term debt and other current borrowings are as follows as of December 31, 2013:
Year Ending December 31,
2014
2015
2016
2017
2018
Thereafter
Total
$
$
26,580
12,554
11,544
5,616
2,705
985
59,984
Revolving Lines of Credit
The Company has approximately $2.3 million available in two lines of credit under a revolving note arrangement as of December 31, 2013. The Revolving
Notes expired and were renewed on April 3, 2014. The interest rate on such revolving note is DTF +6.5% and DTF +7%. DTF is the primary measure of
interest rates in Colombia.
The note is secured by all assets of the Company and the personal guarantees of the officer-stockholders. At December 31, 2013 and 2012 $1,872 and $487
was outstanding, respectively. Approximately $463 and $291 is available on these revolving notes as of December 31, 2013, and approximately $25 and $112
at December 31, 2012, respectively.
Capital Lease Obligations
The Company is obligated under various capital leases under which the aggregate present value of the minimum lease payments amounted to approximately
$17,833. The present value of the minimum lease payments was calculated using discount rates ranging from 7.94% to 12.20%.
The future minimum lease payments under all capital leases at December 31, 2013 are as follows:
Year Ending December 31,
2014
2015
2016
2017
2018
Thereafter
$
$
3,141
3,228
2,832
1,906
1,520
5,206
17,833
Interest expense for the years ended December 31, 2013 and 2012 was $ 7.9 million and $5.5 million, respectively.
68
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Note 10. Note Payable to Shareholder and Advance from Shareholder
The Company issued a $100 principal amount unsecured promissory note to A. Lorne Weil, one of the Company’s Initial Stockholders and its Non-Executive
Chairman of the Board, on November 8, 2011. The note was non-interest bearing and was payable on the earlier of (i) November 8, 2012, (ii) the
consummation of the Offering or (iii) the date on which the Company determined not to proceed with the Offering. The parties to the notes informally agreed
to extend their payable date past the Offering. The note was repaid in full on May 25, 2012.
In addition, on March 15, 2012, the stockholder paid expenses on behalf of the Company in the amount of $71 for various NASDAQ fees. The liability was
repaid in full on August 24, 2012.
On May 20, 2013, the A. Lorne Weil 2006 Irrevocable Trust-Family Investment Trust (the “Trust”), a trust of which the Chairman of the Board of the
Company, his spouse and his descendants are among the beneficiaries, loaned the Company $100. This note was converted into 200,000 warrants upon
consummation of the Merger. The terms of the warrants were identical to the warrants issued by the Company in its initial public offering except that such
warrants will not be redeemable by the Company so long as they are still held by the Trust or its permitted transferees.
From September 5 to November 7, 2013 A. Lorne Weil loaned the Company $150 of which $70 was paid at closing of the Merger and $80 remained unpaid
as of December 31, 2013.
69
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Note 11. Income Taxes
Income Taxes
The Company files income tax returns for TG and ES in the Republic of Colombia where, as a general rule, taxable income for companies is subject to a 25%
Income Tax rate, except for taxpayers with special rates approved by the Congress. A minimum taxable income is calculated as 3% of net equity on the last
day of the immediately preceding period and is used as taxable income if it is higher than taxable income otherwise calculated. For tax years 2013 through
2015, a special additional CREE tax will apply at a rate of 9% to certain tax payers including the Company. Starting in 2016, the rate for this tax will be 8%.
The components of income tax expense (benefit) are as follows:
Current income tax
Foreign
Deferred income Tax
Foreign
Total Provision for Income tax
Years Ended
Dec 31, 2013
Dec 31, 2012
4,183
4,513
8,696
2,421
802
3,223
A reconciliation of the statutory tax rate in Colombia to the Company’s effective tax rate is as follows:
Income tax expense at statutory rates
Non-deductible expenses
Non-taxable income
Effective tax rate
The Company has the following net deferred tax assets (in thousands):
Dec 31, 2013
Dec 31, 2012
34.0%
6.5%
(12.2)%
28.3%
33.0%
4.80%
(5.80)%
32.0%
Deferred tax assets:
Accounts Receivable Clients - Delivered
Accounts Receivable Clients - Poc
Depreciation
Provision Inventory
Total deferred tax assets
Deferred tax liabilities:
Inventory Not delivered
Accounts Receivable Clients - Poc
Depreciation
Financials Liabilities
Provision Accounts Receivable
Total deferred tax liabilities
70
December 31, 2013
517
849
465
489
2,321
404
4,706
565
78
944
6,698
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The Company does not have any uncertain tax positions for which it is reasonably possible that the total amount of gross unrecognized tax benefits will
increase or decrease within 12 months of December 31, 2013. The unrecognized tax benefits may increase or change during the next year for items that arise
in the ordinary course of business.
