Plastic2Oil Inc (PTOI)

[xxxxcslewis]

Symbol: JBII
Availability: 100'000
Exchanges: PINK

https://www.interactivebrokers.com/en/index.php?key=jbii&cntry=usa&tag=United+States&ib_entity=llc&ln=&asset=&f=4587&conf=am&amref=1

I am only permitted one post per day on this board, hence, with regret, I cannot respond should someone post a contrary view. I will attempt to address contrary points raised in future summary posts.

By way of full disclosure I am very long the stock and very confident of the companies success. I intend to continue to maintain my ownership in the company for a very long time. It is my intent that this summary post might be helpful to potential new investors.

The business plan for the company is to sell processors to third parties. The ideal third party will have access to sufficient plastic waste, either generated internally, or by consolidating waste plastic from other sources. It is not the plan to become profitable by producing and selling fuel.

The above strategy represents a change from the previous business plan. About two years ago the company raised funds to continue the development of the technology. Certain terms were required by that financing. Those terms happened to dovetail with a settlement with a SEC lawsuit involving an accounting issue in a previous acquisition.

As a result a new management team was put in place. John Bordynuik the company founder and the true force behind the technology was forced to step down as an officer or director of the company. There were other requirements as well.

Among the requirements was a side letter agreement requiring John Bordynuik to transfer to other investors his 1 million shares of preferred 100 to 1 voting rights stock if he did not comply with certain requirements. Also among the requirements, was a nominating a board of directors comprised of individuals meeting very difficult standards. It was an attempt to gain control of the company. Recently, with the approval of a majority of shareholders, that side letter is no longer effective and the shares have been returned to the company, effectively cancelling the shares.

The new management team put in place as a requirement of the May 2012 financing have all resigned as of last August 15 after a former director of the company, John Wesson, publicly exposed some of the efforts members of that management team had made to undermine the company. Those efforts included creating barriers for candidates for the new board of directors, intentionally paying premium prices for plastic waste that ultimately was simply sent to a landfill and bestowing upon themselves bonuses. There have been unsubstantiated rumors of kickbacks involving the purchases of the high cost waste plastic. The plastic waste inventory was written off in 2013.

Rich Heddle a long time investor in the company then assumed the position of CEO. Upon assuming that position Mr. Heddle invested an additional $3 million into JBII. That is also when the business plan was changed to the current plan. Rich Heddle has successfully built his company, Heddle Marine, from a two man operation into the largest company of its type on the Great Lakes in North America. It should be noted Rich Heddle has taken no salary to date. It should also be noted John Bordynuik took no salary until the May financing was in place and he was no longer either an officer or director of the company.

JBII successfully tested the new flagship processor in 2013. Production now apparently is only done to process plastic waste for potential waste plastic generators that may have an interest in purchasing processors.

There exists public information the company has priced the processors in the $8 million dollar vicinity and is negotiating with several potential buyers.

There are two nearly complete processors that could be shipped in a few weeks time should a purchase order be closed. A case can be made the estimated cost for the fabrication each processor is in the area of $1 million.

The case for a cost of $1 million reflects the analysis of financial statements and historical public statements. At the time the processor consisted of a single kiln. My recollection is the cost was stated at around $700,000 at that time. A second full kiln and a smaller kiln are now required. An estimated cost of around $1 million to $1.5 million seems reasonable. Others may disagree.

The processors will consist of two large kilns and a smaller half kiln. Each kiln is connected to the next by a seal. The kilns are not large units and can be seen on the JBI website. My ballpark estimate of the cost to fabricate all three kilns is $400k to $600k. There are towers that are used in the process, my guess is around $25K to $40K each. There are storage tanks for fuel produced and other purposes, perhaps $200K. Process control equipment is required. I'll ballpark that at $250K. Less than $1.4 to $2.0 million cost per processor looks to be the top end in my opinion.

That would result in a gross profit range for each processor sold of $6.0 to $7 million. A sale could be announced at any time.

It should be noted a buyer of processors will incur other costs. For example, a building may be required if there is not an existing area to house the processors and ancillary equipment. There will also be other costs associated with the material handling aspects, etc. A reasonable guess on the total investment required is probably on the order of $20 to $25 million for a two processor facility capable of handling 6000 to 8000 pounds of feedstock per hour. Having seen the operation of processor #3 it appears an operating staff of only 3 to 4 people per shift could easily operate a two processor facility.

There likely will be additional ongoing revenue to JBII for each processor sold by JBII for royalties, catalysts, software upgrades and for a maintenance contract.

It should be further noted the technology John Bordynuik has developed is the first financially viable capability that can solve a very large worldwide problem. Before it was developed the capability did not exist. It will take a period of time for the capability to be designed into the world economy. Some plastic waste can simply be shipped to a facility and processed. Crayola is an example. Even with Crayola it has taken around two years for the program to implemented. It is doubtful that program is finalized.

For now it makes sense for Crayola to collect and ship plastic waste from a PR standpoint. When processors are located in California, or Texas, or Florida, or Vancouver it will make much sense to ship to a local facility.

In other instances plastic waste will need to be handled differently. Municipal solid waste operations will likely need some modifications. All of that takes time. Think in terms of the impact of the cotton gin, steam engines, electricity, electric lights, automobiles, radio, television, computers, cell phones, and the internet, etc. that eventually took place. None happened overnight. Change does take some time. The first processor sale begins that change for the technology John has developed.

Beyond the simple economic realities, the is the fact that there are those in the waste industry that have a vested economic interests in preventing competition from a new superior technology from entering the market. There may also be others in the financial arena that may have similar concerns.

The company recently filed its 10-K for 2013. The former CFO assumed his position last August 15 when his predecessor left in the "Wesson" house cleaning. He was very young and did not possess sufficient experience for the office he had assumed. The young CFO at the time was moved into the job as he was familiar with the accounting that had been taking place and had been with the company several years. He was not picked by Mr. Heddle. He was a temporary replacement. He was replaced in March with a qualified new CFO. It should be noted the new CFO is accepting one third of his salary in stock.

The 10-Q for the first quarter has not yet been filed but recently the company indicated it will be filed shortly. The new CFO should be granted reasonable latitude in the performance of his job to be confident he releases information that will hold up to extensive scrutiny.

A significant development is the company will change its name and the company will obtain both a new cusip number and a new trading symbol. That may require a full accounting of outstanding shares. If the alleged naked short issue is a valid issue, the accounting could become very "problematic" for those allegedly short the stock.

There was also a recent business update. A major as yet unnamed national engineering firm will be installing, operating and maintaining processors. It appears JBI's new role will be to manage the fabrication of critical components, address specific feedstock issues, supply catalysts, and provide software updates.

As others have indicated it appears the sequence of events will be the filing of the Q-1 2014 10-Q, the naming of the national engineering company, the name, cusip and symbol change, the first sale of processors to a third party and the naming of the new members of the board of Directors.

It would seem a reasonable objective is for the Q-2 2014 filing to be done on time. That implies the Q1 and Q2 filings will be done no later than August 15 to August 20, possibly sooner. I anticipate the name of the engineering company likely released about that time as well and the company name change, etc. happens within days of the Q1 filing.

The real key is the announcement of the first sale of processors. Everyone can hazard their own guess on the timing of the announcement. The technology works. It is only a matter of time.

See the link below dated May 17, 2014 referencing Crayola and JBI, INC.

http://www.environment911.org/Crayolas_Commitment_to_Our_Environment_Colours_the_World