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.
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.
Going
Concern
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 $898,832, and $1,220,710, for the nine months ended September
30, 2018, and 2017, respectively. At September 30, 2018, the Company had a net working capital deficit of $12,004,542, and an
accumulated deficit of $81,043,033. 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, 2017 and 2016, 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.
While
the Company believes that it will be successful in obtaining the necessary financing to fund its operations, meet regulatory requirements,
and achieve commercial production goals, there are no assurances that such additional funding will be achieved and that it will
succeed in its future operations. 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., Plastic2Oil Marine Inc., Javaco,
and Pak-it. All intercompany transactions and balances have been eliminated on consolidation. Amounts in the consolidated financial
statements are expressed in US dollars. Pak-It and Javaco have also been consolidated; however, as mentioned their operations
were classified as discontinued operations.
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, 2017 on Form 10-K filed with the Securities and Exchange Commission (the SEC) on April 2, 2018 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, accounts receivable exposures 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.
Restricted
Cash
At September 30,
2018 and December 31, 2017, the Company had restricted cash of $0 and $100,423 respectively, which was used to secure
a line of credit that secured a performance bond on behalf of the Company. The performance bond was required by the State of New
York for fuel distributors in perpetuity. The bond was cancelled in the first quarter of 2018 due to the lack of current production.
In the event of any future production the Company may be required to post another bond.
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
|
|
25
-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. The operating properties
sold by the Company typically meet the definition of a component of an entity and as such, the revenues and expenses associated
with sold properties are reclassified to discontinued operations for all periods presented.
During
the three months ended September 30, 2018 and 2017, the Company recorded impairment losses on property, plant and equipment of
$0 and $13,158, respectively, in accordance to ASC 360-10-50-2 where an impairment loss will be recognized only if the carrying
amounts of the long-lived assets are not recoverable and exceeds its fair value. The Company estimates the fair value of equipment
for impairment purposes using a discounted cash flow method.
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, 2018 and December 31, 2017, the carrying value of the asset retirement obligations
was $67,403 and $65,920, 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.
The
company evaluates 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.
Deposits
Deposits
represent utility services deposit and payments made to vendors for fabrication of key pieces of property, plant and equipment
that have been made in accordance with the Company’s agreements to purchase such equipment. Payments are made to these vendors
as progress is made on the fabrication of the equipment, with final payments made when the equipment is delivered. Until the company
has possession of the equipment, all payments made to these vendors are classified as deposits on assets. Deposits were $10,000
as of September 30, 2018 and December 31, 2017.
Leases
The
Company has entered into various leases for buildings and equipment. At the inception of a lease, the Company evaluates whether
it is operating or capital in nature. Operating leases are recorded as expense in the appropriate periods of the lease. Capital
leases are classified as property, plant and equipment and the related depreciation is recorded on the assets. Also, the debt
related to the capital lease is included in the Company’s short- and long-term debt obligations, in accordance with the
lease agreement.
Lease
inducements are recognized for periods of reduced rent or for larger than usual rent escalations over the term of the lease. The
benefit of a rent free period and the cost of future rent escalations are recognized on a straight-line basis over the term of
the lease.
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 as general and administrative expenses in
the condensed consolidated statements of operations for the three months ended September 30, 2018 and 2017, 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.
The
Company adopted the accounting standards associated with uncertain tax positions as of January 1, 2007. The adoption of this standard
did not have a material impact on the Company’s condensed consolidated statements of operations or financial position. Upon
adoption, the Company had no unrecognized tax benefits. Furthermore, the Company had no unrecognized tax benefits at September
30, 2018 and December 31, 2017. The Company files tax returns in the U.S federal and state jurisdictions as well as a foreign
country. The years ended December 31, 2014 through December 31, 2017 are open tax years for IRS review.
