UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
10-Q
[X] |
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 |
For
the quarterly period ended
September
30, 2019
or
[ ] |
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 |
For
the transition period from ______________ to
______________
Commission
file number: 000-52444
PLASTIC2OIL, INC.
(Exact
name of registrant as specified in its charter)
Nevada |
|
90-0822950 |
(State
or other jurisdiction of |
|
(IRS
Employer |
incorporation
or organization) |
|
Identification
No.) |
20
Iroquois Street
Niagara
Falls, NY 14303
(Address
of Principal Executive Offices) (Zip Code)
(716)-278-0015
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
report(s)), and (2) has been subject to such filing requirements
for the past 90 days. Yes [X] No [ ]
Indicate
by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§ 232.405 of this chapter) during the preceding
12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes [X] No
[ ]
Indicate
by check mark whether the registrant is a large accelerated filer,
an accelerated filer, a non-accelerated filer or a smaller
reporting company. See definitions of “large accelerated filer,”
“accelerated filer,” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large
accelerated filer [ ] |
|
Accelerated
filer [ ] |
Non-accelerated
filer [X] |
|
Smaller
reporting company [X] |
Emerging
growth company [ ] |
|
|
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
December 16, 2019, there were 124,756,158 shares of the
Registrant’s common stock, $0.001 par value,
outstanding.
PLASTIC2OIL,
INC.
Table
of Contents
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
quarterly report on Form 10-Q (“Report”) contains “forward looking
statements” within the meaning of applicable securities laws. Such
statements include, but are not limited to, statements with respect
to management’s beliefs, plans, strategies, objectives, goals and
expectations, including expectations about the future financial or
operating performance of our Company and its projects, capital
expenditures, capital needs, government regulation of the industry,
environmental risks, limitations of insurance coverage, and the
timing and possible outcome of regulatory matters, including the
granting of patents and permits. Words such as “expect”,
“anticipate”, “intend”, “attempt”, “may”, “will”, “plan”,
“believe”, “seek”, “estimate”, and variations of such words and
similar expressions are intended to identify such forward looking
statements. These statements are not guarantees of future
performance and involve assumptions, risks and uncertainties that
are difficult to predict.
These
statements are based on and were developed using a number of
factors and assumptions including, but not limited to: stability in
the U.S. and other foreign economies; stability in the availability
and pricing of raw materials, energy and supplies; stability in the
competitive environment; the continued ability of our Company to
access cost effective capital when needed; and no unexpected or
unforeseen events occurring that would materially alter the
Company’s current plans. All of these assumptions have been derived
from information currently available to the Company including
information obtained by our Company from third party sources.
Although management believes that these assumptions are reasonable,
these assumptions may prove to be incorrect in whole or in part. As
a result of these and other factors, actual results may differ
materially from those expressed, implied or forecasted in such
forward looking information, which reflect our Company’s
expectations only as of the date hereof.
Factors
that could cause actual results or outcomes to differ materially
from the results expressed, implied or forecasted by the
forward-looking statements include risks associated with general
business, economic, competitive, political and social
uncertainties; risks associated with changes in project parameters
as plans continue to be refined; risks associated with failure of
plant, equipment or processes to operate as anticipated; risks
associated with accidents or labor disputes; risks associated in
delays in obtaining governmental approvals or financing, or in the
completion of development or construction activities; risks
associated with financial leverage and the availability of capital;
risks associated with the price of commodities and the inability of
our Company to control commodity prices; risks associated with the
regulatory environment within which our Company operates; risks
associated with litigation including the availability of insurance;
and risks posed by competition.
Some
of the forward-looking statements may be considered to be financial
outlooks for purposes of applicable securities legislation
including, but not limited to, statements concerning capital
expenditures. These financial outlooks are presented to allow the
Company to benchmark the results of our Company’s Plastic2Oil
business. These financial outlooks may not be appropriate for other
purposes and readers should not assume they would be
achieved.
Our
Company does not intend to, and the Company disclaims any
obligation to, update any forward-looking statements (including any
financial outlooks), whether written or oral, or whether as a
result of new information, future events or otherwise, except as
required by law.
Unless
otherwise noted, references in this Report to “P2O”, the “Company,”
“we,” “our” or “us” means Plastic2Oil, Inc., a Nevada
corporation.
PART I - FINANCIAL
INFORMATION
Item 1. Financial Statements
PLASTIC2OIL, INC. AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
As of
September 30, 2019 |
|
|
As of
December 31, 2018 |
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
CURRENT
ASSETS: |
|
|
|
|
|
|
|
|
Cash |
|
$ |
1,033 |
|
|
$ |
47,808 |
|
Prepaid
expenses and other current assets |
|
|
15,583 |
|
|
|
11,575 |
|
TOTAL
CURRENT ASSETS |
|
|
16,616 |
|
|
|
59,383 |
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net |
|
|
516,595 |
|
|
|
537,190 |
|
Property
held for sale (Note 5) |
|
|
180,237 |
|
|
|
180,237 |
|
Deposits |
|
|
18,800 |
|
|
|
18,800 |
|
|
|
|
|
|
|
|
|
|
TOTAL
ASSETS |
|
$ |
732,248 |
|
|
$ |
795,610 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS’ DEFICIT |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES: |
|
|
|
|
|
|
|
|
Accounts
payable |
|
$ |
1,880,908 |
|
|
$ |
1,846,669 |
|
Accrued
expenses |
|
|
1,711,928 |
|
|
|
1,688,224 |
|
Accrued
officer salary |
|
|
1,380,000 |
|
|
|
1,200,000 |
|
Secured
promissory notes and interest – related parties, current
portion |
|
|
11,022,843 |
|
|
|
9,924,418 |
|
Capital
leases |
|
|
22,868 |
|
|
|
22,210 |
|
TOTAL
CURRENT LIABILITIES |
|
|
16,018,547 |
|
|
|
14,681,521 |
|
|
|
|
|
|
|
|
|
|
LONG-TERM
LIABILITIES: |
|
|
|
|
|
|
|
|
Asset
retirement obligations |
|
|
69,424 |
|
|
|
67,897 |
|
Secured
promissory notes and accrued interest– related parties |
|
|
692,227 |
|
|
|
632,533 |
|
Secured
promissory notes and accrued interest |
|
|
142,093 |
|
|
|
130,274 |
|
TOTAL
LONG-TERM LIABILITIES |
|
|
903,744 |
|
|
|
830,704 |
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES |
|
|
16,922,291 |
|
|
|
15,512,225 |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’
DEFICIT: |
|
|
|
|
|
|
|
|
Common
stock, par $0.001; 250,000,000 authorized, 124,756,158 shares
issued and outstanding |
|
|
124,756 |
|
|
|
124,756 |
|
Additional
paid in capital |
|
|
67,199,658 |
|
|
|
67,199,658 |
|
Accumulated other
comprehensive income |
|
|
87,259 |
|
|
|
154,599 |
|
Accumulated
deficit |
|
|
(83,601,716 |
) |
|
|
(82,195,628 |
) |
TOTAL
STOCKHOLDERS’ DEFICIT |
|
|
(16,190,043 |
) |
|
|
(14,716,615 |
) |
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
$ |
732,248 |
|
|
$ |
795,610 |
|
The
accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
PLASTIC2OIL,
INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
(Unaudited)
|
|
For
the Three Months Ended
September
30,
|
|
|
For
the Nine Months Ended
September
30,
|
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Professional
Fees |
|
$ |
18,309 |
|
|
$ |
27,834 |
|
|
$ |
87,324 |
|
|
$ |
83,118 |
|
Compensation |
|
|
104,370 |
|
|
|
104,446 |
|
|
|
318,221 |
|
|
|
359,231 |
|
General
and administrative expenses |
|
|
35,016 |
|
|
|
51,304 |
|
|
|
117,433 |
|
|
|
181,252 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation of
property, plant and equipment and accretion of long-term
liability |
|
|
7,373 |
|
|
|
87,663 |
|
|
|
22,120 |
|
|
|
275,231 |
|
TOTAL
OPERATING EXPENSES |
|
|
165,068 |
|
|
|
271,247 |
|
|
|
545,098 |
|
|
|
898,832 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LOSS FROM
OPERATIONS |
|
|
(165,068 |
) |
|
|
(271,247 |
) |
|
|
(545,098 |
) |
|
|
(898,832 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
(INCOME) EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense, net |
|
|
292,049 |
