Plastic2Oil, Inc. - Quarter Report: 2018 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

For the quarterly period ended

September 30, 2018

or

For the transition period from ______________ to ______________

Commission file number: 000-52444

PLASTIC2OIL, INC.

(Exact name of registrant as specified in its charter)

20 Iroquois Street

Niagara Falls, NY 14303

(Address of Principal Executive Offices) (Zip Code)

(716)-278-0015

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such report(s)), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of November 14, 2018, there were 124,756,158 shares of the Registrant’s common stock, $0.001 par value, outstanding.

PLASTIC2OIL, INC.

Table of Contents

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This quarterly report on Form 10-Q (“Report”) contains “forward looking statements” within the meaning of applicable securities laws. Such statements include, but are not limited to, statements with respect to management’s beliefs, plans, strategies, objectives, goals and expectations, including expectations about the future financial or operating performance of our Company and its projects, capital expenditures, capital needs, government regulation of the industry, environmental risks, limitations of insurance coverage, and the timing and possible outcome of regulatory matters, including the granting of patents and permits. Words such as “expect”, “anticipate”, “intend”, “attempt”, “may”, “will”, “plan”, “believe”, “seek”, “estimate”, and variations of such words and similar expressions are intended to identify such forward looking statements. These statements are not guarantees of future performance and involve assumptions, risks and uncertainties that are difficult to predict.

These statements are based on and were developed using a number of factors and assumptions including, but not limited to: stability in the U.S. and other foreign economies; stability in the availability and pricing of raw materials, energy and supplies; stability in the competitive environment; the continued ability of our Company to access cost effective capital when needed; and no unexpected or unforeseen events occurring that would materially alter the Company’s current plans. All of these assumptions have been derived from information currently available to the Company including information obtained by our Company from third party sources. Although management believes that these assumptions are reasonable, these assumptions may prove to be incorrect in whole or in part. As a result of these and other factors, actual results may differ materially from those expressed, implied or forecasted in such forward looking information, which reflect our Company’s expectations only as of the date hereof.

Factors that could cause actual results or outcomes to differ materially from the results expressed, implied or forecasted by the forward-looking statements include risks associated with general business, economic, competitive, political and social uncertainties; risks associated with changes in project parameters as plans continue to be refined; risks associated with failure of plant, equipment or processes to operate as anticipated; risks associated with accidents or labor disputes; risks associated in delays in obtaining governmental approvals or financing, or in the completion of development or construction activities; risks associated with financial leverage and the availability of capital; risks associated with the price of commodities and the inability of our Company to control commodity prices; risks associated with the regulatory environment within which our Company operates; risks associated with litigation including the availability of insurance; and risks posed by competition.

Some of the forward-looking statements may be considered to be financial outlooks for purposes of applicable securities legislation including, but not limited to, statements concerning capital expenditures. These financial outlooks are presented to allow the Company to benchmark the results of our Company’s Plastic2Oil business. These financial outlooks may not be appropriate for other purposes and readers should not assume they would be achieved.

Our Company does not intend to, and the Company disclaims any obligation to, update any forward-looking statements (including any financial outlooks), whether written or oral, or whether as a result of new information, future events or otherwise, except as required by law.

Unless otherwise noted, references in this Report to “P2O”, the “Company,” “we,” “our” or “us” means Plastic2Oil, Inc., a Nevada corporation.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

PLASTIC2OIL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

PLASTIC2OIL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

PLASTIC2OIL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS)

(Unaudited)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

PLASTIC2OIL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended September 30,

(Unaudited)

The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.

PLASTIC2OIL, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ORGANIZATION AND GOING CONCERN

Plastic2Oil, Inc. (the “Company” or “P2O”) was originally incorporated as 310 Holdings, Inc. (“310”) in the State of Nevada on April 20, 2006. 310 had no significant activity from inception through 2009. On April 24, 2009, the Company’s founder, former CEO and Chief of Technology, John Bordynuik, purchased 63% of the issued and outstanding shares of 310. During 2009, the Company changed its name to JBI, Inc. and began operations of its main business operation, transforming waste plastics to oil and other fuel products. During 2014, the Company changed its name to Plastic2Oil, Inc. P2O is a combination of proprietary technologies and processes developed by P2O, which convert waste plastics into fuel. P2O currently, as of the date of this filing, has two processors at its Niagara Falls, NY facility (the “Niagara Falls Facility”). Both processors are currently idle, and have been, since December 2013. Our P2O business has begun the transition from research and development to a commercial manufacturing and production business. In the short term, we plan to grow mainly by attempting to re-initiate production by processing fuel, selling processors with a royalty arrangement, licensing technology, and or searching out other revenue generating activities related to the use of our proprietary technology. Longer term, we plan to search out other opportunistic options to fully utilize all of the underlying assets of the Company.