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, 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. For the three and nine months ended September 30, 2018,
potential dilutive common stock equivalents 6,800,000 shares underlying common stock warrants, and 7,330,000 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. The
Company extends limited credit to its customers based upon their creditworthiness and establishes an allowance for doubtful accounts
based upon the credit risk of specific customers, historical trends and other pertinent information. The Company also routinely
assesses the collectability of the short-term note receivable and determines its exposure for non-performance based on the specific
holder and other pertinent information.
Fair
Value of Financial Instruments
The
carrying amounts of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, leases, promissory notes,
long-term debt, and mortgage payable approximate fair value because of the short-term nature of these items.
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,
2018
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
Book
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
$
|
218,054
|
|
|
$
|
(47,089
|
)
|
|
$
|
170,964
|
|
|
Machinery and office equipment
|
|
|
1,360,460
|
|
|
|
(1,202,013
|
)
|
|
|
158,447
|
|
|
Furniture and fixtures
|
|
|
14,166
|
|
|
|
(14,166
|
)
|
|
|
-
|
|
|
Land
|
|
|
243,859
|
|
|
|
-
|
|
|
|
243,859
|
|
|
Asset retirement obligation
|
|
|
58,363
|
|
|
|
(11,823
|
)
|
|
|
46,540
|
|
|
Office and industrial buildings
|
|
|
1,084,899
|
|
|
|
(308,811
|
)
|
|
|
776,088
|
|
|
Equipment under
capital lease
|
|
|
53,257
|
|
|
|
(53,257
|
)
|
|
|
-
|
|
|
Total
|
|
$
|
3,033,058
|
|
|
$
|
(1,637,159
|
)
|
|
$
|
1,395,899
|
|
|
As of December 31, 2017
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net
Book
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leasehold improvements
|
|
$
|
218,054
|
|
|
$
|
(40,635
|
)
|
|
$
|
177,419
|
|
|
Machinery and office equipment
|
|
|
1,626,379
|
|
|
|
(1,385,432
|
)
|
|
|
240,947
|
|
|
Furniture and fixtures
|
|
|
16,368
|
|
|
|
(16,368
|
)
|
|
|
-
|
|
|
Land
|
|
|
243,859
|
|
|
|
-
|
|
|
|
243,859
|
|
|
Asset retirement obligation
|
|
|
58,363
|
|
|
|
(9,799
|
)
|
|
|
48,564
|
|
|
Office and industrial buildings
|
|
|
1,084,899
|
|
|
|
(271,672
|
)
|
|
|
813,227
|
|
|
Equipment under
capital lease
|
|
|
53,257
|
|
|
|
(51,355
|
)
|
|
|
9,510
|
|
|
Total
|
|
$
|
3,301,179
|
|
|
$
|
(1,775,261
|
)
|
|
$
|
1,525,918
|
|
For
the nine months ended September 30, 2018 and 2017, the Company recognized $129,476 and $145,290, respectively, of depreciation
expense. At September 30, 2018 and 2017, machinery and equipment with a cost of $53,257 and accumulated amortization of $53,257
and $49,453, respectively, were under capital lease. During the nine months ended September 30, 2018 and September 30, 2017, the
Company recognized $1,902 and $5,706 respectively, of depreciation expense related to these assets under capital lease.
On
March 31, 2017, the Company sold its land and building located at 1783 Allanport Road, Thorold, Ontario, for a gain of approximately
$254,000. The proceeds were used towards repayment of the outstanding mortgage, real estate taxes and closing costs. The Company
reviews for impairment of long-lived assets on an asset by asset basis, which resulted in an impairment booking of $13,158 for
the nine months ended September 30, 2017.
NOTE
4 – SECURED PROMISSORY NOTES - RELATED PARTY.