|
|
|
254,390 |
|
|
|
861,503 |
|
|
|
736,578 |
|
Other
income , net |
|
|
- |
|
|
|
- |
|
|
|
(513 |
) |
|
|
(10,514 |
) |
TOTAL
OTHER (INCOME) EXPENSES, NET
|
|
|
292,049 |
|
|
|
254,390 |
|
|
|
860,989 |
|
|
|
726,064 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(LOSS)
BEFORE INCOME TAXES |
|
|
(457,117 |
) |
|
|
(525,637 |
) |
|
|
(1,406,087 |
) |
|
|
(1,624,896 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision
for Income taxes |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS |
|
$ |
(457,117 |
) |
|
$ |
(525,637 |
) |
|
$ |
(1,406,087 |
) |
|
$ |
(1,624,896 |
) |
Basic and
diluted loss per share |
|
$ |
(0.00 |
) |
|
$ |
(0.00 |
) |
|
$ |
(0.01 |
) |
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of shares outstanding |
|
|
124,756,158 |
|
|
|
124,756,158 |
|
|
|
124,756,158 |
|
|
|
124,756,158 |
|
The
accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
PLASTIC2OIL, INC. AND
SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
|
|
For
the Three Months Ended
September
30,
|
|
|
For
the Nine Months Ended
September
30,
|
|
|
|
2019 |
|
|
2018 |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS |
|
$ |
(457,117 |
) |
|
$ |
(525,638 |
) |
|
$ |
(1,406,087 |
) |
|
$ |
(1,624,896 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
COMPREHENSIVE INCOME, NET OF INCOME TAX |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency items |
|
|
27,886 |
|
|
|
(45,612 |
) |
|
|
87,259 |
|
|
|
35,500 |
|
COMPREHENSIVE
LOSS |
|
$ |
(429,231 |
) |
|
$ |
(571,250 |
) |
|
$ |
(1,318,828 |
) |
|
$ |
(1,589,396 |
) |
The
accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
PLASTIC2OIL,
INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For the Nine Months Ended September 30,
2018
(Unaudited)
|
|
Common
Stock
$0.001
Par Value
|
|
|
Additional
Paid |
|
|
Accumulated |
|
|
Other
Comprehensive |
|
|
Total
Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
in
Capital |
|
|
Deficit |
|
|
Income
(Loss) |
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES -
DECEMBER 31, 2017 |
|
|
124,756,158 |
|
|
$ |
124,756 |
|
|
$ |
67,176,992 |
|
|
$ |
(79,418,137 |
) |
|
$ |
(28,445 |
) |
|
$ |
(12,144,834 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To book
Stock Compensation expense related to granting of stock options at
$0.05 |
|
|
- |
|
|
|
- |
|
|
|
10,668 |
|
|
|
- |
|
|
|
- |
|
|
|
10,668 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
58,066 |
|
|
|
58,066 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(580,917 |
) |
|
|
- |
|
|
|
(580,917 |
) |
Balances
March 31, 2018 |
|
|
124,756,158 |
|
|
$ |
124,756 |
|
|
$ |
67,187,660 |
|
|
$ |
(79,999,054 |
) |
|
$ |
29,621 |
|
|
$ |
(12,657,017 |
) |
To book
Stock Compensation expense related to granting of stock options at
$0.05 |
|
|
- |
|
|
|
- |
|
|
|
3,999 |
|
|
|
- |
|
|
|
- |
|
|
|
3,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
51,541 |
|
|
|
51,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(518,342 |
) |
|
|
- |
|
|
|
(518,342 |
) |
Balances
June 30, 2018 |
|
|
124,756,158 |
|
|
$ |
124,756 |
|
|
$ |
67,191,659 |
|
|
$ |
(80,517,396 |
) |
|
$ |
81,162 |
|
|
$ |
(13,119,819 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To book
Stock Compensation expense related to granting of stock options at
$0.05 |
|
|
- |
|
|
|
- |
|
|
|
3,999 |
|
|
|
- |
|
|
|
- |
|
|
|
3,999 |
|
Foreign
currency adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(45,612 |
) |
|
|
(45,612 |
) |
Net
Loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(525,637 |
) |
|
|
- |
|
|
|
(525,637 |
) |
BALANCES
September 30, 2018 |
|
|
124,756,158 |
|
|
$ |
124,756 |
|
|
$ |
67,195,658 |
|
|
$ |
(81,043,033 |
) |
|
$ |
35,550 |
|
|
$ |
(13,687,069 |
) |
The
accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
PLASTIC2OIL,
INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
For
the Nine Months Ended September 30, 2019
(Unaudited)
|
|
Common
Stock
$0.001
Par Value
|
|
|
Additional
Paid |
|
|
Accumulated |
|
|
Other
Comprehensive |
|
|
Total
Stockholders’ |
|
|
|
Shares |
|
|
Amount |
|
|
in
Capital |
|
|
Deficit |
|
|
Income
(Loss) |
|
|
Deficit |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BALANCES -
DECEMBER 31, 2018 |
|
|
124,756,158 |
|
|
$ |
124,756 |
|
|
$ |
67,199,658 |
|
|
$ |
(82,195,628 |
) |
|
$ |
154,599 |
|
|
$ |
(14,716,615 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(46,897 |
) |
|
|
(46,897 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(472,347 |
) |
|
|
- |
|
|
|
(472,347 |
) |
Balances
March 31, 2019 |
|
|
124,756,158 |
|
|
$ |
124,756 |
|
|
|
67,199,658 |
|
|
|
(82,667,975 |
) |
|
|
107,702 |
|
|
|
(15,235,859 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(48,329 |
) |
|
|
(48,329 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(476,624 |
) |
|
|
- |
|
|
|
(476,624 |
) |
BALANCES
June 30, 2019 |
|
|
124,756,158 |
|
|
$ |
124,756 |
|
|
|
67,199,658 |
|
|
|
(83,144,599 |
) |
|
|
59,373 |
|
|
|
(15,760,812 |
) |
Foreign
currency adjustment |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
27,886 |
|
|
|
27,886 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(457,117 |
) |
|
|
- |
|
|
|
(457,117 |
) |
BALANCES
September 30, 2019 |
|
|
124,756,158 |
|
|
$ |
124,756 |
|
|
$ |
67,199,658 |
|
|
$ |
(83,601,716 |
) |
|
$ |
87,259 |
|
|
$ |
(16,190,043 |
) |
The
accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
PLASTIC2OIL,
INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended September
30,
(Unaudited)
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
CASH FLOWS
FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
NET
LOSS |
|
|
(1,406,087 |
) |
|
|
(1,624,896 |
) |
Reconciliation of loss
to net cash used in operations: |
|
|
|
|
|
|
|
|
Depreciation of
property plant and equipment |
|
|
22,120 |
|
|
|
131,501 |
|
Accretion
of long-term liability |
|
|
- |
|
|
|
143,732 |
|
Accrued
interest expense |
|
|
829,427 |
|
|
|
715,933 |
|
Amortization of debt
discount |
|
|
10,766 |
|
|
|
- |
|
Stock or
options issued for services |
|
|
- |
|
|
|
18,666 |
|
Working
capital changes: |
|
|
|
|
|
|
|
|
Prepaid
expenses and other current assets |
|
|
(4,007 |
) |
|
|
(17,910 |
) |
Accounts
payable |
|
|
28,271 |
|
|
|
(15,313 |
) |
Accrued
expenses and accrued office salary |
|
|
203,704 |
|
|
|
216,889 |
|
NET CASH
USED IN OPERATING ACTIVITIES |
|
|
(315,806 |
) |
|
|
(431,398 |
) |
|
|
|
|
|
|
|
|
|
CASH FLOW
FROM INVESTMENT ACTIVITIES: |
|
|
|
|
|
|
|
|
Release of
restricted cash |
|
|
- |
|
|
|
100,524 |
|
NET CASH
PROVIDED BY INVESTING ACTIVITIES |
|
|
- |
|
|
|
100,524 |
|
|
|
|
|
|
|
|
|
|
CASH FLOWS
FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Cash
proceeds from secured promissory notes – related
parties |
|
|
272,534 |
|
|
|
252,930 |
|
NET CASH
PROVIDED BY FINANCING ACTIVITIES |
|
|
272,534 |
|
|
|
252,930 |
|
|
|
|
|
|
|
|
|
|
Foreign
currency exchange effect on cash |
|
|
(3,503 |
) |
|
|
- |
|
NET
DECREASE IN CASH |
|
|
(46,775 |
) |
|
|
(77,944 |
) |
|
|
|
|
|
|
|
|
|
CASH AT
BEGINNING OF PERIOD |
|
|
47,808 |
|
|
|
172,286 |
|
|
|
|
|
|
|
|
|
|
CASH AT
END OF PERIOD |
|
$ |
1,033 |
|
|
$ |
94,342 |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid
for income taxes |
|
$ |
- |
|
|
$ |
- |
|
Cash paid
for interest |
|
$ |
48 |
|
|
$ |
16 |
|
The
accompanying notes are an integral part of the unaudited condensed
consolidated financial statements.
PLASTIC2OIL,
INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(Unaudited)
NOTE
1 – ORGANIZATION AND GOING CONCERN
Plastic2Oil,
Inc. (the “Company” or “P2O”) was originally incorporated as 310
Holdings, Inc. (“310”) in the State of Nevada on April 20, 2006.
310 had no significant activity from inception through 2009. On
April 24, 2009, the Company’s founder, former CEO and Chief of
Technology, John Bordynuik, purchased 63% of the issued and
outstanding shares of 310. During 2009, the Company changed its
name to JBI, Inc. and began operations of its main business
operation, transforming waste plastics to oil and other fuel
products. During 2014, the Company changed its name to Plastic2Oil,
Inc. P2O is a combination of proprietary technologies and processes
developed by P2O, which convert waste plastics into fuel. P2O
currently, as of the date of this filing, has two processors at its
Niagara Falls, NY facility (the “Niagara Falls Facility”). Both
processors are currently idle, and have been, since December 2013.
Our P2O business has begun the transition from research and
development to a commercial manufacturing and production business.
In the short term, we plan to grow mainly by attempting to
re-initiate production by processing fuel, selling processors with
a royalty arrangement, licensing technology, and or searching out
other revenue generating activities related to the use of our
proprietary technology. Longer term, we plan to search out other
opportunistic options to fully utilize all of the underlying assets
of the Company.
