Go now John, for thine people have corrupted themselves.
Lets just hope that when he comes back from SSCC with JVs in hand and sees the share price where it is, that he doesn't tear the contracts into pieces and leave shareholders to wander aimlessly on the OTC for years ;-)
JBI Inc Inks Second Supply Contract for NY Plastic2Oil Plant June 24, 2011 By Serious Speculator
JBI Inc, Plastic2OilThorold, Ontario (Serious Speculator – 06/24/2001) – On June 10, without fanfare, JBI, Inc (OTCQB: JBII) filed disclosure documents with the SEC revealing it had entered into an agreement with Coco Ashphalt Engineering, a division of Coco Paving to provide Coco with petroleum distillate for $109.80 per barrel or $2.614 per gallon. In May, the company disclosed that it had received a purchase order from Ocy Vinyl Canada Co to purchase 214 barrels per week of fuel oil for the same $109.80 per barrel. While we don’t know the volumes needed by Coco Paving, at the stated prices, the Ocy Vinyl contract alone represents $1,221,854 in annual revenues. Now we only need what the margin of profit is at $109.80 per gallon, if any. We expect to see this revealed throughout the rest of the year.
The Serious Speculator featured JBI, Inc in an article on December 17, 2010 and, given recent events, now seems to be a good time to revisit the company and update our readers on their progress. At the time we featured JBI, Inc, its stock was trading for around $.80 a share so those Serious Speculators who followed our advice and added JBII to their speculative portfolio have got to be feeling pretty good about things now that the stock is trading at around $4.
With a 500% increase, the question now becomes, “is this a good time to exit, hold or add to my position?” To try to gain some insight into this important question, we first took a look at the JBI, Inc 10K annual report for the year ending December, 31, 2010.
Looking at FY 2009 versus 2010, we see significant increases in revenues as JBI, Inc generated $12.4 million compared to $3.9 million in the prior year. Offsetting that positive, however is the fact that the cost of sales in both the Javaco and Pak-It subsidiaries showed a decrease in the margin. Cost of Sales in the case of Pak-It increased from about 17% of sales to over 33% and Javaco cost of sales increased from 32% to 45.8%. The increase was due in large part to the fact that both Javco and Pak-It were acquired during 2009 and the 20009 figures only represent a partial year for both subsidiaries.
According to company filings, the company has implemented significant improvements to internal processes, particularly in the Pak-It subsidiary which were not implemented until the first part of April. Still, the 10Q for the first quarter ending March 31, shows a significant reduction in cost of sales for Pak-It down to only 7% of sales, a marked improvement. Still, over the next few quarters, we will know if the changes implemented by CEO John Bordynuik, JBI Inc CEO will result in consistent improvement in margins, The next test will be when the company releases its 10Q for the quarter ending June 30 somewhere around August 15.
In another major development, JBI Inc announced on June 17 that the York State Department of Environmental Conservation (NYSDEC) has issued a Solid Waste Management and an Air State Facility permit for 3 Plastic2Oil(TM) processors in its Niagara Falls, NY facility. The air and 360 waste permits allow JBI to store, process, and convert waste plastic into fuel. All permits required to operate Plastic2Oil(TM) processors were issued. The facility has been operating since the first of the year on temporary permits pending the completion of the licensing process. Having secured supply contracts during the permitting process certainly speaks to an existing market demand and suggests the remainder of the year will provide Serious Speculators with a much better understanding of the future potential of this emerging business.
Based upon disclosure documents, there are 61,648,512 shares issued and outstanding as of the completion of JBI Inc’s most recent private placement. At $4, this results in a market cap for JBI, Inc stock of $246,594,048. Needless to say, this is a pretty hefty market cap, considering the stage of development we currently find JBI Inc in today. Still, the stock has managed to support the stock above $3 since early May and now appears relatively solid in the high $3's.
Another concern is that, despite the fact the stock has risen to the $4 level, JBI, Inc is still doing private placements at $.70 as evidenced by the recent sale of 6.4 million shares as disclosed in its June 7 Form 8K filing. This represents a discount of around 70% to market. While we recognize the need of an emerging company to raise capital to sustain growth, we think its appropriate for the ratio of private placements to market to remain somewhat stable absent mitigating factors. Historically, we have found that the rule of thumb for private placements on a stable stock is more in the vicinity of a 50% discount, the only thing we can conclude is that the investor was unwilling to accept the current value of the stock as fairly representing the value of the company and that John Bordynuik was willing to accept the investors valuation. Compare this to the $.50 private placement JBI Inc started in December and reported January 6 when the stock was trading between $.56 and $.93. This reality certainly gives us pause when considering an investment in the company at $4 a share.
Still, we don’t see evidence that insiders are taking advantage of the stock price and cashing in, despite reduced trading volume, and the stock appears somewhat stable. Accordingly, we think it might be wise for people holding the stock at a considerable gain, to take some of their principal off the table to reduce the risk and to hold the rest while watching for developments and the next 10Q and that new potential investors keep an eye on the stock to watch for meaningful developments or corrections where establishing an initial position might make a lot better sense.
While JBI Inc has a ways to go to give us the confidence that there’s nothing but upside ahead, recent accomplishments still suggest this is a company with a bright future and well worth watching for further developments.
Disclosure: We do not have an equity position, either long or short in JBI Inc stock nor have we been compensated in any way to write and publish this article. As always, consult a financial professional before investing in any stock.
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