Related
Party notes payable consists of the following at periods ended:
|
|
|
As
of
September 30, 2018
|
|
|
As
of
December 31, 2017
|
|
|
Secured Demand Promissory
Note (provided by a related party) bearing interest of 4% per annum.
|
|
$
|
1,984,360
|
|
|
$
|
1,969,121
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Demand Promissory Note (provided
by a related party) bearing interest of 12% per annum.
|
|
|
618,043
|
|
|
|
588,651
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Demand Promissory Note -
$77,930 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.
|
|
|
79,355
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Demand Promissory Note -
$75,000, 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.
|
|
|
75,527
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Demand Promissory Note -
$100,000 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.
|
|
|
100,637
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Promissory Notes (provided by
a related party -$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.
|
|
|
1,547,481
|
|
|
|
1,413,186
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Promissory Notes (provided by
a related party - $1,000,000 in August 29, 2013 and $2,000,000 in September 30, 2013) bearing interest of 12% per annum
compounded annually, together with a five-year warrant to purchase up to three million shares of the Company’s common
stock at an exercise price of $0.54 per share and payable upon maturity in 2018 and secured by a security interest in substantially
all of the assets of the Company and its subsidiaries.
|
|
|
5,304,648
|
|
|
|
4,746,490
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
125,814
|
|
|
|
115,276
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
486,872
|
|
|
|
443,757
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
10,322,737
|
|
|
|
9,276,481
|
|
|
Short Term Demand
Notes Payable
|
|
$
|
2,857,922
|
|
|
$
|
2,557,772
|
|
|
Short Term Secured
promissory notes – related party
|
|
$
|
5,304,648
|
|
|
$
|
4,746,490
|
|
|
Long Term Secured promissory notes –
related party
|
|
$
|
2,160,167
|
|
|
$
|
1,972,219
|
|
|
Short Term and
Long Term promissory notes – related party
|
|
$
|
7,464,815
|
|
|
$
|
6,718,709
|
|
|
Continuity of Secured
Promissory Notes – Related Party
|
|
As
of
September 30, 2018
|
|
|
As
of
December 31, 2017
|
|
|
Face value of November 19, 2014 secured note
payable
|
|
$
|
1,000,000
|
|
|
$
|
1,000,000
|
|
|
Face value of August 29, 2013 secured note payable
|
|
|
1,000,000
|
|
|
|
1,000,000
|
|
|
Face value of September 30, 2013 secured note payable
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
|
Face value of August 25, 2016 secured note payable
|
|
|
100,000
|
|
|
|
100,000
|
|
|
Face value of October 18, 2016
secured note payable
|
|
|
400,000
|
|
|
|
400,000
|
|
|
Total face value of promissory notes
payable
|
|
|
4,500,000
|
|
|
|
4,500,000
|
|
|
Discount on November 19, 2014 secured
notes payable (1,000,000 warrants)
|
|
|
(58,082
|
)
|
|
|
(58,082
|
)
|
|
Discount on August 29, 2013 secured
note payable (1,000,000 warrants)
|
|
|
(310,200
|
)
|
|
|
(310,200
|
)
|
|
Discount on September 30, 2013 secured
note payable (2,000,000 warrants)
|
|
|
(600,400
|
)
|
|
|
(600,400
|
)
|
|
Discount on August 24, 2016 secured
notes payable (100,000 warrants)
|
|
|
(2,000
|
)
|
|
|
(2,000
|
)
|
|
Discount on October 18, 2016 secured
notes payable (500,000 warrants)
|
|
|
(20,000
|
)
|
|
|
(20,000
|
)
|
|
Accretion of discount on secured notes
payable ($4,000,000 secured note payable)
|
|
|
958,612
|
|
|
|
818,480
|
|
|
Accretion of discount on secured notes
payable ($500,000 secured note payable)
|
|
|
8,500
|
|
|
|
5,200
|
|
|
Interest on secured notes payable($4,000,000
secured note payable)
|
|
|
2,862,200
|
|
|
|
2,309,878
|
|
|
Interest on secured