As of December 31, 2013 and 2012, neither TG nor ES had tax losses.
The 2013 fiscal tax year is open for ES and TG until July 1, 2014. All tax years from 2012 and prior are closed.
Note 12. Related Parties
The Company has two major related parties: ES Windows LLC (“ESW LLC”), a Florida LLC partially owned by the Chief Executive Officer and the Chief
Operating Officer, and Ventanas Solar S.A. (“VS”), an importer and installer based in Panama owned by related party family members. Union Temporal
ESW is a temporary joint venture with Ventanar S.A. for building projects in 2013.
The following is a summary of assets, liabilities, and income and expense transactions as of December 31, 2013 and 2012 with all related parties,
shareholders, directors and managers:
Assets—
Revenues—
Expenses—
Due from ESW LLC
Due from VS
Due from Union Temporal ESW
Due from other related parties
Sales to ESW LLC and VS
Fees paid to Directors and Officers
Paid to other related parties
71
$
$
$
2013
11,823 $
2,690
3,199
1,346
19,058 $
28,788 $
408
512
2012
1,761
2,963
-
570
$5,294
26,123
592
-
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
The Company guaranteed a bank loan for $519 to related party A Construir S.A. in order to purchase raw materials and accelerate completion of a warehouse
for Tecnoglass. At the December 31, 2013 the guarantee was in good standing and no liabilities have been recorded. At completion of the warehouse in
February 2014, the loan was repaid in full and the guarantee was canceled.
The Company guaranteed a loan for $163 used to develop a lot adjacent to the Alutions plant into a related party fuel service station Santa Maria del Mar S.A.
At the December 31, 2013 the guarantee was in good standing and no liabilities have been recorded, and the Company was in the process of restructuring the
guarantee to exclude the involvement of Tecnoglass, S.A., as required by the merger agreement.
Note 13. Derivative Financial Instruments
In 2012, the Company entered into two interest rate swap (IRS) contracts as economic hedges against interest rate risk through 2017, and two currency
forward contracts as economic hedges against foreign currency rate risk on U.S. dollar loans. The currency forwards expired in January 2014. Hedge
accounting treatment per guidance in ASC 815-10 and related Subsections was not pursued at inception of the contracts. The derivative contracts were
recorded on the balance sheet as liabilities as of December 31, 2013, at an aggregate fair value of $230. Changes in the fair value of the derivatives will be
recorded in current earnings.
Note 14. Commitments and Contingencies
Guarantees
The Company guaranteed a $3,633 bank loan for Construimos y Señalizamos S.A. The borrowed funds were deposited with ES to ensure enough resources
for large projects that could potentially require significant uses of cash by the Company. At the December 31, 2013, the guarantee was in good standing and
no liabilities are recorded. The funds were repaid to the bank on April 1st, 2014.
Guarantees to related parties are disclosed in Note 12 – Related Parties
Legal Matters
TG and Tecnoglass USA, Inc., a related party, are named in a civil action for wrongful death, negligence and negligent infliction of emotional distress arising
out of a workplace accident where a crate of glass fell and fatally crushed a worker during the unloading process. TG denies liability and intends to rigorously
defend the claim in court. TG’s insurance carrier is providing coverage to TG under a $3,000 wasting policy, which means that the attorneys’ fees and
expenses incurred during the defense of the claim reduce the amount of coverage available. TG’s U.S. counsel believe that the claimants’ initial request of
$6,000 in negotiations is without merit or substance. Based on pre-trial settlement negotiations, TG’s U.S. counsel believe that the claimants will settle for
substantially less than the $3,000 policy coverage, and uninsured losses in excess of the policy are unlikely. The case is scheduled for the trial calendar in
Miami-Dade County beginning September 15, 2014. TG’s counsel believes that an uninsured loss to the Company above the coverage limits is unlikely and
immaterial.
