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EX-31.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - Plastic2Oil, Inc.f10q0310ex31ii_jbi.htm
EX-31.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - Plastic2Oil, Inc.f10q0310ex31i_jbi.htm
EX-32.1 - CERTIFICATION OF CHIEF EXECUTIVE OFFICER - Plastic2Oil, Inc.f10q0310ex32i_jbi.htm
EX-32.2 - CERTIFICATION OF CHIEF FINANCIAL OFFICER - Plastic2Oil, Inc.f10q0310ex32ii_jbi.htm


 
 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549
 
FORM 10-Q
 
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED MARCH 31, 2010

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD:  From ______________to ________________

000-52444
 
JBI, INC.

(Exact name of registrant as specified in its charter)
 
Nevada
 
20-4924000
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)
 
500 Technology Square, Suite 150
Cambridge, MA 02139
(Address of principal executive offices)
 
Copies of communications to:
 
Gregg E. Jaclin, Esq.
Anslow + Jaclin,  LLP
195 Route 9 South, Suite 204
Manalapan, New Jersey 07726
(732) 409-1212

Registrant’s telephone number, including area code: (905) 354-7222

Securities to be registered under Section 12(b) of the Act: None

Securities to be registered under Section 12(g) of the Act:

 
Title of each class to be so registered
Common stock, par value $.001
 
 
1

 
 
 
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes No x   
 
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes No x      
 
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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o No x

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 o No o
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
 
 
 
Large accelerated filer  o
Non-accelerated filer  o
    Accelerated filer  o
    Smaller Reporting Company  x
 
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act. Yes o No x

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date: As at July 13, 2010, there were 50,597,229 shares of Common Stock, $0.001 par value per share issued and outstanding.
 
Documents Incorporated By Reference –None
 
 
2

 
 
 
JBI, INC.
                                                                                                                        
 
Index    Page
     
Part I.    Financial Information  
   Item 1.  Financial Statements  
       
    Condensed Consolidated Balance Sheets – March 31, 2010 (Unaudited) and December 31, 2009  5
       
    Condensed Consolidated Statements of Operations – Three Month Periods Ended March 31, 2010 and 2009 (Unaudited) 6
       
    Condensed Consolidated Statements of Changes in Shareholders’ Equity - Three Month Period Ended March 31, 2010 (Unaudited)       7
       
    Condensed Consolidated Statements of Cash Flows – Three Month Periods Ended March 31, 2010 and 2009 (Unaudited)     8
       
    Notes to Condensed Consolidated Financial Statements (Unaudited)   9
       
   Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations 14
       
   Item 3. Quantitative and Qualitative Disclosures about Market Risk 21
       
   Item 4. Controls and Procedures 21
       
 Part II.  Other Information  
       
   Item 1. Legal Proceedings 23
       
   Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds 23
       
   Item 3. Defaults Upon Senior Securities 23
       
   Item 4. (Removed and Reserved) 23
       
   Item 5.  Other Information 23
       
   Item 6.   Exhibits 23
       
 Signatures   24
 
            
 
3

 
 
Introductory Note: Caution Concerning Forward-Looking Statements
This Form 10-Q Report and the Company’s other communications and statements may contain “forward-looking statements,” including statements about the Company’s beliefs, plans, objectives, goals, expectations, estimates, projections and intentions. These statements are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond the Company’s control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements. All forward-looking statements, by their nature, are subject to risks and uncertainties. The Company’s actual future results may differ materially from those set forth in its forward-looking statements. For information concerning these factors and related matters, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this Report, and the following sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009: (a) “Risk Factors” in Part I, and (b) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II. However, other factors besides those referenced could adversely affect the Company’s results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by the Company herein speak as of the date of this Report. The Company does not undertake to update any forward-looking statement, except as required by law.
 
Unless the context otherwise indicates, all references in this report to the “Company,” “JBI,” “we,” “us,” or “our,” or similar words are to JBI, Inc. and its subsidiaries.
 
 
4

 
Part I - FINANCIAL INFORMATION
 
Item 1. Financial Statements.
 