Going
Concern
Currently,
we do not have sufficient cash to operate our business, which has
forced us to suspend our operations until we receive a capital
infusion or cash advances on the sale of our processors. We are
currently attempting to raise capital through the sale of assets
and or through other means including the use of debt and or equity
and equity equivalents that will allow us to re start the
production of fuel and provide working capital for the
Company.
These
unaudited condensed consolidated financial statements have been
prepared in accordance with accounting principles generally
accepted in the United States of America (“U.S. GAAP”), which
contemplates continuation of the Company as a going concern, which
assumes the realization of assets and satisfaction of liabilities
and commitments in the normal course of business. The Company has
experienced net losses from continuing operations of $1,406,087,
and $1,624,896, for the nine months ended September 30, 2019, and
2018, respectively. At September 30, 2019, the Company had a net
working capital deficit of $16,001,931, and an accumulated deficit
of $83,601,716. These factors raise substantial doubt about the
Company’s ability to continue as a going concern and to operate in
the normal course of business. The Company has funded its
activities to date almost exclusively from equity financings and
loans from related parties. For the years ended December 31, 2018
and 2017, the Company’s auditors included a going concern opinion
in its report on the Company’s audited financial statements for
such periods.
The
Company will continue to require substantial funds to continue the
expansion of its P2O business to achieve commercial productions,
and to resume sales and marketing efforts. Management’s plans in
order to meet its operating cash flow requirements include
financing activities such as private placements of its common
stock, issuances of debt and convertible debt
instruments.
The
condensed consolidated financial statements do not include any
adjustments relating to the recoverability and classification of
recorded asset amounts or amounts of liabilities that might be
necessary should we be unable to continue in existence.
NOTE
2 – SUMMARY OF ACCOUNTING POLICIES
Basis
of Consolidation
The
condensed consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries, Plastic2Oil of NY#1
Inc., Plastic2Oil (Canada) Inc., JBI CDE Inc., Plastic2Oil Re One
Inc., JBI Re #1 Inc.. The following companies are inactive-
Plastic2Oil Marine Inc., Javaco, and Pak-it. All intercompany
transactions and balances have been eliminated in consolidation.
Amounts in the consolidated financial statements are expressed in
US dollars.
Interim
Disclosure
In
the opinion of management, the accompanying unaudited condensed
financial statements include all adjustments, which are considered
necessary for a fair presentation of the results for the periods
presented. These condensed consolidated financial statements are
presented in considerably less detail than complete financial
statements that are intended to present financial position, results
of operations, and cash flows in conformity with generally accepted
accounting principles. For this reason, they should be read in
conjunction with the entity’s most recent complete financial
statements included in its annual report for the year ended
December 31, 2018 on Form 10-K filed with the Securities and
Exchange Commission (the SEC) on June 4, 2019 that include all the
disclosures required by generally accepted accounting
principles.
Estimates
The
preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates. Significant estimates include amounts for impairment of
long-lived assets, share based compensation, asset retirement
obligations, accrued liabilities, and valuation of options and
warrants.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with maturities of
three months or less at the time of purchase to be cash
equivalents. The Company held no cash equivalents at September 30,
2019 or December 31, 2018.
Property,
Plant and Equipment
Property,
plant and equipment are recorded at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of
the various classes of assets, and capital-leased assets are given
useful lives coinciding with the asset classification they are
classified as follows:
Leasehold
improvements |
|
lesser
of useful life or term of the lease |
Machinery
and office equipment |
|
3-15
years |
Furniture
and fixtures |
|
7
years |
Office
and industrial buildings |
|
15
-30 years |
Gains
and losses on depreciable assets retired or sold are recognized in
the statements of operations in the year of disposal. Repairs and
maintenance expenditures are expensed as incurred and expenditures
that increase the value or useful life of the asset are
capitalized.
Impairment
of Long-Lived Assets
The
Company reviews for impairment of long-lived assets on an asset by
asset basis. Impairment is recognized on properties held for use
when the expected undiscounted cash flows for a property are less
than its carrying amount at which time the property is written-down
to fair value. Properties held for sale are recorded at the lower
of the carrying amount or the expected sales price less costs to
sell. The sale or disposal of a “component of an entity” is treated
as discontinued operations.
During
the nine months ended September 30, 2019 and 2018, the Company did
not record any impairment losses on property, plant and
equipment.
Asset
Retirement Obligations
The
fair value of the estimated asset retirement obligation is
recognized in the consolidated balance sheets when identified and a
reasonable estimate of fair value can be made. The asset retirement
cost, equal to the estimated fair value of the asset retirement
obligation, is capitalized as part of the cost of the related
long-lived asset. The balance of the asset retirement obligation is
determined through an assessment made by the Company’s engineers,
of the total costs expected to be incurred by the Company when
closing a facility. The total estimated cost is then discounted
using the current market rates to determine the present value of
the asset as of the date of this valuation. As of the date of the
creation of the asset retirement obligation in the amount of
$58,363, the Company determined the present value of the obligation
using a discount rate equal to 2.96%. The present value of the
asset retirement obligation is then capitalized in the condensed
consolidated balance sheets and is depreciated over the asset’s
estimated useful life and is included in depreciation and accretion
expense in the condensed consolidated statements of operations.
Increases in the asset retirement obligation resulting from the
passage of time are recorded as accretion of asset retirement
obligations in the condensed consolidated statements of operations.
Actual expenditures incurred are charged against the accumulated
obligation. As of September 30, 2019 and December 31, 2018, the
carrying value of the asset retirement obligations was $69,424 and
$67,897, respectively. These costs include disposal of plastic and
other non-hazardous waste, site closing labor, testing, and
sampling of the site upon closure.
Environmental
Contingencies
The
Company records environmental liabilities at their undiscounted
amounts on its balance sheets as other current or long-term
liabilities when environmental assessments indicate that
remediation efforts are probable and the costs can be reasonably
estimated. These costs may be discounted to reflect the time value
of money if the timing of the cash payments is fixed or reliably
determinable and extends beyond a current period. Estimates of our
liabilities are based on currently available facts, existing
technology and presently enacted laws and regulations, taking into
consideration the likely effects of other societal and economic
factors, and include estimates of associated legal costs. These
amounts also consider prior experience in remediating contaminated
sites, other companies’ clean-up experience and data released by
the Environmental Protection Agency (EPA) or other organizations.
The company estimates are subject to revision in future periods
based on actual costs or new circumstances. We capitalize costs
that benefit future periods and we recognize a current period
charge in operation and maintenance expense when clean-up efforts
do not benefit future periods.
We
evaluate any amounts paid directly or reimbursed by government
sponsored programs and potential recoveries or reimbursements of
remediation costs from third parties including insurance coverage
separately from our liability. Recovery is evaluated based on the
creditworthiness or solvency of the third party, among other
factors. When recovery is assured, the company records and reports
an asset separately from the associated liability on our balance
sheets. No amounts for recovery have been accrued to
date.
Foreign
Currency Translation
The
condensed consolidated financial statements have been translated
into U.S. dollars in accordance with Financial Accounting Standards
Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830.
All monetary items have been translated using the exchange rates in
effect at the balance sheet date. All non-monetary items have been
translated using the historical exchange rates at the time of
transactions. Income statement amounts have been translated using
the average exchange rate for the year. There were no material
foreign exchange gains or losses that are included in the condensed
consolidated statements of operations for the nine months ended
September 30, 2019 and 2018, respectively.
Income
Taxes
The
Company utilizes the asset and liability method to measure and
record deferred income tax assets and liabilities. Deferred tax
assets and liabilities reflect the future income tax effects of
temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
basis and are measured using enacted tax rates that apply to
taxable income in the years in which those temporary differences
are expected to be recovered or settled. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized.
ASC
740-10 prescribes a recognition threshold that a tax position is
required to meet before being recognized in the financial
statements and provides guidance on recognition, measurement,
classification, interest and penalties, accounting in interim
periods, disclosure and transition issues. To date, the Company has
not been assessed, nor paid, any interest or penalties.
Stock-Based
Compensation
Stock-based
compensation is accounted for based on the requirements of ASC 718
– “Compensation –Stock Compensation,” which requires
recognition in the financial statements of the cost of employee
services received in exchange for an award of equity instruments
over the period the employee is required to perform the services in
exchange for the award (presumptively, the vesting period). The ASC
also requires measurement of the cost of employee services received
in exchange for an award based on the grant-date fair value of the
award. Additionally, the Company has elected to recognize
forfeitures as they occur as prescribed by ASU No. 2016-09,
Improvements to Employee Share-Based Payment
Accounting.
In June
2018, the FASB issued ASU No. 2018-07, Improvements to
Nonemployee Share-Based Payment Accounting, which simplifies
several aspects of the accounting for nonemployee share-based
payment transactions by expanding the scope of the stock-based
compensation guidance in ASC 718 to include share-based payment
transactions for acquiring goods and services from non-employees.
ASU No. 2018-07 is effective for annual periods beginning after
December 15, 2018, including interim periods within those annual
periods. Early adoption is permitted, but entities may not adopt
prior to adopting the new revenue recognition guidance in ASC 606.
The Company adopted ASU No. 2018-07 during the three-month period
ended September 30, 2019 when it issued options to nonemployees
(see Note 10).