TG is also a named defendant in in the matter of Diplomat Properties, Limited Partnership as assignee of Shower Concepts, Inc. v. Tecnoglass Colombia, S.A.
in the 17 th Judicial Circuit in and for Broward County, Florida. Plaintiff Diplomat Properties, Limited (“Diplomat”) has asserted a claim for indemnification
against TG and Tecnoglass USA, Inc.. The claim arises from the supplying of glass shower doors to a hotel/spa in Broward County, Florida. Specifically, in
2006, Diplomat commenced arbitration against Shower Concepts, Inc. seeking damages for breach of contract due to fractures in the installed glass shower
doors. Diplomat initiated a complaint asserting various claims which were dismissed with prejudice. The only remaining claim against the Tecnoglass entities
is common law indemnification. TG denies liability and asserts that Shower Concepts was at fault and that as a joint tort feasor, it cannot sue for indemnity. A
trial date has not yet been set for this case. TG’s counsel believes that a liability in this claim is unlikely and immaterial.
72
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
General Legal Matters
From time to time, the Company is involved in legal matters arising in the ordinary course of business. While management believes that such matters are
currently not material, there can be no assurance that matters arising in the ordinary course of business for which the Company is, or could be, involved in
litigation, will not have a material adverse effect on its business, financial condition or results of operations.
Note 15. Shareholders’ Equity
Preferred Shares
TGI is authorized to issue 1,000,000 preferred shares with a par value of $0.0001 per share with such designation, rights and preferences as may be
determined from time to time by the Company’s board of directors.
As of December 31, 2013, there are no preferred shares issued or outstanding.
Ordinary Shares
The Company is authorized to issue 100,000,000 ordinary shares with a par value of $0.0001 per share. As of December 31, 2013, a total of 27,214,670
Ordinary shares were issued and outstanding which includes 3,000,000 Earnout shares which have been issued and placed in escrow but have no voting
rights. The Earnout shares are not considered issued and outstanding as a matter of Cayman Islands law.
Legal Reserve
Colombian regulation requires that companies retain 10% of net income until it accumulates at least 50% of subscribed and paid in capital
Long Term Incentive Compensation Plan
The Long-Term Incentive Plan will reserve a number of Company ordinary shares for issuance in accordance with the plan’s terms in an amount equal to 6%
of the ordinary shares outstanding immediately after the closing of the merger (including the full amount of earn out shares). The company can offer its
employees, officers, directors and consultants whose past, present and/or potential future contributions to the Company have been, are or will be important to
the success of the Company, an opportunity to acquire a proprietary interest in the Company. The various types of incentive awards that may be provided
under the plan, which include options, share appreciation rights, restricted shares and other share-based awards, are intended to enable the Company to
respond to changes in compensation practices, tax laws, accounting regulations and the size and diversity of its business. Awards under this plan may only be
granted for ten years after December 20th, 2013, the effective date of the plan and may only be exercised within ten years from the date of the grant, and five
years in the case of an incentive share option granted to a person possessing more than 10% of the total combined voting power at the time of the grant.
73
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
Note 16. Fair Value Measurements
ASC 820-10, “Fair Value Measurements and Disclosures” (“ASC 820-10”), defines fair value, establishes a framework for measuring fair value in U.S.
GAAP and provides for expanded disclosure about fair value measurements. ASC 820-10 applies to all other accounting pronouncements that require or
permit fair value measurements.
The Company determines or calculates the fair value of financial instruments using quoted market prices in active markets when such information is available
or using appropriate present value or other valuation techniques, such as discounted cash flow analyses, incorporating available market discount rate
information for similar types of instruments while estimating for non-performance and liquidity risk. These techniques are significantly affected by the
assumptions used, including the discount rate, credit spreads, and estimates of future cash flow.
ASC 820-10 requires that assets and liabilities recorded at fair value be classified and disclosed in one of the following three categories:
•
•
•
Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access.
Level 2 inputs utilize other-than-quoted prices that are observable, either directly or indirectly. Level 2 inputs include quoted prices for similar
assets and liabilities in active markets, and inputs such as interest rates and yield curves that are observable at commonly quoted intervals.