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:

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:

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:

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:                

NOTE 5 – SECURED PROMISSORY NOTES

Secured notes payable consists of the following at periods ended:

The following annual payments of principal and interest are required over the next five years in respect to these secured notes payable:

NOTE 6 - CAPITAL LEASES

The Mortgages Payable and Capital Leases consists of the following at periods ending:

(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:

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:

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:

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.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis (the“MD&A”) of the results of operations of the Company should be read in conjunction with the consolidated financial statements of the Company, together with the accompanying notes, as well as other financial information included elsewhere in this Report. This discussion contains forward-looking statements that involve certain risks and uncertainties, and that reflect estimates and assumptions. See the section titled, “Cautionary Statement Regarding Forward-Looking Statements” for more information on forward-looking statements. Our actual results may differ materially from those indicated in forward- looking statements.

Business Overview

For the three and nine months ended September 30, 2018 and 2017, the Company had no revenues. The Company’s P2O processors were idle for all of 2017 and remained idle during the three and nine months ended September 30, 2018. The Company no longer operates its data storage and recovery business. The Company wrapped up its accounts related to its data storage and recovery business as of March 31, 2017.

For financial reporting purposes, we currently operate in one business segment, our P2O® solution business. As of the filing date of the report, our two operating processors were idle and not producing fuel products. Previously, we operated in two business segments, which also included a business data and recovery segment and a recycling facility for waste paper fiber processing, a chemical processing and cleaning business, known as Pak-It, and a retail and wholesale distribution business, known as Javaco, Inc. which we discontinued, prior to 2017. As of March 31, 2017, we had exited all of these businesses. We settled the final accounts of the data storage and recovery business in the first quarter of 2017 and had no revenues or operating expenses during this period.

Our P2O business is a commercial manufacturing and production business. We plan to grow mainly from sale of processors, and secondarily from the sale of fuel products. Historically, our revenues have been derived primarily from our other segments and products, including those noted above as discontinued operations.

Plastic2Oil Business

Our P2O business has elements of both a recycling business and a fuel refiner/ production business, which makes it difficult to identify and make direct comparisons to competitors. Both the recycling and energy sectors are characterized by rapid technological change. Our future success will depend on our ability to achieve and maintain a competitive position with respect to technological advances in both of these sectors. We believe that our business currently faces competition in the plastics-to-energy market, including competition from PK Clean, Vadxx Energy, Green Envirotec Holdings LLC, and RES polyflow, each of which has developed alternative methods for obtaining and generating fuel from plastics. Because P2O solution products include a variety of fuels, we also face competition from the broader petroleum industry.

We continue our business strategy with the goal of becoming a leading North American company that transforms waste plastic into ultra-clean, ultra-low sulphur fuel.

When in operation, we provide environmentally friendly solutions through our processors and technologies. Our primary offering is our Plastic2Oil®, or P2O®, solution, which is our proprietary process that converts waste plastic into fuel through a series of chemical reactions (our “P2O business”). We collect mainly mixed plastics from commercial and industrial enterprises that generate large amounts of waste plastic for use in our process.

Generally, this waste plastic would otherwise be sent to landfills and its disposal potentially can be quite costly for companies. We use this waste plastic as feedstock to produce Fuel Oil No. 2, Naphtha, and Fuel Oil No. 6 for various uses by our customers. We own our P2O processors and have the capability to produce and store the fuels at, and ship from, our facilities in Niagara Falls, New York. We sell the fuels we produce to customers through two main distribution channels, fuel wholesalers and directly to commercial and industrial end-users.

Our P2O processors have evolved to be modular solutions with the completion of processor #3 in 2013. We use third party contract manufacturers for the manufacture of many of the key modular components of our processors, including the kilns and distillation towers as well as certain other key components that require specialized machining and fabrication.