Loss
Per Share
The
financial statements include basic and diluted per share
information. Basic net loss per share is computed by dividing net
loss by the weighted average number of shares of common stock
outstanding during the period. Diluted net loss per share is
computed by dividing net loss by the weighted average number of
shares of common stock and potentially outstanding shares of common
stock during each period. Common stock equivalents are excluded
from the computation of diluted loss per share when their effect is
anti-dilutive. For the three and nine months ended September 30,
2019, potential dilutive common stock equivalents consisted
1,600,000 shares underlying common stock warrants and 3,720,000
shares underlying stock options, which were not included in the
calculation of the diluted loss per share because their effect was
anti-dilutive. For the three and nine months ended September 30,
2018, potential dilutive common stock equivalents consisted
4,600,000 shares underlying common stock warrants and 6,580,000
shares underlying stock options, which were not included in the
calculation of the diluted loss per share because their effect was
anti-dilutive.
Concentrations
and Credit Risk
Financial
instruments, which potentially expose the Company to concentrations
of credit risk, consist principally of operating demand deposit
accounts and accounts receivable. The Company’s policy is to place
our operating demand deposit accounts with high credit quality
financial institutions that are insured by the FDIC, however,
account balances may at times exceed insured limits.
Fair
Value of Financial Instruments
The
carrying amounts of cash, accounts payable, accrued expenses,
capital leases, and promissory notes, approximate fair value
because of the short-term nature of these items, or prevailing
interest rates.
Reclassification
Certain
reclassifications have been made in the prior period’s consolidated
financial statements to conform to the current period’s
presentation. Such reclassifications had no effect on stockholders’
deficit or net loss.
Recently
Issued Accounting Pronouncements
Management
does not believe that there are any recently issued, but not yet
effective accounting pronouncements, if adopted, that would have a
material effect on the accompanying consolidated financial
statements.
NOTE
3 - PROPERTY, PLANT AND EQUIPMENT, NET
Property,
Plant and Equipment consist of the following at:
As of
September 30, 2019 |
|
Cost |
|
|
Accumulated
Depreciation |
|
|
Net
Book
Value |
|
|
|
|
|
|
|
|
|
|
|
Machinery
and office equipment |
|
$ |
47,137 |
|
|
$ |
(47,060 |
) |
|
$ |
78 |
|
Furniture
and fixtures |
|
|
14,166 |
|
|
|
(14,166 |
) |
|
|
- |
|
Land |
|
|
109,203 |
|
|
|
- |
|
|
|
109,203 |
|
Asset
retirement obligation |
|
|
58,363 |
|
|
|
(14,521 |
) |
|
|
43,842 |
|
Office and
industrial buildings |
|
|
542,449 |
|
|
|
(178,977 |
) |
|
|
363,472 |
|
Equipment
under capital lease |
|
|
53,257 |
|
|
|
(53,257 |
) |
|
|
- |
|
Total |
|
$ |
824,575 |
|
|
$ |
(307,981 |
) |
|
$ |
516,595 |
|
As of
December 31, 2018 |
|
Cost |
|
|
Accumulated
Depreciation |
|
|
Net
Book
Value |
|
|
|
|
|
|
|
|
|
|
|
Machinery
and office equipment |
|
$ |
47,137 |
|
|
$ |
(47,057 |
) |
|
$ |
80 |
|
Furniture
and fixtures |
|
|
14,166 |
|
|
|
(14,166 |
) |
|
|
- |
|
Land |
|
|
109,203 |
|
|
|
- |
|
|
|
109,203 |
|
Asset
retirement obligation |
|
|
58,363 |
|
|
|
(12,497 |
) |
|
|
45,866 |
|
Office and
industrial buildings |
|
|
542,449 |
|
|
|
(160,408 |
) |
|
|
382,481 |
|
Equipment
under capital lease |
|
|
53,257 |
|
|
|
(53,257 |
) |
|
|
- |
|
Total |
|
$ |
824,575 |
|
|
$ |
(287,385 |
) |
|
$ |
537,190 |
|
For
the nine months ended September 30, 2019 and 2018, the Company
recognized $22,120 and $275,231, and for the three months ended
September 30, 2019 and 2018, $7,373 and $87,663, respectively, of
depreciation expense. At September 30, 2019 and 2018, machinery and
equipment with a cost of $53,257 and accumulated amortization of
$53,257 and $53,257, respectively, were under capital
lease.
During
the year ended December 31, 2018, we recorded an impairment loss on
property, plant and equipment of $635,770 in accordance with ASC
360-10-50-2 due to the carrying amount exceeding the estimated
long-lived assets fair value. This impairment loss was primarily
attributable to the write down of equipment and office and
industrial buildings. Management’s assessment was triggered by the
minimal operations of the business. Management estimated the
undiscounted cash flows that may be generated from the long-lived
assets by estimating their fair value less estimated
costs.
NOTE
4 - PROPERTY HELD FOR SALE
The
Company has offered for sale its land and building of its blending
site located in Thorold, Ontario. Canada. The Company no longer
requires the land or building as part of its plans to, either
assemble and or manufacture, or license its technology. The land
and building are currently listed for sale and the Company
anticipates a sale in less than twelve (12) months. Accordingly,
these assets have been reclassified from property, plant and
equipment to property held for sale. The Company has determined the
fair value of its property held for sale exceeds its carrying value
and no valuation allowance is necessary. The net book value of the
land and building of $180,237 has been presented in the
accompanying balance sheet as property held for sale at September
30, 2019 and December 31, 2018.
NOTE
5 – SECURED PROMISSORY NOTES - RELATED PARTIES
Related
Party Secured Promissory Notes, including accrued interest,
consists of the following at periods ended:
|
|
As of
September 30, 2019 |
|
|
As of
December 31, 2018 |
|
Secured
Demand Promissory Note - $1,664,000 Canadian dollars in 2015 and
$505,000 Canadian dollars in 2016, bearing interest of 4% to 12%
per annum, respectively, with the company CEO. |
|
$ |
2,056,605 |
|
|
$ |
1,907,636 |
|
|
|
|
|
|
|
|
|
|
Secured
Demand Promissory Note - $358,850 in February and March of 2015 and
$150,000 in February of 2016, bearing interest of 4% to 12% per
annum, respectively, with company CEO |
|
|
660,432 |
|
|
|
628,382 |
|
|
|
|
|
|
|
|
|
|
Secured
Demand Promissory Note - $100,000 Canadian dollars in February 16,
2018 bearing interest of 4% per annum, payable on demand and
secured by the blending site property located at 1776 Allanport,
Road, Thorold, Ontario CA with a company Director |
|
|
80,531 |
|
|
|
75,892 |
|
|
|
|
|
|
|
|
|
|
Secured
Demand Promissory Note - $125,000, July 11, 2018 bearing interest
of 4% per annum, payable on demand and secured by the blending site
property located at 1776 Allanport Road, Thorold, Ontario CA with a
company Director |
|
|
130,553 |
|
|
|
126,711 |
|
|
|
|
|
|
|
|
|
|
Secured
Demand Promissory Note - $125,000 in July 31, 2018 bearing interest
of 4% per annum, payable on demand and secured by the blending site
property located at 1776 Allanport Road, Thorold, Ontario CA. with
a company Director. |
|
|
130,583 |
|
|
|
126,740 |
|
|
|
|
|
|
|
|
|
|
Secured
Demand Promissory Note - $20,000 Canadian dollars in February of
2019 bearing interest of 4% per annum, payable on demand and
secured by the blending site property located at 1776 Allanport
Road, Thorold, Ontario CA. with a Company Director |
|
|
15,491 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Secured
Demand Promissory Note - $170,000 Canadian dollars in first, second
and third quarters of 2019 bearing interest of 4% per annum,
payable on demand and secured by the blending site property located
at 1776 Allanport Road, Thorold, Ontario CA. with the Company’s
CEO |
|
|
130,386 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Secured
Promissory Notes with the company’s CEO ($1,000,000 in November 19,
2014) bearing interest of 12% per annum compounded annually,
together with a five-year warrant to purchase up to one million
shares of the Company’s common stock at an exercise price of $0.12
per share, and payable upon maturity in 2019 and secured by a
security interest in substantially all of the assets of the Company
and its subsidiaries. The Secured Promissory Note became past due
on November 19, 2019. The Company is currently is discussion with
the company’s CEO on extending the Secured Promissory
Notes. |
|
|
1,743,784 |
|
|
|
1,595,798 |
|
|
|
|
|
|
|
|
|
|
Secured
Promissory Notes with the company’s CEO - $1,000,000 in August 29,
2013 and $2,000,000 in September 30, 2014) bearing interest of 12%
per annum compounded annually, payable upon maturity in 2018 and
extended in July of 2019 until December 31, 2020. In consideration
for the extension, the Company issued 3,000,000 options with an
exercise price of $.02. Loan is secured by a security interest in
substantially all of the assets of the Company and its
subsidiaries. |
|
|
5,941,206 |
|
|
|
5,463,259 |
|
|
|
|
|
|
|
|
|
|
Secured
Promissory Note -$100,000 in August 24, 2016 bearing interest of
12% per annum compounded annually, together with a five-year
warrant to purchase up to one million shares of the Company’s
common stock at an exercise price of $0.12 per share, and payable
upon maturity in 2021 and secured by a security interest in
substantially all of the assets of the Company and its subsidiaries
with a company Director. |
|
|
141,451 |
|
|
|
129,685 |
|
|
|
|
|
|
|
|
|
|
Secured