Level 3 inputs are unobservable and are typically based on the Company’s own assumptions, including situations where there is little, if any,
market activity. Both observable and unobservable inputs may be used to determine the fair value of positions that are classified within the
Level 3 classification. As a result, the unrealized gains and losses for assets within the Level 3 classification may include changes in fair value
that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in historical company data)
inputs.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the Company classifies such
financial asset or liability based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the
significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
Assets and Liabilities Measured at Fair Value on a Recurring Basis (at December 31, 2013)
Due from Continental Stock and Trust
Warrant Liability
Interest Rate Swap Derivative Liability
Foreign Currency Forward Liability
Quotes Prices
in Active
Markets
(Level 1)
15,908
-
Significant
Other
Observable
Inputs (Level 2)
-
-
178
53
Significant
Unobservable
Inputs (Level 3)
-
18,280
74
Tecnoglass, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(amounts in thousands, except share and per share data)
For fair value measurements categorized within Level 3 of the fair value hierarchy, the Company’s principal executive determines its valuation policies and
procedures.
Note 17. Segment and Geographic Information
The Company operates a single segment business for product sales which consists of geographical sales territories as follows:
Colombia
United States
Panama
Other
December 31,
2013
2012
101,754
66,723
10,210
4,607
183,294 $
63,217
49,098
14,296
3,713
130,324
$
Note 18. Subsequent Events
In March 2014, the Company closed on its letter of intent dated December 26, 2013 for the purchase of land adjacent to the Company’s current facilities for
$7.3 million.
On March 5, 2014, the Company entered into a subscription agreement with an affiliate of A. Lorne Weil, the Company’s Non-Executive Chairman of the
Board, pursuant to which such affiliate agreed to purchase an aggregate of 95,693 ordinary shares of the Company for $1,000,000, or approximately $10.45
per share, representing a slight premium to the closing price of the ordinary shares immediately prior to the execution of the subscription agreement. The
transaction closed on March 14, 2014.
Subsequent events were evaluated through April 15, 2014 the date the financial statements were available for publication.
75
AGREEMENT, dated December 19, 2013, by and between Red Oak Partners LP (the “Purchaser” or “Red Oak”) and The A. Lorne Weil 2006 Irrevocable
Trust (the “Insider”), and Andina Acquisition Corporation, a Cayman Islands company (the “Company”).
WARRANT TRANSFER AGREEMENT
RECITALS:
A. The Company will hold an extraordinary general meeting of its shareholders to consider and act upon, among other things, a proposal to adopt
and approve the Agreement and Plan of Reorganization (“Acquisition Agreement”), dated as of August 17, 2013, as amended as of November 6, 2013, by and
among the Company, Andina Merger Sub, Inc., the Company’s wholly-owned subsidiary (“Merger Sub”), Tecnoglass S.A. (“Tecnoglass”), C.I. Energia Solar
S.A. E.S. Windows (“ES”) and Tecno Corporation (“Tecno Holding”), providing for the merger (“Merger”) of Merger Sub with and into Tecno Holding with
Tecno Holding becoming a wholly owned subsidiary of the Company (the “Acquisition Proposal”).
B. The Purchaser desires to purchase up to 1,000,000 ordinary shares (common stock) of the Company (“Current Ownership”) sold in the
Company’s initial public offering (the “Public Shares”).
IT IS AGREED:
1. Purchase of Shares. The Purchaser hereby agrees that it and/or its designees set forth on Exhibit A (collectively, the “Designees”) hereto will
use commercially reasonable efforts to purchase the 1,000,000 Public Shares prior to the closing of the Merger (“Closing”) at $10.18 per share. Purchaser
agrees that neither it nor its Designees will seek redemption or conversion of any of Public Shares in connection with the Merger.
2. Insider Warrant Transfers. In consideration of the agreements made by the Purchaser, if the Acquisition Proposal is approved and the Merger is
consummated, the Insider will, promptly after the Closing but in no event later than December 31, 2013, transfer to the Purchaser (or its Designees as
instructed by the Purchaser) 2.19888 Insider Warrants (as defined below) per share purchased of the Company by Purchaser or its Designees (up to a
maximum of 2,198,880 Insider Warrants). Public Shares purchased but not yet settled shall be included in the foregoing Insider Warrant calculation. For the
purposes hereof, the Insider Warrants shall mean the warrants each covering one share of underlying common stock of the Company and exercisable at $8 per
warrant and further identified as “insider warrants” in the Andina Acquisition Corporation Prospectus filed pursuant to Rule 414(b)(4) with the Securities and
Exchange Commission on or about March 16, 2012 (the “Prospectus”) (the “Prospectus”).