notes payable($500,000 secured note payable)
|
|
|
126,185
|
|
|
|
75,833
|
|
|
Carrying value
of Short Term and Long Term Secured Promissory Notes
|
|
$
|
7,464,815
|
|
|
$
|
6,718,709
|
|
The
following annual payments of principal and interest are required over the next five years in respect to these short term and long
term related party secured notes payables:
|
Years Ending December 31,
|
|
|
Annual
Payments
|
|
|
|
|
|
|
|
|
2018
|
|
|
$
|
8,184,040
|
|
|
2019
|
|
|
|
1,547,481
|
|
|
2020
|
|
|
|
-
|
|
|
2021
|
|
|
|
591,216
|
|
|
Total
|
|
|
$
|
10,322,737
|
|
NOTE
5 – SECURED PROMISSORY NOTES
Secured
notes payable consists of the following at periods ended:
|
|
|
As
of
September 30, 2018
|
|
|
As
of
December 31, 2017
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
$
|
126,386
|
|
|
$
|
115,802
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
126,386
|
|
|
|
115,802
|
|
|
Less: current
portion
|
|
|
-
|
|
|
|
-
|
|
|
Secured promissory
notes
|
|
$
|
126,386
|
|
|
$
|
115,802
|
|
|
Continuity of Secured
Promissory Notes
|
|
As
of
September 30, 2018
|
|
|
As
of
December 31, 2017
|
|
|
Face value of August
10, 2016 secured note payable
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
Total face value of promissory notes
payable
|
|
|
100,000
|
|
|
|
100,000
|
|
|
Discount on August 10, 2016 secured
notes payable (100,000 warrants)
|
|
|
(2,000
|
)
|
|
|
(2,000
|
)
|
|
Accretion of discount on secured notes
payable ($100,000 secured note payable)
|
|
|
833
|
|
|
|
533
|
|
|
Interest on secured
notes payable
|
|
|
27,553
|
|
|
|
17,269
|
|
|
Carrying value
of Secured Promissory Notes
|
|
$
|
126,386
|
|
|
$
|
115,802
|
|
The
following annual payments of principal and interest are required over the next five years in respect to these secured notes payable:
|
Years Ending December
31,
|
|
|
Annual
Payments
|
|
|
2017
|
|
|
$
|
-
|
|
|
2018
|
|
|
|
-
|
|
|
2019
|
|
|
|
-
|
|
|
2020
|
|
|
|
-
|
|
|
2021
|
|
|
|
126,386
|
|
|
Total
|
|
|
$
|
126,386
|
|
NOTE
6 - CAPITAL LEASES
The
Mortgages Payable and Capital Leases consists of the following at periods ending:
|
|
|
As of
September 30, 2018
|
|
|
As of
December 31, 2017
|
|
|
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.
|
|
$
|
21,995
|
(1)
|
|
$
|
21,362
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
21,995
|
|
|
|
21,362
|
|
|
Less: current portion
|
|
|
21,995
|
|
|
|
21,362
|
|
|
Mortgages payable and capital leases
|
|
$
|
-
|
|
|
$
|
-
|
|
(1)
Includes accrued interest.
NOTE
7 – COMMITMENTS AND CONTINGENCIES
Commitments
On
April 17, 2017, the Company received cash in the amount of $524,010, net of legal expenses from the settlement of the Glenny and
Maskell litigation. The Company filed the lawsuit on May 25, 2012 at the Ontario Superior Court of Justice, seeking damages consisting
of the costs of defense and any damages that may be awarded against the Company, our former CEO John Bordynuik, and former CFO
Ron Baldwin in the Class Action and in the SEC Action. The Ontario Superior Court of Justice issued the dismissal order dated
May 9, 2017. The case was settled in the U.S. with ACE (Insurance carrier) in or about May 2013, pursuant to what is known as
a “Mary Carter” (confidential) settlement.
As
of September 30, 2018, the Company has committed to purchase certain pieces of key machinery
from vendors related to the future expansion of its operations. At December 31, 2016,
we recorded impairment loss $1,448,464 on the deposits in accordance to ASC 360-10-50-2
where an impairment loss will be recognized only if the carrying amount of the long-lived
assets are not recoverable and exceeds its fair value. The Company will be required to
pay approximately $540,000 upon the delivery of these assets which is expected occur
with the delivery of processor #4 and processor #5.