Demand Promissory Note - $170,000 Canadian dollars in the first,
second and third quarters of 2019, bearing interest of 4% per
annum, payable on demand and secured by the blending site property
located at 1776 -Allanport, Road, Thorold, Ontario CA. with a
Company Director |
|
|
130,567 |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
Secured
Promissory Note -$400,000 in October 18, 2016 bearing interest of
12% per annum compounded annually, together with a five-year
warrant to purchase up to one million shares of the Company’s
common stock at an exercise price of $0.12 per share, and payable
upon maturity in 2021 and secured by a security interest in
substantially all of the assets of the Company and its subsidiaries
with a company Director. |
|
|
553,481 |
|
|
|
502,848 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
11,715,070 |
|
|
|
10,556,951 |
|
|
|
|
|
|
|
|
|
|
Less:
Current Portion Short Term Secured Promissory Notes – related
parties |
|
$ |
11,022,843 |
|
|
$ |
9,924,418 |
|
|
|
|
|
|
|
|
|
|
Long Term
Secured promissory notes – related parties |
|
$ |
692,227 |
|
|
$ |
632,533 |
|
Continuity
of Secured Promissory Notes – Related Party |
|
As of
September 30, 2019
|
|
|
As of
December 31, 2018 |
|
Face value
of secured promissory notes |
|
$ |
7,268,664 |
|
|
$ |
6,996,441 |
|
Accrued
interest on secured promissory notes payable |
|
|
4,456,273 |
|
|
|
3,581,343 |
|
Less:
Unamortized debt discount |
|
|
(9,867 |
) |
|
|
(20,833 |
) |
Carrying
value of Secured Promissory Notes – Related parties |
|
$ |
11,715,070 |
|
|
$ |
10,556,951 |
|
The
following annual payments of principal and interest are required
over the next three years in respect to these short term and long
term secured promissory notes with related parties:
Years
Ending December 31, |
|
Annual
Payments |
|
|
|
|
|
2019 |
|
$ |
5,081,637 |
|
2020 |
|
|
5,941,206 |
|
2021 |
|
|
692,227 |
|
Total |
|
$ |
11,715,070 |
|
NOTE
6 – SECURED PROMISSORY NOTE
Secured
promissory note consists of the following at periods
ended:
|
|
As of
September 30, 2019
|
|
|
As of
December 31, 2018 |
|
|
|
|
|
|
|
|
Secured
Promissory Note -$100,000 in August 10, 2016 bearing interest of
12% per annum compounded annually, together with a five-year
warrant to purchase up to one million shares of the Company’s
common stock at an exercise price of $0.12 per share, and payable
upon maturity in 2021 and secured by a security interest in
substantially all of the assets of the Company and its
subsidiaries. |
|
$ |
142,093 |
|
|
$ |
130,274 |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
142,093 |
|
|
|
130,274 |
|
Less:
current portion |
|
|
- |
|
|
|
- |
|
Secured
promissory note |
|
$ |
142,093 |
|
|
$ |
130,724 |
|
Continuity
of Secured Promissory Note |
|
As of
September 30, 2019
|
|
|
As of
December 31, 2018 |
|
Face value
of August 10, 2016 secured promissory note |
|
$ |
100,000 |
|
|
$ |
100,000 |
|
Total face
value of secured promissory note |
|
|
100,000 |
|
|
|
100,000 |
|
Discount
on August 10, 2016 secured promissory note (100,000
warrants) |
|
|
(2,000 |
) |
|
|
(2,000 |
) |
Accretion
of discount on secured promissory note ($100,000 ) |
|
|
1,234 |
|
|
|
933 |
|
Interest
on secured promissory note |
|
|
42,859 |
|
|
|
31,341 |
|
Carrying
value of Secured Promissory Note |
|
$ |
142,093 |
|
|
$ |
130,274 |
|
The
following annual payments of principal and interest are required in
respect to these secured notes payable:
Years
Ending December 31, |
|
Annual
Payments |
|
2019 |
|
|
- |
|
2020 |
|
|
- |
|
2021 |
|
|
142,093 |
|
Total |
|
$ |
142,093 |
|
NOTE
7 - CAPITAL LEASE
The
Capital Lease consists of the following at periods
ending:
|
|
As of
September 30, 2019
|
|
As of
December 31, 2018 |
|
Equipment
capital lease bears interest at 3.9% per annum, secured by the
equipment and matured on May 10, 2016, Principal and interest were
due, in their entirety, at maturity. The maturity was extended to
May 10, 2016 by the Lessor. The capital lease is in
default. |
|
$ |
22,868 |
(1) |
$ |
22,210 |
(1) |
|
|
|
|
|
|
|
|
Total |
|
|
22,868 |
|
|
22,210 |
|
Less:
current portion |
|
|
22,868 |
|
|
22,210 |
|
Capital
leases |
|
$ |
- |
|
$ |
- |
|
(1)
Includes accrued interest.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
Commitments
Plastic2Oil
Marine, Inc., one of the Company’s subsidiaries, which is currently
not operating and presently is inactive, entered into a consulting
service contract in 2010 with a company owned by the Company’s
chief executive officer. The contract provides the related company
with a share of the operating income earned from Plastic2Oil
technology installed on marine vessels which are owned by the
related company. The contract provides a minimum future payment
equal to fifty percent of the operating income generated from the
operations of two of the most profitable marine vessel processors
and 10% from all other marine vessel processors. As of September
30, 2019 and December 31, 2018, there were no currently installed
marine vessel processors pursuant to the contract.
Contingencies.
As of
September 30, 2019, the Company is involved in litigation and
claims, which arise from time to time in the normal course of
business. In the opinion of management, based upon the information
and facts known to them, any liability that may arise from such
contingencies would not have a material adverse effect on the
unaudited condensed consolidated financial statements of the
Company.
NOTE
9 - WARRANTS
The
following table summarizes the activities for the
period.
Warrants
The
following table summarizes the activities for the quarter ended
September 30, 2019 and year ended December 31, 2018:
|
|
Warrants
Number
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Term
|
|
OUTSTANDING,
December 31, 2018 |
|
|
1,600,000 |
|
$ |
0.12 |
|
|
1.09 |
|
|
|
|
|
|
|
|
|
|
|
|
OUTSTANDING,
September 30, 2019
|
|
|
1,600,000 |
|
$ |
0.12 |
|
|
1.09 |
|
There
were no warrants issued or expired during the three or nine months
ended September 30, 2019.
NOTE
10 – STOCK-BASED COMPENSATION PLANS AND AWARDS
Employee
Incentive Plan
The
Company’s stock incentive plan is administered by the Board of
Directors that authorizes the grant or award of incentive stock
options, non-qualified stock options (NQSO), restricted stock
awards (RSA), stock appreciation rights, dividend equivalent
rights, performance unit awards and phantom shares. The Company
issues new shares of common stock upon the exercise of stock
options. Any shares associated with options forfeited are added
back to the number of shares that underlie stock options to be
granted under the stock incentive plan. The Company made available
10,000,000 common shares that were registered, approved, and filed
on November 17, 2012 for issuance under the plan. The Company has
issued non-qualified stock option awards as described
below.
The
Company estimates the fair value of nonqualified stock awards using
a Black-Scholes Option Pricing model (“Black-Scholes model”). The
fair value of each stock award is estimated on the date of grant
using the Black-Scholes model, which requires an assumption of
dividend yield, risk free interest rates, volatility, forfeiture
rates and expected option life. The risk-free interest rates are
based on the U.S. Treasury yield for a period consistent with the
expected term of the option in effect at the time of the grant.
Expected volatilities are based on the historical volatility of our
common stock over the expected option term. The expected term of
options granted is based on a review of historical employee
termination rates and option exercises.
There
were 3,500,000 options granted during the three and nine months
ended September 30, 2019. Options were granted to employees, a
consultant of the Company, the Company’s CEO, and two Directors. As
of September 30, 2019, 3,720,000 options were outstanding, of which
220,000 are fully vested and 3,500,000 are not vested. There are
6,280,000 options available for grant as of September 30,
2019.
The
stock awards were valued using a Black-Scholes model on the date of
grant and the follow assumptions: expected term of 5 years, a risk
free rate of 2.82%, volatility of 355.41%, and no assumed dividend
yield.
A
summary of stock option activity as of September 30, 2019 and 2018,
and changes during the nine month periods ended September 30, 2019
and 2018 are set forth below:
|
|
Outstanding
Stock
Options
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value (1)
|
|
Balance as
of December 31, 2018 |
|
|
220,000 |
|
|
$ |
.41 |
|
|
$ |
|
|
Options
Granted |
|
|
3,500,000 |
|
|
|
.02 |
|
|
$ |
|
|
Balance as
of September 30, 2019 |
|
|
3,720,000 |
|
|
$ |
0.04 |
|
|
$ |
|
|
Exercisable as of
September 30, 2019 |
|
|
220,000 |
|
|
$ |
0.41 |
|
|
$ |
|
|
|
|
Outstanding
Stock
Options |
|
|
Weighted-
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value (1) |
|
Balance
as of December 31, 2017 |
|
|
4,380,000 |
|
|
$ |
1.12 |
|
|
$ |
– |
|
Balance
as of September 30, 2018 |
|
|
4,380,000 |
|
|
$ |
0.42 |
|
|
$ |
– |
|
Exercisable
as of September 30, 2018 |
|
|
2,330,000 |
|
|
$ |
0.72 |
|
|
$ |
– |
|
|
(1) |
There was
no intrinsic value associated with options outstanding, exercisable
and expected to vest as of September 30, 2019, as the stock price
was below the lowest option exercise price or was not vested.