3. Registration of Warrants; Acknowledgement.
(a) Not later than April 1, 2014 (the “Filing Deadline”), the Company shall file a registration statement covering the resale by the Purchaser of the
Insider Warrants (and underlying ordinary shares) and use its best efforts to have such registration statement declared effective by the Securities and
Exchange Commission as soon as possible, but no later than June 1, 2014 (the “Effectiveness Deadline”).
(b) In the event that the registration statement is (a) not filed on or before the Filing Deadline (“Filing Failure”), or (b) not declared effective by
the SEC on or before the respective Effectiveness Deadline for any reason (an "Effectiveness Failure") then, Red Oak (or the then current holders of the
transferred Insider Warrants) (the “Holder”) shall be entitled to a payment of $.20 (subject to equitable adjustment for splits, combinations and similar
occurrences) for each Insider Warrant (or underlying share of Common Stock) held by such Holder for each thirty day period (or portion thereof) as partial
relief for the damages to any Holder by reason of any such delay in or reduction of its ability to sell the underlying shares of ordinary shares (the
“Registrable Securities”) of the Company (which remedy shall not be exclusive of any other remedies available at law or in equity).
(c) If, on any day after the applicable, Effective Date, sales of all of the Registrable Securities required to be included on such registration
statement that have not already been sold by Holders pursuant to the registration Statement cannot be made pursuant to such Registration Statement or
otherwise (including, without limitation, because of a failure to keep such Registration Statement effective, to disclose such information as is necessary for
sales to be made pursuant to such Registration Statement, to register a sufficient number of shares of common stock or to maintain the listing of the shares of
common stock) (a "Maintenance Failure") then, as partial relief for the damages to any Holder by reason of any such delay in or reduction of its ability to
sell the underlying shares of common stock (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay
to each Holder of Registrable Securities (or securities that are exercisable for Registrable Securities) who has not already sold all of its shares of common
stock relating to such Registration Statement an amount in cash equal to $.20 (subject to equitable adjustment for splits, combinations and similar
occurrences) per share of common stock of such Holder's Registrable Securities included in such Registration Statement that have not already been sold
pursuant to the Registration Statement on the initial day of a Maintenance Failure and on every thirtieth day (pro rated for periods totaling less than thirty
days) thereafter until such Maintenance Failure is cured.
(d) Notwithstanding the foregoing, the Company shall have thirty (30) days during which to cure a Filing Failure, Effectiveness Failure or
Maintenance Failure and in which no penalty fee shall be owed.
(e) In the event that the Company fails to make any payments required in Sections (b) or (c) above in a timely manner, such amounts shall bear
interest at the rate of one and one-half percent (1.5%) per month (prorated for partial months) until paid in full.
(f) The Company by executing below hereby confirms its acknowledgement of the transfers of Warrants contained herein and shall take all action
reasonably necessary to effect the transfer of the Insider Warrants as provided herein to the Purchaser and/or its Designees. Further the Company hereby
agrees not to take any action in contravention or inconsistent with the transfers of the Insider Warrants as contemplated herein.
2
4. Representations of Purchaser. Purchaser hereby represents and warrants to the Insider that:
(a) Purchaser, in making the decision to receive the Insider Warrants from the Insider, has not relied upon any oral or written representations or
assurances from the Insider or any of the Company’s officers, directors, partners or employees or any other representatives or agents.
(b) This Agreement has been validly authorized, executed and delivered by the Purchaser and, assuming the due authorization, execution and
delivery thereof by the other parties hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by
the Purchaser does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract
or instrument to which the Purchaser is a party which would prevent the Purchaser from performing its obligations hereunder or (ii) any law, statute, rule or
regulation to which the Purchaser is subject.
(c) The Purchaser acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement
with the Purchaser’s own legal counsel and investment and tax advisors. The Purchaser is not relying on any statements or representations of the Company or
any of its representatives or agents for legal, tax or investment advice with respect to this Agreement or the transactions contemplated by the Agreement.
(d) The Purchaser (and/or the Designees) shall direct its broker to purchase on December 20, 2013 at least 500,000 shares of ordinary stock of the
Company at $10.18 per share.