The
Company leased premises in Thorold, Ontario, Canada, which was previously used in the operation Plastic2Oil (Canada), Inc. doing
business as Regional Recycling of Niagara (“RRON”). During the third quarter of 2013, the Company determined that
it would shut down the operations of RRON. The employees of RRON were given notice of the shut down in the first week of September
2013, after which point the Company approached the landlord about terminating the lease; however, there was no formal termination
as an agreement to terminate the lease was not reached. During September 2013, the Company was assessing its options with the
facility, including potential sublease, but determined that a sublease of the facility was not permitted by the lease and officially
decided to cease use of the premises as of September 30, 2013. Accordingly, the Company has applied September 30, 2013 as the
cease-use-date in recognizing the liability for the contract termination costs. The property was vacated on November 10, 2015.
On January 15, 2016, the Company entered into a Surrender of Lease agreement which terminated its lease, dated December 1, 2010,
between Avondale Store Limited Properties and JBI, (Canada) Inc. relating to the Company’s premises located at 1786 Allanport
Road, Thorold, Canada. The effective date of the termination was October 31, 2015. The premises was the site of the Company’s
Regional Recycling Center, which was part of a business line that was discontinued by the Company in 2013. The Company anticipates
the termination will save approximately $1,161,360 in lease payments over the original life of the lease which had a term ending
on December 1, 2030. The Company settled all unpaid rent on July 26, 2017, covering the period from May 2016 to October 2016.
Contingencies.
As
of September 30, 2018, 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
8 - WARRANTS
The
following table summarizes the activities for the period.
Warrants
The
following table summarizes the activities for the quarter ended September 30, 2018 and year ended December 31, 2017:
|
|
|
Warrants
Number
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Remaining
Term
|
|
|
OUTSTANDING,
December 31, 2017
|
|
|
4,850,000
|
|
|
$
|
0.38
|
|
|
|
1.3
|
|
|
Expired
|
|
|
250,000
|
|
|
|
0.15
|
|
|
|
|
|
|
OUTSTANDING,
September 30, 2018
|
|
|
4,600,000
|
|
|
$
|
0.39
|
|
|
|
1.1
|
|
There
were no warrants issued during the three or nine months ended September 30, 2018. For the three and nine months ended September
30 2018, 250,000 of warrants expired.
NOTE
9 – STOCK-BASED COMPENSATION PLANS AND AWARDS
2012
Plan
There
were no options granted during the three or nine months ended September 30, 2018 and 2017. As of September 30, 2018, 4,380,000
options were outstanding of which 2,330,000 are fully vested.
A
summary of stock option activity for the nine months ended September 30, 2018 is as follows:
|
|
|
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
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity awards
available for grant, net of restricted stock (811,576) at September 30, 2018:
|
|
|
4,858,424
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Amounts
represent the difference between the exercise price and the fair value of common stock at period end for all in the money
options outstanding based on the fair value per share of common stock.
|
As
of September 30, 2018, the Company expects to recognize $37,333 of, compensation through September 30, 2019 related to the vesting
of stock options.
2016
Incentive Plan
There
were no options granted during the three and nine months ended September 30, 2018 and 2017, respectively. As of September 30,
2018, 2,250,000 options were outstanding and are fully vested.
A
summary of stock option activity for the three and nine months ended September 30, 2018 is as follows:
|
|
|
Outstanding
Stock
Options
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value (1)
|
|
|
Balance
as of December 31, 2017
|
|
|
2,250,000
|
|
|
|
0.17
|
|
|
|
|
|
|
Balance as of
September 30, 2018
|
|
|
2,250,000
|
|
|
$
|
0.17
|
|
|
$
|
-
|
|
|
Exercisable
as of September 30, 2018
|
|
|
2,250,000
|
|
|
$
|
0.17
|
|
|
$
|
-
|
|
NOTE
10 – RISK MANAGEMENT
Concentration
of Credit Risk
The
Company maintains 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.
NOTE
11 – SUBSEQUENT EVENTS
None.