Our P2O business is a proprietary process that converts waste plastic into fuel through a series of chemical reactions. We began developing this process in 2009 and began very limited production in late 2010 following our receipt of a consent order from the New York State Department of Environmental Conservation (“NYSDEC”) allowing us to commercially operate our first large-scale P2O processor located at our Niagara Falls, New York facility. Currently, as of the filing of this report, these processors were idle for all of 2017 and remained idle for the nine months ended September 30, 2018. Our processors are capable of producing Naphtha, Fuel Oil No. 2 and Fuel Oil No. 6. Our P2O process also produces two by-products, a reusable off-gas similar to natural gas, and a petcoke carbon residue. We sell our fuel products to fuel wholesalers and directly to commercial and industrial end-users. We primarily use our off-gas product in our processing operations to fuel the burners in our P2O processors. Since inception, we have produced a total of 667,996 gallons of fuel, however no fuel was produced in the three and nine months ended September 30, 2018 and 2017.

Listing on the OTCQB

At September 30, 2018, we had 124,756,158 shares of common stock issued and outstanding. Our common stock is currently trading on the OTCQB marketplace in the United States of America under the stock ticker symbol “PTOI.” On November 14, 2018, the last trading day prior to the date of this filing, the closing price of the common stock on the OTCQB was $0.01.

Sources of Revenues and Expenses

Results of Operations – Three months ended September 30, 2018 compared to Three months ended September 30, 2017.

Revenue

We had no revenues during the three months ended September 30, 2018 and 2017. We have shifted our business strategy to attempting to license our intellectual property and technology related to our fuel processors, selling fuel processors and selling oil produced by our own P2O equipment.

We had no fuel production or processor sales in the three and nine months ended September 30, 2018. Consequently, there was neither fuel shipment nor fuel revenue. This was mainly due to management’s decision to shut down its production in the fourth quarter of 2013 due to the severe cold weather that caused damage to condensers and other components of our processors and the lack of operating cash. The damage requires substantial working capital for general repairs and replacement of damaged condensers and we have been unable to obtain the financing necessary to make these repairs. These processors were idle from December of 2014 through 2017 and remained idle through the date of this filing. Management estimates the processors will remain idle until the Company can raise additional capital. While, Management has recently raised some additional debt capital and is preparing plans to attempt to re-initiated limited production in one of its kilns of used oils and plastic films, no assurances can be made to the time and extent of capital that may be required to successfully accomplish this task.

The Company’s operating expenses consisted of the following:

Operating Expenses

We incurred operating expenses of $271,247 during the three months ended September 30, 2018, compared to $298,069 for the three months ended September 30, 2017, respectively. This decrease in operating expenses was materially due to a decrease in compensation, offset slightly by increases in professional fees and other expenses, along with a decrease in depreciation and accretion for a total reduction of approximately $26,822. The Company is currently attempting to minimize its operating expenses while it works to recapitalize the company.

Non-Operating Expenses

Interest Expenses

For the three months ended September 30, 2018, we incurred net interest expense of approximately $254,390 as compared to approximately $230,042 for the three months ended September 30, 2017, which were materially due to increases in related party secured promissory and short-term notes.

Income Tax Expenses

For the three months ended September 30, 2018 and 2017, we had no federal taxable income due to net losses and recorded a deferred tax asset and a valuation allowance to the extent that those assets are attributable to net operating losses. We recognized the valuation allowance because we are unsure as to the ability to use these assets in the near future due to continued operating losses

Net Loss

As a result of the above, we incurred a net loss of approximately $(525,637) for the three months ended September 30, 2018 as compared to a net loss of approximately $(528,095), for the three months ended September 30, 2017.

Results of Operations - Nine months ended September 30, 2018 compared to Nine months ended September 30, 2017.

Revenue

We had no revenues during the nine months ended September 30, 2018 and 2017. We have shifted our business strategy to attempting to license our intellectual property and technology related to our fuel processors, selling fuel processors and selling oil produced by our own P2O equipment.

We had no fuel production or processor sales in the nine months ended September 30, 2018. Consequently, there was neither fuel shipment nor fuel revenue. This was mainly due to management’s decision to shut down its production in the fourth quarter of 2013 due to the severe cold weather that caused damage to condensers and other components of our processors and the lack of operating cash. The damage requires substantial working capital for general repairs and replacement of damaged condensers and we have been unable to obtain the financing necessary to make these repairs. These processors were idle for all of 2014, through, 2017 and remained idle through the date of this filing. Management estimates the processors will remain idle until the Company can raise additional capital. While, Management has recently raised some additional debt capital and is preparing plans to attempt to re-initiated limited production in one of its kilns of used oils and plastic films, no assurances can be made to the time and extent of capital that may be required to successfully accomplish this task.