5. Insider Representations. The Insider hereby represents and warrants to the Purchaser that:
(a) This Agreement has been validly authorized, executed and delivered by the Insider and, assuming the due authorization, execution and
delivery thereof by the other parties hereto, is a valid and binding agreement enforceable in accordance with its terms, subject to the general principles of
equity and to bankruptcy or other laws affecting the enforcement of creditors’ rights generally. The execution, delivery and performance of this Agreement by
the Insider does not and will not conflict with, violate or cause a breach of, constitute a default under, or result in a violation of (i) any agreement, contract or
instrument to which the Insider is a party which would prevent the Insider from performing its obligations hereunder or (ii) any law, statute, rule or regulation
to which the Insider is subject.
(b) The Insider is the beneficial owner of the Insider Warrants transferred hereby and will transfer to the Purchaser promptly after the closing of
the Merger, but in no event later than December 31, 2013, good marketable title to the Insider Warrants free and clear of any liens, claims, security interests,
options charges or any other encumbrance whatsoever, except for restrictions imposed by federal and state securities laws.
(c) The terms, provisions and conditions of the Insider Warrants have not been amended, revised or modified in any manner since their issuance.
The description of the Insider Warrants contained in the Prospectus is true, correct and complete in all material respects.
3
6. Indemnification. Each party hereto shall indemnify and hold harmless the other parties hereto with respect to any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys' fees, amounts paid in settlement or expenses, joint or several, (collectively,
"Claims") incurred by the other party in connection with, arising from or related to a breach of any representation, warranty or covenant contained herein. For
the avoidance of doubt, and without limitation, Red Oak, the Designees and their respective assignees shall be entitled to recover: (i) all reasonable costs
incurred in enforcing the provisions of this Agreement and (ii) any lost profits incurred as a result of the failure of the Insider to transfer the Insider Warrants
as provided for herein.
7. Disclosure; Exchange Act Filings. Promptly upon execution of this Agreement, the Company will issue a press release describing this
Agreement and file a Current Report on Form 6-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) reporting such execution.
The parties to this Agreement shall cooperate with one another to assure that all such disclosures are accurate and consistent.
8. Representations of Principals. David Sandberg hereby represents and warrants on behalf of Red Oak, that Red Oak has the financial
wherewithal to honor its obligations hereunder. A. Lorne Weil hereby represents and warrants on behalf of the Insider, that the Insider has the financial
wherewithal to honor its obligations hereunder.
9. Entire Agreement; Amendment. This Agreement constitutes the entire agreement among the parties with respect to the subject matter hereof
and may be amended or modified only by written instrument signed by all parties. The headings in this Agreement are for convenience of reference only and
shall not alter or otherwise affect the meaning hereof.
9. Governing Law. This Agreement shall be governed by and construed in accordance with the law of the State of New York, including the
conflicts of law provisions and interpretations thereof.
10. Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. Delivery of an
executed signature page by facsimile or other electronic transmission shall be effective as delivery of a manually signed counterpart of this Agreement.
11. Termination. Notwithstanding any provision in this Agreement to the contrary, this Agreement shall become null and void and of no force and
effect (i) upon the termination of the Acquisition Agreement prior to the consummation of the Merger or if the Purchaser seeks redemption or conversion of
any of its shares in connection with the Merger. Notwithstanding any provision in this Agreement to the contrary, the Insider’s obligation to transfer the
Insider Warrants to the Purchaser shall be conditioned on the consummation of the Merger.
12. Remedies. Each of the parties hereto acknowledges and agrees that, in the event of any breach of any covenant or agreement contained in this
Agreement by the other party, money damages may be inadequate with respect to any such breach and the non-breaching party may have no adequate remedy
at law. It is accordingly agreed that each of the parties hereto shall be entitled, in addition to any other remedy to which they may be entitled at law or in
equity, to seek injunctive relief and/or to compel specific performance to prevent breaches by the other party hereto of any covenant or agreement of such
other party contained in this Agreement.
4
13. Acknowledgement; Waiver. Purchaser (i) acknowledges that the Insider may possess or have access to material non-public information which
has not been communicated to the Purchaser; (ii) hereby waives any and all claims, whether at law, in equity or otherwise, that he, she, or it may now have or
may hereafter acquire, whether presently known or unknown, against the Insider or any of the Company’s officers, directors, employees, agents, affiliates,
subsidiaries, successors or assigns relating to any failure to disclose any non-public information in connection with the transaction contemplated by this
Agreement, including without limitation, any claims arising under Rule 10-b(5) of the Securities and Exchange Act of 1934; and (iii) is aware that the Insider
is relying on the truth of the representations set forth in Section 4 of this Agreement and the foregoing acknowledgement and waiver in clauses (i) and (ii)
above, respectively, in connection with the transactions contemplated by this Agreement.