Aggregate intrinsic value represents total pretax intrinsic value
(the difference between PTO’s closing stock price on September 30,
2019 and the exercise price, multiplied by the number of
in-the-money options) that would have been received by the option
holders had all option holders exercised their options on September
30, 2019. The intrinsic value will change based on the fair market
value of PTO’s stock. |
A
summary of stock options not yet vested as of September 30, 2019 is
set forth below:
|
|
Number of
Options |
|
|
Weighted-
Average
Grant-Date
Fair Value
|
|
Non-vested
as of January 1, 2019 |
|
|
25,000 |
|
|
$ |
0.01 |
|
Options
Granted |
|
|
3,500,000 |
|
|
$ |
0.02 |
|
Vested |
|
|
(25,000 |
) |
|
$ |
0.01 |
|
Non-vested
as of September 30, 2019 |
|
|
3,500,000 |
|
|
$ |
0.02 |
|
There
were no options granted during the three or nine months ended
September 30, 2018. As of September 30, 2018, 4,380,000 options
were outstanding of which 2,330,000 were fully vested. As of
September 30, 2018, there was $37,333 of unrecognized compensation
expense for options outstanding not yet vested. .
During
the nine month period ended September 30, 2019, there were no NQSOs
that were cancelled or forfeited.
The
weighted-average remaining contractual life of the non-qualified
stock options outstanding and exercisable, as of September 30, 2019
were approximately 9.5 years and 4 years, respectively. Share-based
compensation represents both stock options based expense and stock
grant expense. Stock compensation expense is included in general
and administrative expense for the periods then ended. At September
30, 2019, the Company had approximately $70,000 of total
unamortized share-based compensation expense, related to stock
option plans that will be recognized over the weighted average
remaining period of 2 years.
NOTE
11 – RELATED PARTY TRANSACTIONS AND BALANCES
As of
September 30, 2019 and December 31, 2018, Richard Heddle, CEO is
due $1,380,000 and $1,200,000 in accrued payroll, respectively,
which is included in Accrued Officers Salary on the consolidated
balance sheets.
At
September 30, 2019 and December 31, 2018, the company’s accounts
payable and accrued expenses included $132,217 outstanding balance
due to Heddle Marine Services, a business controlled by Mr. Richard
Heddle, the company’s Chief Executive Officer and member of the
Company’s board of directors. The amounts payable arose from
payments made in 2014 by Heddle Marine on behalf of the Company to
a logistics company to transport fuel from the Niagara Falls site
to the blending tanks at our facility in Thorold, Ontario, as well
as for labor and material provided by Heddle Marine towards upkeep
of our Canadian facilities including 2015 cleanup costs incurred in
order to terminate the lease with Avondale properties on the
discontinued (RRON) Operation.
See
also Note 5 for secured promissory notes with related
parties.
Plastic2Oil
Marine, Inc., one of the Company’s subsidiaries, which is currently
not operating, entered into a consulting service contract in 2010
with a company owned by Mr. Heddle, who later (in 2014) became the
Company’s Chief Executive Officer. The contract provides the
related company with a share of the operating income earned from
Plastic2Oil technology installed on marine vessels which are owned
by the related company. The contract provides a minimum future
payment equal to fifty percent of the operating income generated
from the operations of two of the most profitable marine vessel
processors and 10% from all other marine vessel processors. As of
September 30, 2019 and December 31, 2018, there were no currently
installed marine vessel processors pursuant to the
contract.
NOTE
12 – SUBSEQUENT EVENTS
The
Company received $30,000 on October 1, 2019, $15,000 on October 21,
2019, $15,000 on October 29, 2019, $30,000 on November 18, 2019 and
$30,000 on November 22, 2019, all in Canadian funds, from the
Company’s CEO and Directors in the form of demand secured
promissory notes. The advances bear interest at 4%.
ITEM 2. MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The
following management’s discussion and analysis (the“MD&A”) of
the results of operations of the Company should be read in
conjunction with the consolidated financial statements of the
Company, together with the accompanying notes, as well as other
financial information included elsewhere in this Report. This
discussion contains forward-looking statements that involve certain
risks and uncertainties, and that reflect estimates and
assumptions. See the section titled, “Cautionary Statement
Regarding Forward-Looking Statements” for more information on
forward-looking statements. Our actual results may differ
materially from those indicated in forward- looking
statements.
Business
Overview
For
the three and nine months ended September 30, 2019 and 2018, the
Company had no revenues. The Company’s P2O processors were idle for
all of 2018 and remained idle during the three and nine months
ended September 30, 2019. For financial reporting purposes, we
currently operate in one business segment, our P2O® solution
business. As of the filing date of the report, our two operating
processors were idle and not producing fuel products. Previously,
we operated in two business segments, which also included a
business data and recovery segment and a recycling facility for
waste paper fiber processing, a chemical processing and cleaning
business, known as Pak-It, and a retail and wholesale distribution
business, known as Javaco, Inc. which we discontinued, prior to
2017. Our P2O business is a commercial manufacturing and production
business. We plan to grow mainly from sale of processors, and
secondarily from the sale of fuel products. Historically, our
revenues have been derived primarily from our other segments and
products.
Plastic2Oil Business
Our
P2O business has elements of both a recycling business and a fuel
refiner/ production business, which makes it difficult to identify
and make direct comparisons to competitors. Both the recycling and
energy sectors are characterized by rapid technological change. Our
future success will depend on our ability to achieve and maintain a
competitive position with respect to technological advances in both
of these sectors. We believe that our business currently faces
competition in the plastics-to-energy market, including competition
from PK Clean, Vadxx Energy, Green Envirotec Holdings LLC, and RES
polyflow, each of which has developed alternative methods for
obtaining and generating fuel from plastics. Because P2O solution
products include a variety of fuels, we also face competition from
the broader petroleum industry.
We
continue our business strategy with the goal of becoming a leading
North American company that transforms waste plastic into
ultra-clean, ultra-low sulphur fuel.
When
in operation, we provide environmentally friendly solutions through
our processors and technologies. Our primary offering is our
Plastic2Oil®, or P2O®, solution, which is our proprietary process
that converts waste plastic into fuel through a series of chemical
reactions (our “P2O business”). We collect mainly mixed plastics
from commercial and industrial enterprises that generate large
amounts of waste plastic for use in our process.
Generally,
this waste plastic would otherwise be sent to landfills and its
disposal potentially can be quite costly for companies. We use this
waste plastic as feedstock to produce Fuel Oil No. 2, Naphtha, and
Fuel Oil No. 6 for various uses by our customers. We own our P2O
processors and have the capability to produce and store the fuels
at, and ship from, our facilities in Niagara Falls, New York. We
sell the fuels we produce to customers through two main
distribution channels, fuel wholesalers and directly to commercial
and industrial end-users.
Our
P2O processors have evolved to be modular solutions with the
completion of processor #3 in 2013. We use third party contract
manufacturers for the manufacture of many of the key modular
components of our processors, including the kilns and distillation
towers as well as certain other key components that require
specialized machining and fabrication.
Our
P2O business is a proprietary process that converts waste plastic
into fuel through a series of chemical reactions. We began
developing this process in 2009 and began very limited production
in late 2010 following our receipt of a consent order from the New
York State Department of Environmental Conservation (“NYSDEC”)
allowing us to commercially operate our first large-scale P2O
processor located at our Niagara Falls, New York facility.
Currently, as of the filing of this report, these processors were
idle for all of 2017 and remained idle for the nine months ended
September 30, 2019. Our processors are capable of producing
Naphtha, Fuel Oil No. 2 and Fuel Oil No. 6. Our P2O process also
produces two by-products, a reusable off-gas similar to natural
gas, and a petcoke carbon residue. We sell our fuel products to
fuel wholesalers and directly to commercial and industrial
end-users. We primarily use our off-gas product in our processing
operations to fuel the burners in our P2O processors. Since
inception, we have produced a total of 667,996 gallons of fuel,
however no fuel was produced in the three and nine months ended
September 30, 2019 and 2018.
Listing on the OTCQB
At
September 30, 2019, we had 124,756,158 shares of common stock
issued and outstanding. Our common stock is currently trading on
the OTCQB marketplace in the United States of America under the
stock ticker symbol “PTOI.” On December 16, 2019, the last trading
day prior to the date of this filing, the closing price of the
common stock on the OTCQB was $0.05.
Sources
of Revenues and Expenses
Results
of Operations – Three months ended September 30, 2019 compared to
Three months ended September 30, 2018.
Revenue
We
had no revenues during the three months ended September 30, 2019
and 2018. We have shifted our business strategy to attempting to
license our intellectual property and technology related to our
fuel processors, selling fuel processors and selling oil produced
by our own P2O equipment.
We
had no fuel production or processor sales in the three and nine
months ended September 30, 2019. Consequently, there was neither
fuel shipment nor fuel revenue. This was mainly due to management’s
decision to shut down its production in the fourth quarter of 2013
due to the severe cold weather that caused damage to condensers and
other components of our processors and the lack of operating cash.
The damage requires substantial working capital for general repairs
and replacement of damaged condensers and we have been unable to
obtain the financing necessary to make these repairs. These
processors were idle from December of 2014 through 2018 and
remained idle through the date of this filing. Management estimates
the processors will remain idle until the Company can raise
additional capital or procure new revenue producing
contracts.
The
Company has recently entered into a Master Agreement and Purchase
Order to provide several units and other services that is awaiting
an initial deposit to commence work. The initial deposit is tied to
final governmental approvals and contract awards that are currently
working its way through the procurement cycle. There can be no
assurance that these awards will be made and that the initial
deposit due under the Master Agreement and Purchase Order will be
honored.