The Company’s operating expenses consisted of the following:

Operating Expenses

We incurred operating expenses of $898,832 during the nine months ended September 30, 2018, compared to $1,220,710 for the nine months ended September 30, 2017, respectively. This decrease in operating expenses was materially due to a decrease in professional fees, compensation, other expenses, along with depreciation and accretion for a total reduction of approximately $321,878. The Company is currently attempting to minimize its operating expenses while it works to recapitalize the company.

Non-Operating Expenses

Interest Expenses

For the nine months ended September 30, 2018, we incurred net interest expense of approximately $736,562 as compared to approximately $683,420 for the nine months ended September 30, 2017, which were materially due to related party secured promissory and short-term notes.

Income Tax Expenses.

For the nine months ended September 30, 2018 and 2017, we had no federal taxable income due to net losses and recorded a deferred tax asset and a valuation allowance to the extent that those assets are attributable to net operating losses. We recognized the valuation allowance because we are unsure as to the ability to use these assets in the near future due to continued operating losses.

Net Loss

As a result of the above, we incurred a net loss of approximately $(1,624,896) for the nine months ended September 30, 2018 as compared to a net loss of approximately $(880,457) for the nine months ended September 30, 2017.

Liquidity and Capital Resources

We do not have sufficient cash to operate our business, which has forced us to suspend our operations until such time as we receive a capital infusion or cash advances on the sale or license of our processors and or related technology. We intend to source additional capital through the sale of our equity and debt securities and other financing methods. We plan to use the cash proceeds from any financing to either complete the repairs on Processors #3 to resume production of fuels for pilot runs and customer demonstrations and or review other options including but not limited to licensing intellectual property and or pursuing other operational alternatives that may become available to management as we review the options available to the Company. At September 30, 2018, we had a cash balance of $94,342. Our principal sources of liquidity in 2018 were the proceeds of secured promissory notes and the elimination of the cash security we placed against our fuel oil sale tax bond.

As discussed earlier in this MD&A, our processors are currently idle and, thus, we are not producing fuel or generating fuel sales or processor sales. Our current cash levels are not sufficient to enable us to make the required repairs to our processors or to execute our business strategy as described in this Report. As a result, we intend to seek significant additional capital through the sale of our equity and debt securities and other financing methods to enable us to make the repairs, to meet ongoing operating costs and reduce existing liabilities. We also intend to seek cash advances or deposits under any new processor sale agreements and/or related technology licenses. Management currently anticipates that the processors will remain idle until the company can raise additional capital. While management has recently secured additional debt financing to attempt to re-initiate the limited production of processing used fuel oils and plastic films, management cannot determine if it will be successful and or if additional capital will be required to be successful. Due to the many factors and uncertainties involved in capital markets transactions, there can be no assurance that we will raise sufficient capital to allow us to resume operations in 2018, or at all. In the interim, we anticipate that our level of operations will continue to be nominal, although we plan to continue to market our P2O processors with the intention of making P2O processor sales and technology licenses, along with attempting to restart fuel oil processing.

Our limited capital resources, lack of revenue and recurring losses from operations raise substantial doubt about our ability to continue as a going concern and may adversely affect our ability to raise additional capital. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern

Liquidity and Capital Resources

We do not have sufficient cash to operate our business, which has forced us to suspend our operations until such time as we receive a capital infusion or cash advances on the sale or license of our processors and or related technology. We intend to source additional capital through the sale of our equity and debt securities and other financing methods. We plan to use the cash proceeds from any financing to either complete the repairs on Processors #3 to resume production of fuels for pilot runs and customer demonstrations and or review other options including but not limited to licensing intellectual property and or pursuing other operational alternatives that may become available to management as we review the options available to the Company. At September 30, 2018, we had a cash balance of approximately $94,342. Our principal sources of liquidity in 2018 were the proceeds of secured promissory notes and the elimination of the cash security placed against our fuel oil sale tax bond.

As discussed earlier in this MD&A, our processors are currently idle and, thus, we are not producing fuel or generating fuel sales or processor sales. Our current cash levels are not sufficient to enable us to make the required repairs to our processors or to execute our business strategy as described in this Report. As a result, we intend to seek significant additional capital through the sale of our equity and debt securities and other financing methods to enable us to make the repairs, to meet ongoing operating costs and reduce existing liabilities. We also intend to seek cash advances or deposits under any new processor sale agreements and/or related technology licenses. Management currently anticipates that the processors will remain idle until the company can raise additional capital. Due to the many factors and uncertainties involved in capital markets transactions, there can be no assurance that we will raise sufficient capital to allow us to resume operations in 2018, or at all. In the interim, we anticipate that our level of operations will continue to be nominal, although we plan to continue to market our P2O processors with the intention of making P2O processor sales and technology licenses, along with attempting to restart fuel oil processing.