14. Binding Effect; Assignment. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective legal
representatives, successors and permitted assigns. This Agreement shall not be assigned by either party without the prior written consent of the other party
hereto.
5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
[Signature Page to Agreement Dated December 20, 2013]
PURCHASERS:
RED OAK FUND LP
By:
Name:
Title:
INSIDER:
THE A. LORNE WEIL 2006
IRREVOCABLE TRUST
By:
Name:
Title:
6
ANDINA ACQUISITION CORPORATION
Solely with respect to its obligations set
forth in Sections 3 and 7 hereof
By:
Name:
Title:
A. Lorne Weil solely with respect to his
obligations set forth in Section 8 hereof
David Sandberg solely with respect to his
obligations set forth in Section 8 hereof
7
EXHIBIT A
DESIGNEES
Name of Subsidiary
Description
Alcoy Group Worldwide S.A.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of Tecnoglass S.A.
Archena Continental Corp.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of Tecnoglass S.A.
Belagua Consultants Inc.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of Tecnoglass S.A.
C.I. Energía Solar S.A. E.S. Windows
A sociedad anómina, organized under the laws of Colombia, which is owned directly by five wholly-owned
subsidiaries of Tecno Corporation.
Exhibit 21.1
Hollental Investors S.A.
Isarco Investments Inc.
Kodori Holdings S.A.
Luena Commercial Corp.
Mosela Ventures Corp.
Ordesa Valley Inc.
Pineta Services Inc.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of ES.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of ES.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of ES.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of Tecnoglass S.A.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of ES.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of Tecnoglass S.A.
A sociedad anómina, organized under the laws of Panama, which is a wholly owned subsidiary of Tecno
Corporation and is one of five direct shareholders of ES.
Name of Subsidiary
Description
Tecno Corporation
Tecnoglass S.A.
An exempted company organized under the laws of the Cayman Islands, which is a wholly owned subsidiary of
Tecnoglass Inc.
A sociedad anómina, organized under the laws of Colombia, which is owned directly by five wholly-owned
subsidiaries of Tecno Corporation.
CERTIFICATION PURSUANT TO
RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit 31.1
I, Jose Daes, certify that:
1. I have reviewed this annual report on Form 10-K of Tecnoglass Inc.;
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 issuer as of, and for, the periods presented in this report;
4. I am 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 my supervision,
to ensure that material information relating to the issuer is made known to me 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 issuer’s disclosure controls and procedures and presented in this report my 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 issuer’s internal control over financial reporting that occurred during the issuer’s most recent
fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the issuer’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of
the issuer’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 issuer’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 issuer’s internal
control over financial reporting.
Date: April 16, 2014
/s/ Jose Daes
Name:
Title:
(Principal Executive Officer)
Jose Daes
Chief Executive Officer
CERTIFICATION PURSUANT TO
RULE 13a-14 AND 15d-14
UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
Exhibit 31.2
I, Joaquin Fernandez, certify that:
1. I have reviewed this annual report on Form 10-K of Tecnoglass Inc.;
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 issuer as of, and for, the periods presented in this report;
4. I am 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 my supervision,
to ensure that material information relating to the issuer is made known to me 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 issuer’s disclosure controls and procedures and presented in this report my 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 issuer’s internal control over financial reporting that occurred during the issuer’s most recent
fiscal quarter (the issuer’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect,
the issuer’s internal control over financial reporting; and
5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the issuer’s auditors and the audit committee of
the issuer’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 issuer’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 issuer’s internal
control over financial reporting.
Date: April 16, 2014
/s/ Jose Daes
Name:
Title:
(Principal Financial and Accounting Officer)
Joaquin Fernandez
Chief Financial Officer
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32
In connection with the Annual Report of Tecnoglass Inc. (the “Company”) on Form 10-K for the year ended December 31, 2013 as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), each of the undersigned, in the capacities and on the dates indicated below, hereby certifies
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 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 operation of the Company.
Date: April 16, 2014
/s/ Jose Daes
Name:
Title:
Jose Daes
Chief Executive Officer
(Principal Executive Officer)
/s/ Joaquin Fernandez
Name:
Title:
Joaquin Fernandez
Chief Financial Officer
(Principal Financial and Accounting Officer)