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%.