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 current 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 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 our
securities, including the debt and /or equity securities or equity equivalents in order to allow us to restart 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 $948,970, and $1,099,259, for the six months ended June 30, 2019,
and 2018, respectively. At June 30, 2019, the Company had a net working capital deficit of $15,604,113, and an accumulated deficit
of $83,144,599. 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. 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.
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.
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, 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.
The Company held no cash equivalents as of June 30, 2019 and 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 six months ended June 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 $57,530, 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 June 30, 2019 and December 31, 2018, the carrying value of the asset retirement obligations
was $68,916 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 our 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 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 as general and administrative expenses in
the condensed consolidated statements of operations for the three and six months ended June 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.
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 six months ended June 30, 2019, potential dilutive common stock equivalents consisted 1,600,000
shares underlying common stock warrants and 220,000 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 six months ended June 30, 2018, potential
dilutive common stock equivalents 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, leases, 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 June 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
|
|
|
|
(13,846
|
)
|
|
|
44,517
|
|
|
Office and industrial buildings
|
|
|
542,449
|
|
|
|
(172,787
|
)
|
|
|
369,662
|
|
|
Equipment under capital lease
|
|
|
53,257
|
|
|
|
(53,257
|
)
|
|
|
-
|
|
|
Total
|
|
$
|
824,575
|
|
|
$
|
(301,116
|
)
|
|
$
|
523,460
|
|
|
As of December 31, 2018
|
|
Cost
|
|
|
Accumulated
Depreciation
|
|
|
Net Book
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and office equipment
|
|
|
47,137
|
|
|
|
(47,056
|
)
|
|
|
81
|
|
|
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
|
|
|
542,450
|
|
|
|
(160,408
|
)
|
|
|
382,042
|
|
|
Equipment under capital lease
|
|
|
53,257
|
|
|
|
(53,257
|
)
|
|
|
-
|
|
|
Total
|
|
$
|
824,576
|
|
|
$
|
(287,384
|
)
|
|
$
|
537,192
|
|
For
the six months ended June 30, 2019 and 2018, the Company recognized $14,747 and $86,951, for the three months ended June 30,
2019 and 2018, $7,374 and $ 43,784 respectively, of depreciation expense. At June 30, 2019 and 2018, machinery and equipment
with a cost of $53,257 and accumulated amortization of $53,257, 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 $180,235 has been presented in the accompanying balance sheet as property held for sale at June 30, 2019
and December 31, 2018.
NOTE
5 – SECURED PROMISSORY NOTES - RELATED PARTIES
Related
Parties Secured promissory Notes consists of the following at periods ended:
|
|
|
As of
June 30, 2019
|
|
|
As of
December 31, 2018
|
|
|
Secured Demand Promissory Note bearing interest of 4% to 12% per annum with the Company’s CEO.
|
|
$
|
2,048,265
|
|
|
$
|
1,907,636
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Demand Promissory Note bearing interest of 4% to 12% per annum with the Company’s CEO.
|
|
|
649,397
|
|
|
|
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
|
|
|
80,641
|
|
|
|
75,892
|
|
|
|
|
|
|
|
|
|
|
|
|
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 November 2019 and secured by a security interest in substantially all of the assets of the Company and its subsidiaries.
|
|
|
1,695,487
|
|
|
|
1,595,798
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
129,246
|
|
|
|
126,711
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Promissory Notes with the Company’s CEO –( $1,000,000 in August 29, 2013 and $2,000,000 in September 31, 2014) 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 (See note 12).
|
|
|
5,780,480
|
|
|
|
5,463,259
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
129,275
|
|
|
|
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
|
|
|
15,512
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Demand Promissory Note - $110,000 Canadian dollars in first and second quarter
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
|
|
|
84,921
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
137,429
|
|
|
|
129,685
|
|
|
|
|
|
|
|
|
|
|
|
|
Secured Demand Promissory Note - $140,000 Canadian dollars in the first
and second quarter 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
|
|
|
107,954
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
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.
|
|
|
534,800
|
|
|
|
502,848
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,393,407
|
|
|
|
10,556,951
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Current Portion Short Term Secured Promissory Notes- Related Parties
|
|
$
|
10,721,178
|
|
|
$
|
9,924,418
|
|
|
Long Term Secured promissory notes – related parties
|
|
$
|
672,229
|
|
|
$
|
632,533
|
|
|
Continuity of Secured Promissory Notes – Related Parties
|
|
As of
June 30, 2019
|
|
|
As of
December 31, 2018
|
|
|
Face value of secured promissory notes
|
|
$
|
7,200,607
|
|
|
$
|
6,996,441
|
|
|
Accrued interest on secured promissory notes
|
|
|
4,205,225
|
|
|
|
3,581,343
|
|
|
Less: Unamortized debt discount
|
|
|
(12,425
|
)
|
|
|
(20,833
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Carrying value of secured promissory notes- related parties
|
|
$
|
11,393,407
|
|
|
$
|
10,556,951
|
|
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
|
|
|
|
|
|
|
|
2019
|
|
$
|
10,721,178
|
|
|
2020
|
|
|
|
|
|
2021
|
|
|
672,229
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
11,393,407
|
|
NOTE
6 – SECURED PROMISSORY NOTES
Secured
notes payable consists of the following at periods ended:
|
|
|
As of
June 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.