The
Company’s operating expenses consisted of the
following:
Operating
Expenses
|
|
For the
Three Months Ended
September 30, |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
Professional
Fees |
|
$ |
18,309 |
|
|
$ |
27,834 |
|
Compensation |
|
|
104,370 |
|
|
|
104,446 |
|
General
and administrative expenses |
|
|
35,016 |
|
|
|
51,304 |
|
Depreciation and
Accretion |
|
|
7,373 |
|
|
|
87,663 |
|
Total
Operating Expenses |
|
$ |
165,068 |
|
|
$ |
271,247 |
|
We
incurred operating expenses of $165,068 during the three months
ended September 30, 2019, compared to $271,247 for the three months
ended September 30, 2018, respectively. This decrease in operating
expenses was materially due to a decrease in depreciation, along
with decreases in Professional fees and other expenses for a total
reduction of $106,179. The Company is currently attempting to
minimize its operating expenses while it works to recapitalize the
company.
Non-Operating Expenses
Interest Expenses
For
the three months ended September 30, 2019, we incurred net interest
expense of approximately $292,049 as compared to approximately
$254,390 for the three months ended September 30, 2018, an increase
of $37,659, which was due to increases in related party secured
promissory and short-term notes.
Income Tax Expenses
For
the three months ended September 30, 2019 and 2018, we had no
federal taxable income due to net losses and recorded a deferred
tax asset and a valuation allowance to the extent that those assets
are attributable to net operating losses. We recognized the
valuation allowance because we are unsure as to the ability to use
these assets in the near future due to continued operating
losses
Net Loss
As a
result of the above, we incurred a net loss of approximately
$(457,117) for the three months ended September 30, 2019 as
compared to a net loss of approximately $(525,637), for the three
months ended September 30, 2018.
Results
of Operations - Nine months ended September 30, 2019 compared to
Nine months ended September 30, 2018.
Revenue
We
had no revenues during the nine months ended September 30, 2019 and
2018 due to the same factors discussed in the three month period
comparison above.
The
Company’s operating expenses consisted of the
following:
Operating
Expenses
|
|
For the
Nine Months Ended
September 30, |
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
Professional
Fees |
|
$ |
87,324 |
|
|
$ |
83,118 |
|
Compensation |
|
|
318,221 |
|
|
|
359,231 |
|
General
and administrative |
|
|
117,433 |
|
|
|
181,252 |
|
Depreciation and
Accretion |
|
|
22,120 |
|
|
|
275,231 |
|
Total
Operating Expenses |
|
$ |
545,098 |
|
|
$ |
898,832 |
|
We
incurred operating expenses of $545,098 during the nine months
ended September 30, 2019, compared to $898,832 for the nine months
ended September 30, 2018, respectively. This decrease in operating
expenses was materially due to a decrease in compensation, other
expenses, along with depreciation and accretion for a total
reduction of approximately $353,734. The Company is currently
attempting to minimize its operating expenses while it works to
recapitalize the company.
Non-Operating Expenses
Interest Expenses
For
the nine months ended September 30, 2019, we incurred net interest
expense of approximately $861,503 as compared to approximately
$736,578 for the nine months ended September 30, 2018 an increase
of $124,941, due to an increase in related party secured promissory
and short-term notes.
Income Tax Expenses.
For
the nine months ended September 30, 2019 and 2018, we had no
federal taxable income due to net losses and recorded a deferred
tax asset and a valuation allowance to the extent that those assets
are attributable to net operating losses. We recognized the
valuation allowance because we are unsure as to the ability to use
these assets in the near future due to continued operating
losses.
Net Loss
As a
result of the above, we incurred a net loss of approximately
$(1,406,087) for the nine months ended September 30, 2019 as
compared to a net loss of approximately $(1,624,896) for the nine
months ended September 30, 2018.
Liquidity
and Capital Resources
We do
not have sufficient cash to operate our business, which has forced
us to suspend our operations until such time as we receive a
capital infusion or cash advances on the sale or license of our
processors and or related technology. We intend to source
additional capital through the sale of our equity, debt securities,
and other financing methods. We plan to use the cash proceeds from
any financing to either complete the repairs on Processors #3 to
resume production of fuels for pilot runs and customer
demonstrations and or review other options including but not
limited to licensing intellectual property and or pursuing other
operational alternatives that may become available to management as
we review the options available to the Company. At September 30,
2019, we had a cash balance of $1,033. Our principal sources of
liquidity in 2019 were the proceeds of secured promissory notes and
the elimination of the cash security we placed against our fuel oil
sale tax bond.
As
discussed earlier in this MD&A, our processors are currently
idle and, thus, we are not producing fuel or generating fuel sales
or processor sales. Our current cash levels are not sufficient to
enable us to make the required repairs to our processors or to
execute our business strategy as described in this Report. As a
result, we intend to seek significant additional capital through
the sale of our equity and debt securities and other financing
methods to enable us to make the repairs, to meet ongoing operating
costs and reduce existing liabilities. We also intend to seek cash
advances or deposits under any new processor sale agreements and/or
related technology licenses. Management currently anticipates that
the processors will remain idle until the company can raise
additional capital. While management has recently secured
additional debt financing to attempt to re-initiate the limited
production of processing used fuel oils and plastic films,
management cannot determine if it will be successful and or if
additional capital will be required to be successful. Due to the
many factors and uncertainties involved in capital markets
transactions, there can be no assurance that we will raise
sufficient capital to allow us to resume operations in 2019, or at
all. In the interim, we anticipate that our level of operations
will continue to be nominal, although we plan to continue to market
our P2O processors with the intention of making P2O processor sales
and technology licenses, along with attempting to restart fuel oil
processing.
Our
limited capital resources, lack of revenue and recurring losses
from operations raise substantial doubt about our ability to
continue as a going concern and may adversely affect our ability to
raise additional capital. The financial statements do not include
any adjustments that might be necessary if we are unable to
continue as a going concern.
Cash
Flow from Operating Activities.
|
|
For the
Nine Months Ended
September 30, |
|
|
|
2019 |
|
|
2018 |
|
Net
loss |
|
|
(1,406,087 |
) |
|
|
(1,624,896 |
) |
Net cash
used in operating activities |
|
|
(315,806 |
) |
|
|
(431,398 |
) |
Cash flow
from investing activities |
|
|
|
|
|
|
|
|
Net cash
provided by investing activities |
|
|
- |
|
|
|
100,524 |
|
Cash flows
from Financing activities: |
|
|
|
|
|
|
|
|
Net cash
provided by financing activities |
|
|
272,534 |
|
|
|
252,930 |
|
Foreign currency exchange effect on cash |
|
|
(3,503 |
) |
|
|
|
|
Cash at
beginning of period |
|
|
47,808 |
|
|
|
172,286 |
|
Cash at end of
period |
|
$ |
1,033 |
|
|
$ |
94,342 |
|
Cash Flow from Operations
Cash
used in operations was approximately $315,806 and $431,398 for the
nine months ended September 30, 2019 and 2018, respectively. In
2019 and 2018 cash was mainly used to continue funding the minimum
operating costs.
Cash Flow from Investing Activities
Cash
flow provided from investing activities was approximately $0, and
$100,524, for the nine months ended September 30, 2019 and 2018,
respectively, and was attributed to the release of a cash bond for
fuel oil taxes that released the reserved cash for 2018.
Cash Flow from Financing Activities
Cash
flow from financing activities was approximately $272,534 and
$252,930, for the nine months ended September 30, 2019 and 2018,
respectively. For 2019 and 2018, these amounts were mainly from
proceeds received from secured promissory notes from related
parties.
Off-Balance
Sheet Arrangements
We
had no off-balance sheet arrangements in the periods ended
September 30, 2019 and 2018.
Critical Accounting Policies
Basis of Consolidation
The
condensed consolidated financial statements include our accounts
and the accounts of our wholly-owned subsidiaries, Plastic2Oil
(Canada) Inc., JBI CDE Inc., Plastic2Oil, Re One Inc., and JBI Re
#1 Inc., Plastic2Oil of NY #1, and Plastic2Oil Marine Inc.. The
results of Javaco and Pak-It are consolidated and classified as
discontinued operations for all periods presented. All of our
intercompany transactions and balances have been eliminated on
consolidation. Amounts in the consolidated financial statements are
expressed in U.S. dollars.
Estimates
The
preparation of financial statements in conformity with U.S. GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates. Significant estimates include amounts for impairment of
long-lives assets, share based compensation, asset retirement
obligations, inventory obsolescence, accrued
liabilities.
Property, Plant and Equipment
Property,
plant and equipment are recorded at cost. Depreciation is provided
using the straight-line method over the estimated useful lives of
the various classes of assets, and capital-leased assets are given
useful lives coinciding with the asset classification they are
classified as follows:
Leasehold
improvements |
|
lesser
of useful life or term of the lease |
Machinery
and office equipment |
|
3-15
years |
Furniture
and fixtures |
|
7
years |
Office
and industrial buildings |
|
15
-30 years |
Gains
and losses on depreciable assets retired or sold are recognized in
the statements of operations in the year of disposal. Repairs and
maintenance expenditures are expensed as incurred and expenditures
that increase the value or useful life of the asset are
capitalized.
Impairment of Long-Lived Assets
The
Company reviews for impairment of long-lived assets on an asset by
asset basis. Impairment is recognized on properties held for use
when the expected undiscounted cash flows for a property are less
than its carrying amount at which time the property is written-down
to fair value. Properties held for sale are recorded at the lower
of the carrying amount or the expected sales price less costs to
sell. The sale or disposal of a “component of an entity” is treated
as discontinued operations.