Our limited capital resources, lack of revenue and recurring losses from operations raise substantial doubt about our ability to continue as a going concern and may adversely affect our ability to raise additional capital. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern

Cash Flow from Operating Activities.

Cash Flow from Operations

Cash used in operations was approximately $495,393 and $8,650 for the nine months ended September 30, 2018 and 2017, respectively. In 2018 and 2017 cash was mainly used to continue funding the minimum operating costs.

Cash Flow from Investing Activities

Cash flow provided from investing activities was approximately $100,524, and cash flow used by of $75, for the nine months ended September 30, 2018 and 2017, respectively, and was attributed to the release of a cash bond for fuel oil taxes that released the reserved cash for 2018.

Cash Flow from Financing Activities

Cash flow from financing activities was approximately $252,930 and $85,913, for the nine months ended September 30, 2018 and 2017, respectively. For 2018 and 2017, these amounts were mainly driven by the proceeds sale of property in Ontario, Canada and amounts received from short-term notes from related parties, respectively.

Off-Balance Sheet Arrangements

We had no off-balance sheet arrangements in the periods ended September 30, 2018 and 2017.

Critical Accounting Policies

Basis of Consolidation

The condensed consolidated financial statements include our accounts and the accounts of our wholly-owned subsidiaries, Plastic2Oil (Canada) Inc., JBI CDE Inc., Plastic2Oil, Re One Inc., and JBI Re #1 Inc., Plastic2Oil of NY #1, and Plastic2Oil Marine Inc.. The results of Javaco and Pak-It are consolidated and classified as discontinued operations for all periods presented. All of our intercompany transactions and balances have been eliminated on consolidation. Amounts in the consolidated financial statements are expressed in U.S. dollars.

Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates include amounts for impairment of long-lives assets, share based compensation, asset retirement obligations, inventory obsolescence, accrued liabilities and accounts receivable exposures.

Accounts Receivable

Accounts receivable represent unsecured obligations due from customers under terms requesting payments upon receipt of invoices up to ninety days, depending on the customer. Accounts receivable are non-interest bearing and are stated at the amounts billed to the customer net of an allowance for uncollectible accounts. Customer balances with invoices over 90 days old are considered delinquent. Payments of accounts receivable are applied to the specific invoices identified on the customer remittance, or if unspecified, are applied to the earliest unpaid invoice.

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:

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 and nine months ended September 30, 2018 and 2017, the Company recorded no impairment losses on property, plant and equipment,, 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 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 on the consolidated balance sheets and is depreciated over the asset’s estimated useful life and is included in depreciation and accretion expense in the unaudited condensed consolidated statements of operations. Increases in the asset retirement obligation resulting from the passage of time are recorded as accretion of asset retirement obligations in the unaudited condensed consolidated statements of operations. Actual expenditures incurred are charged against the accumulated obligations.

Environmental Contingencies

The Company records environmental liabilities at their undiscounted amounts on our consolidated balance sheets as other current or long-term liabilities when environmental assessments indicate that remediation efforts are probable and the costs can be reasonably estimated. These costs may be discounted to reflect the time value of money if the timing of the cash payments is fixed or reliably determinable and extends beyond a current period. Estimates of our liabilities are based on currently available facts, existing technology and presently enacted laws and regulations, taking into consideration the likely effects of other societal and economic factors, and include estimates of associated legal costs. These amounts also consider prior experience in remediating contaminated sites, other companies’ clean-up experience and data released by the Environmental Protection Agency (EPA) or other organizations. Our estimates are subject to revision in future periods based on actual costs or new circumstances. We capitalize costs that benefit future periods and we recognize a current period charge in operation and maintenance expense when clean-up efforts do not benefit future periods.

We evaluate any amounts paid directly or reimbursed by government sponsored programs and potential recoveries or reimbursements of remediation costs from third parties including insurance coverage separately from our liability. Recovery is evaluated based on the creditworthiness or solvency of the third party, among other factors. When recovery is assured, we record and report an asset separately from the associated liability on our balance sheet. No amounts for recovery have been accrued to date.

Revenue Recognition

The Company recognizes revenue when it is realized or realizable and collection is reasonably assured. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured.