|
|
$
|
138,052
|
|
|
$
|
130,274
|
|
|
Total
|
|
|
138,052
|
|
|
|
130,274
|
|
|
Less: current portion
|
|
|
-
|
|
|
|
-
|
|
|
Secured promissory notes
|
|
$
|
138,052
|
|
|
$
|
130,274
|
|
|
Continuity of Secured Promissory Notes
|
|
As of
June 30, 2019
|
|
|
As of
December 31, 2018
|
|
|
Face value of August 10, 2016 secured promissory notes
|
|
$
|
100,000
|
|
|
$
|
100,000
|
|
|
Total face value of secured promissory notes
|
|
|
100,000
|
|
|
|
100,000
|
|
|
Discount on August 10, 2016 secured notes payable (100,000 warrants)
|
|
|
(2,000
|
)
|
|
|
(2,000
|
)
|
|
Accretion of discount on secured promissory notes ($100,000 secured note payable)
|
|
|
1,133
|
|
|
|
93
|
|
|
Interest on secured notes payable
|
|
|
38,919
|
|
|
|
31,341
|
|
|
Carrying value of Secured Promissory Notes
|
|
$
|
138,052
|
|
|
$
|
130,274
|
|
The
following annual payments of principal and interest are required over the next five years in respect to these secured promissory
notes:
|
Years Ending December 31,
|
|
Annual Payments
|
|
|
2019
|
|
|
-
|
|
|
2020
|
|
|
-
|
|
|
2021
|
|
|
138,052
|
|
|
Total
|
|
$
|
138,052
|
|
NOTE
7 - CAPITAL LEASES
The
Mortgages Payable and Capital Leases consists of the following at periods ending:
|
|
|
As of
June 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.
|
|
$
|
22,647
|
|
|
$
|
22,210
|
(1)
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
22,647
|
|
|
|
22,210
|
|
|
Less: current portion
|
|
|
22,647
|
|
|
|
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 June 30, 2019 and December 31, 2018, there were no currently installed marine vessel processors pursuant to the contract.
Contingencies
As
of June 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 June 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, June 30, 2019
|
|
|
|
1,600,000
|
|
|
$
|
0.12
|
|
|
|
1.09
|
|
There
were no warrants issued, expired or exercised during the three or six months ended June 30, 2019.
NOTE
10 – STOCK-BASED COMPENSATION PLANS AND AWARDS
2012
Incentive Plan
There were no options granted during the three or six months ended June 30, 2019. As of June 30, 2019, 220,000
options were outstanding, of which 195,000 are fully vested.
A
summary of stock option activity for the three and six months ended June 30, 2019 is as follows:
|
|
|
Outstanding
Stock
Options
|
|
|
Weighted-
Average
Exercise
Price
|
|
|
Aggregate
Intrinsic
Value (1)
|
|
|
Balance as of December 31, 2018
|
|
|
220,000
|
|
|
$
|
0.41
|
|
|
$
|
-
|
|
|
Balance as of June 30, 2019
|
|
|
220,000
|
|
|
$
|
0.41
|
|
|
$
|
-
|
|
|
Exercisable as of June 30, 2019
|
|
|
195,000
|
|
|
$
|
0.46
|
|
|
$
|
-
|
|
|
(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 June 30, 2019, compensation to be recognized on unvested options is not significant.
2016
Incentive Plan
On
October 25, 2016, the Board awarded Rahoul S Banerjea, the former chief financial officer 2,250,000 options to purchase shares
of common stock at $0.17 per share. This grant was independent of the Company’s 2012 long term incentive plan. The purpose
of this award was to further incentivize Mr. Banerjea and promote the interests of the Company, its subsidiaries and its stockholders
by enabling the Company and its subsidiaries to attract, retain and motivate executive employees of the Company and/or its subsidiaries,
and to align the interests of those individuals and the Company’s stockholders. At December 31, 2017, all 2,250,000 were
vested and an expense of $90,000 was recognized. As of April 18, 2018, Rahoul S Banerjea, CFO, resigned and forfeited his vested
options 90 days after that date.
NOTE
11 – RELATED PARTY TRANSACTIONS AND BALANCES
As
of June 30, 2019 and December 31, 2018, Richard Heddle, CEO is due $1,320,000 and $1,200,000 in accrued payroll, respectively,
which is included in Accrued Officers Salary on the consolidated balance sheets.
At
June 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 June 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 $22,396 on August 16, 2019, $23,529 on July 15, 2019 and $22,442 on August 23, 2019 from the Company’s
CEO and Directors in the form of demand secured promissory notes. The advances bear interest at 4%.
On
July 25, 2019, Plastic2Oil, Inc., a Nevada corporation (the “Company”), entered into an agreement (“Amendment
to Note 1”) with Mr. Richard Heddle, the Company’s chief executive officer and a member of the Company’s board
of directors, to extend the maturity date of the outstanding $1 million principal amount 12% Secured Promissory Note and all accrued
interest due December 1, 2018 (“Note 1”) to December 31, 2020. Mr. Heddle originally purchased Note 1 from the Company
on August 29, 2013 in the Company’s private placement of 12% Secured Promissory Notes due December 31, 2018.
On
July 25, 2019, the Company entered into an agreement (“Amendment to Note 2”) with Mr. Heddle to extend the maturity
date of the outstanding $2 million principal amount 12% Secured Promissory Note and all accrued interest due December 1, 2018
(“Note 2”) to December 31, 2020. Mr. Heddle originally purchased Note 2 from the Company on September 30, 2013 in
the Company’s private placement of 12% Secured Promissory Notes due December 1, 2018.
In
consideration for extending the maturity dates of Notes 1 and 2, the Company issued Richard Heddle 3,000,000 options to purchase
common stock shares with an exercise price of $.02 per share. The options vest 50% in six months and fully vest one year from
July 25, 2019.
On
July 25, 2019, the Company issued an aggregate of 500,000 options to purchase common stock shares with an exercise price of $0.02
per share to directors, employees and a consultant for services. The options vest 50% in six months and fully vest one year from
July 25, 2019.