Asset Retirement Obligations
The
fair value of the estimated asset retirement obligation is
recognized in the consolidated balance sheets when identified and a
reasonable estimate of fair value can be made. The asset retirement
cost, equal to the estimated fair value of the asset retirement
obligation, is capitalized as part of the cost of the related
long-lived asset. The balance of the asset retirement obligation is
determined through an assessment made by the Company’s engineers,
of the total costs expected to be incurred by the Company when
closing a facility. The total estimated cost is then discounted
using the current market rates to determine the present value of
the asset as of the date of this valuation. As of the date of the
creation of the asset retirement obligation in the amount of
$69,424, the Company determined the present value of the obligation
using a discount rate equal to 2.96%. The present value of the
asset retirement obligation is then capitalized on the consolidated
balance sheets and is depreciated over the asset’s estimated useful
life and is included in depreciation and accretion expense in the
unaudited condensed consolidated statements of operations.
Increases in the asset retirement obligation resulting from the
passage of time are recorded as accretion of asset retirement
obligations in the unaudited condensed consolidated statements of
operations. Actual expenditures incurred are charged against the
accumulated obligations.
Environmental Contingencies
The
Company records environmental liabilities at their undiscounted
amounts on our consolidated balance sheets as other current or
long-term liabilities when environmental assessments indicate that
remediation efforts are probable and the costs can be reasonably
estimated. These costs may be discounted to reflect the time value
of money if the timing of the cash payments is fixed or reliably
determinable and extends beyond a current period. Estimates of our
liabilities are based on currently available facts, existing
technology and presently enacted laws and regulations, taking into
consideration the likely effects of other societal and economic
factors, and include estimates of associated legal costs. These
amounts also consider prior experience in remediating contaminated
sites, other companies’ clean-up experience and data released by
the Environmental Protection Agency (EPA) or other organizations.
Our estimates are subject to revision in future periods based on
actual costs or new circumstances. We capitalize costs that benefit
future periods and we recognize a current period charge in
operation and maintenance expense when clean-up efforts do not
benefit future periods.
We
evaluate any amounts paid directly or reimbursed by government
sponsored programs and potential recoveries or reimbursements of
remediation costs from third parties including insurance coverage
separately from our liability. Recovery is evaluated based on the
creditworthiness or solvency of the third party, among other
factors. When recovery is assured, we record and report an asset
separately from the associated liability on our balance sheet. No
amounts for recovery have been accrued to date.
Revenue Recognition
The
Company recognizes revenue when it is realized or realizable and
collection is reasonably assured. The Company considers revenue
realized or realizable and earned when all of the following
criteria are met: (i) persuasive evidence of an arrangement exists,
(ii) the product has been shipped or the services have been
rendered to the customer, (iii) the sales price is fixed or
determinable, and (iv) collectability is reasonably
assured.
P2O
processor sales are recognized when the customer take possession of
the processors since title to the goods and the risk of loss
transfers from P2O to Customer upon delivery. P2O fuel sales are
recognized when the customers take possession of the fuel since at
that stage the customer has completed all prior testing necessary
for their acceptance of the fuel. At the time of possession they
have arranged for transportation to pick it up and the sales price
has either been set in contract or negotiated prior to the time of
pick up. The Company negotiates the pricing of the fuel based on
the quality of the product and the type of fuel being sold (e.g.
Naphtha, Fuel Oil No.6 or Fuel Oil No. 2).
Foreign Currency Translation
The
consolidated financial statements have been translated into U.S.
dollars in accordance with Financial Accounting Standards Board
(“FASB”) Accounting Standards Codification (“ASC”) Topic 830. All
monetary items have been translated using the exchange rates in
effect at the balance sheet date. All non-monetary items have been
translated using the historical exchange rates at the time of
transactions. Income statement amounts have been translated using
the average exchange rate for the year. Realized foreign exchange
gains and losses are included in the consolidated statements of
operations. Resulting differences are reflected in accumulated
other comprehensive income in the accompanying consolidated balance
sheets.
ITEM 3. Quantitative and Qualitative
Disclosures about Market Risk
Disclosures About Market Risk
We
may be exposed to changes in financial market conditions in the
normal course of business. Market risk generally represents the
risk that losses may occur as a result of movements in interest
rates and equity prices. We currently do not use financial
instruments in the normal course of business that are subject to
changes in financial market conditions.
Currency Fluctuations and Foreign Currency Risk
We
mainly operate in the United States and Canada. Due to the relative
stability of the Canadian Dollar in comparison to the U.S. Dollar,
we have not experienced foreign currency risk, however, should this
stability change, we could be exposed to such risk.
Interest Rate Risk
We do
not feel that we are subject to significant interest rate risk. We
deposit surplus funds with banks earning daily interest at fixed
rates and we do not invest in any instruments for trading purposes.
Additionally, all of our outstanding debt instruments (our mortgage
and capital leases) carry fixed rates of interests. We are exposed
to opportunity risk should interest rates decrease. The amount of
interest bearing short-term debt outstanding as of September 30,
2019 and December 31, 2018 was $11,022,843 and $9,924,418,
respectively.
Credit Risk
Financial
instruments, which potentially expose us to concentrations of
credit risk, consist principally of operating demand deposit
accounts and accounts receivable. Our policy is to place our
operating demand deposit accounts with high credit quality
financial institutions that are insured by the FDIC, however,
account balances may at times exceed insured limits. We extend
limited credit to our customers based upon their creditworthiness
and establish an allowance for doubtful accounts based upon the
credit risk of specific customers, historical trends and other
pertinent information.
We
may maintain cash balances, at times, with financial institutions
in excess of amounts insured by the Canada Deposit Insurance
Corporation and the U.S. Federal Deposit Insurance Corporation.
Management monitors the soundness of these institutions and has not
experienced any collection losses with these financial
institutions.
Inflation Risk
Inflationary
factors such as increases in the cost of our product and overhead
costs may adversely affect our operating results. Although we do
not believe that inflation has had a material impact on our
financial position or results of operations to date, a high rate of
inflation in the future may have an adverse effect on our ability
to maintain current levels of gross margin and selling, general and
administrative expenses as a percentage of net revenues if the
selling prices of our products do not increase with these increased
costs.
ITEM 4. CONTROLS AND
PROCEDURES
Evaluation
of disclosure controls and procedures
Under
the supervision and with the participation of our management,
including our principal executive officer and principal financial
officer, we conducted an evaluation of our disclosure controls and
procedures, as such term is defined under Rule 13a-15(e) and Rule
15d-15(e) promulgated under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”), as of September 30, 2019. Based on
this evaluation, our principal executive officer and principal
financial officer concluded that as of September 30, 2019 our
disclosure controls and procedures were ineffective to ensure that
information required to be disclosed by us in the reports we file
or submit under the Exchange Act is recorded, processed, and
reported within the time periods specified in the SEC’s rules and
forms, and that such information is accumulated and communicated to
the Company’s management, including the Company’s CEO and CFO, as
appropriate, to allow timely decisions regarding required
disclosure.
The
Company currently has just three directors, one of whom is member
of executive management and not independent. The Company does not
maintain separately designated audit, compensation, and nominating
and corporate governance committees of the Board.
Changes in Internal Control over Financial
Reporting
On
April 18, 2018 the Company’s Chief Financial Officer resigned. The
Company is currently undertaking a review to determine what course
of action it may take in regards to filling this position given the
Company’s current negative financial condition. Currently, the
Chief Executive Officer has assumed the additional responsibilities
of the Chief Financial Officer. The Company has retained a
financial consultant to assist management in the preparation and
review of its Exchange Act reports. The continuing deterioration of
the financial condition of the Company along with the reduction of
staffing continues to hamper the ability of management to ensure
effective internal controls and unless the financial condition
improves an effective remediation plan cannot be put into place to
correct the current deficiencies. With the exception of the noted
changes herein, there were no other changes in our internal control
over financial reporting identified in connection with the
evaluation required by paragraph (d) of Exchange Act Rules 13a-15
or 15d-15 that occurred during our last fiscal quarter that have
materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting. Management has
reported to the Board of Directors material weaknesses described
herein and also under the heading Management’s Report on Internal
Control over Financial Reporting” in Section 9A of the Company’s
Annual Report on Form 10-K for the year ended December 31,
2018.
PART II – OTHER
INFORMATION
Item 1. Legal
Proceedings
For a
discussion of legal proceedings affecting the Company, see the
information in Note 7, “Commitments and Contingencies,” to the
financial statements, included in Part I of this Report.
Item 1A. Risk Factors
As a
“smaller reporting company”, we are not required to provide the
information required by this item.
Item 2. Unregistered Sales of Equity
Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior
Securities
None.
Item 4. Mine Safety
Disclosures
Not
Applicable.
Item 5. Other
Information
None.
Item 6. Exhibits
The
exhibits required by this item are listed on the Exhibit Index
attached hereto, which is incorporated herein by
reference.
Signatures
Pursuant
to the requirements 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.
|
PLASTIC2OIL,
INC. |
|
|
|
Date:
December 16, 2019 |
By: |
/s/
Richard Heddle |
|
Name: |
Richard
Heddle |
|
Title: |
President
and Chief Executive Officer (Principal Executive Officer) and Chief
Financial Officer (Principal Financial Officer) |
Item
6. Exhibit Index
Plastic2Oil (PK) (USOTC:PTOI)
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