P2O processor sales are recognized when the customer take possession of the processors since title to the goods and the risk of loss transfers from P2O to Customer upon delivery. P2O fuel sales are recognized when the customers take possession of the fuel since at that stage the customer has completed all prior testing necessary for their acceptance of the fuel. At the time of possession they have arranged for transportation to pick it up and the sales price has either been set in contract or negotiated prior to the time of pick up. The Company negotiates the pricing of the fuel based on the quality of the product and the type of fuel being sold (e.g. Naphtha, Fuel Oil No.6 or Fuel Oil No. 2).

Foreign Currency Translation

The consolidated financial statements have been translated into U.S. dollars in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 830. All monetary items have been translated using the exchange rates in effect at the balance sheet date. All non-monetary items have been translated using the historical exchange rates at the time of transactions. Income statement amounts have been translated using the average exchange rate for the year. Foreign exchange gains and losses are included in the consolidated statements of operations. Resulting differences are reflected in accumulated other comprehensive income in the accompanying consolidated balance sheets. Foreign exchange loss of approximately $45,612, and gain of approximately $88,091, for the three months ended September 30, 2018 and 2017, respectively for monetary items are included as general and administrative expenses in the condensed consolidated statements of operations. Foreign exchange gain of approximately $35,550, and loss of approximately $42,294, for the nine months ended September 30, 2018 and 2017, respectively for monetary items are included as general and administrative expenses in the condensed consolidated statements of operations

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

Disclosures About Market Risk

We may be exposed to changes in financial market conditions in the normal course of business. Market risk generally represents the risk that losses may occur as a result of movements in interest rates and equity prices. We currently do not use financial instruments in the normal course of business that are subject to changes in financial market conditions.

Currency Fluctuations and Foreign Currency Risk

We mainly operate in the United States and Canada. Due to the relative stability of the Canadian Dollar in comparison to the U.S. Dollar, we have not experienced foreign currency risk, however, should this stability change, we could be exposed to such risk.

Interest Rate Risk

We do not feel that we are subject to significant interest rate risk. We deposit surplus funds with banks earning daily interest at fixed rates and we do not invest in any instruments for trading purposes. Additionally, all of our outstanding debt instruments (our mortgage and capital leases) carry fixed rates of interests. We are exposed to opportunity risk should interest rates decrease. The amount of interest bearing short-term debt outstanding as of September 30, 2018 and December 31, 2017 was $8,162,572 and $7,304,262, respectively.

Credit Risk

Financial instruments, which potentially expose us to concentrations of credit risk, consist principally of operating demand deposit accounts and accounts receivable. Our policy is to place our operating demand deposit accounts with high credit quality financial institutions that are insured by the FDIC, however, account balances may at times exceed insured limits. We extend limited credit to our customers based upon their creditworthiness and establish an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends and other pertinent information.

We may maintain cash balances, at times, with financial institutions in excess of amounts insured by the Canada Deposit Insurance Corporation and the U.S. Federal Deposit Insurance Corporation. Management monitors the soundness of these institutions and has not experienced any collection losses with these financial institutions.

Inflation Risk

Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross margin and selling, general and administrative expenses as a percentage of net revenues if the selling prices of our products do not increase with these increased costs.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of September 30, 2018. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of September 30, 2018 our disclosure controls and procedures were ineffective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

The Company currently has just three directors, one of whom is member of executive management and not independent. The Company does not maintain separately designated audit, compensation, and nominating and corporate governance committees of the Board.

Changes in Internal Control over Financial Reporting

On April 18, 2018 the Company’s Chief Financial Officer resigned. The Company is currently undertaking a review to determine what course of action it may take in regards to filling this position given the Company’s current negative financial condition. Currently, the Chief Executive Officer has assumed the additional responsibilities of the Chief Financial Officer. The Company has retained a financial consultant to assist management in the preparation and review of its Exchange Act reports. The continuing deterioration of the financial condition of the Company along with the reduction of staffing continues to hamper the ability of management to ensure effective internal controls and unless the financial condition improves an effective remediation plan cannot be put into place to correct the current deficiencies. With the exception of the noted changes herein, there were no other changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Management has reported to the Board of Directors material weaknesses described herein and also under the heading Management’s Report on Internal Control over Financial Reporting” in Section 9A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

For a discussion of legal proceedings affecting the Company, see the information in Note 7, “Commitments and Contingencies,” to the financial statements, included in Part I of this Report.

Item 1A. Risk Factors

As a “smaller reporting company”, we are not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not Applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The exhibits required by this item are listed on the Exhibit Index attached hereto, which is incorporated herein by reference.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Item 6. Exhibit Index