JBI, Inc. and Subsidiaries
 
             
CONSOLIDATED BALANCE SHEETS
 
             
March 31, 2010 and December 31, 2009
 
             
ASSETS
 
   
2010
   
2009
 
CURRENT ASSETS
           
Cash and cash equivalents
  $ 2,448,662     $ 26,307  
Escrow cash - attorneys' trust
    150,631       3,123,595  
Accounts receivable, net
    2,088,910       1,662,202  
Inventories
    1,029,324       1,414,813  
Prepaid expenses
    119,341       51,549  
                 
                 
TOTAL CURRENT ASSETS
    5,836,868       6,278,466  
                 
PROPERTY AND EQUIPMENT
               
Leasehold improvements
    481,773       473,609  
Machinery and office equipment
    1,220,249       572,295  
Vehicles
    12,325       12,325  
Furniture and fixtures
    17,679       17,679  
      1,732,026       1,075,908  
Less accumulated depreciation and amortization
    (169,544 )     (101,120 )
                 
NET PROPERTY AND EQUIPMENT
    1,562,482       974,788  
                 
OTHER ASSETS
               
                 
  Restricted Cash
    144,500       144,500  
  Other Assets
    194,234       64,116  
  Deposits
    9,420       10,014  
  Goodwill
    5,179,249       5,179,249  
                 
 TOTAL OTHER ASSETS
    5,527,403       5,397,879  
                 
TOTAL ASSETS
  $ 12,926,753     $ 12,651,133  
                 
                 
LIABILITIES AND SHAREHOLDERS' EQUITY
 
                 
CURRENT LIABILITIES
               
Accounts payable
  $ 1,377,472     $ 1,066,949  
Accrued expenses
    203,290       225,420  
Income taxes payable
    159,661       159,661  
Deferred income taxes
    60,903       60,903  
                 
TOTAL CURRENT LIABILITIES
    1,801,326       1,512,933  
                 
                 
                 
EQUITY
               
Common Stock, par $0.001; 150,000,000 authorized, 50,018,450
               
      and 69,453,840  issued and outstanding at March 31, 2010
               
       and December 31, 2009, respectively
    50,019       69,454  
Common Stock Subscribed, 100,000 and 1,022,410 shares at cost at
               
       March 31, 2010 and December 31, 2009 respectively
    80,000       817,928  
Stock subscriptions receivable
    (80,000 )     (817,928 )
Preferred stock, par $0.001; 5,000,000 authorized, 1,000,000 issued and
               
      outstanding at March 31, 2010 and December 31, 2009
    1,000       1,000  
Additional Paid in Capital
    16,680,303       13,377,032  
   Accumulated deficit
    (5,605,895 )     (2,309,286 )
                 
                 
      11,125,427       11,138,200  
                 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
  $ 12,926,753     $ 12,651,133  
                 
The accompanying notes are an integral part of the consolidated financial statements.
 
5

 
 
 
JBI, Inc. and Subsidiaries
 
             
CONSOLIDATED STATEMENTS OF OPERATIONS
 
             
Three Month Periods Ended March 31, 2010 and 2009
 
             
             
   
2010
   
2009
 
             
NET SALES
           
Pak-It
  $ 1,552,737     $ -  
Javaco
    1,994,573       -  
Other
    26,120       -  
      3,573,430       -  
COST OF SALES
               
Pak-It
    1,534,036       -  
Javaco
    1,721,007       -  
Other
    5,183       -  
      3,260,226       -  
                 
GROSS PROFIT
    313,204       -  
                 
OPERATING EXPENSES
               
Compensation Paid in Stock
    2,369,900        -  
Other Operating Expenses
    1,262,231       4,056  
                 
TOTAL OPERATING EXPENSES
    3,632,131        4,056  
                 
LOSS FROM OPERATIONS
    (3,318,927 )     (4,056 )
                 
                 
OTHER INCOME (EXPENSE)
               
Interest expense, net
    (1,825 )     -  
Other income (expense), net
    24,143       -  
                 
OTHER INCOME (EXPENSE), NET
    22,318       -  
                 
                 
LOSS BEFORE INCOME TAXES
    (3,296,609 )     (4,056 )
                 
                 
INCOME TAX PROVISION
    -       -  
                 
                 
NET LOSS
  $ (3,296,609 )   $ (4,056 )
                 
Basic & diluted net loss per share
  $ (0.052 )   $ (0.000 )
                 
Weighted average number of common shares outstanding
    63,673,210       63,700,000  
                 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
6

 
 
JBI, Inc. and Subsidiaries
 
                                                             
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
 
                                                             
Three Month Period Ended March 31, 2010
 
                                                             
                                                             
                                                             
                                                             
                                                             
   
Common Stock
   
Common Stock
   
Stock
   
Preferred Stock
   
Additional
         
Total
 
   
$0.001 Par Value
   
Subscribed
   
Subscriptions
   
$0.001 Par Value
   
paid in
   
Retained
   
Shareholders'
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Receivable
   
Shares
   
Amount
   
Capital
   
Earnings
   
Equity
 
                                                             
BALANCE - DECEMBER 31, 2009
    69,453,840     $ 69,454       1,022,410     $ 817,928     $ (817,928 )     1,000,000     $ 1,000     $ 13,377,032     $ (2,309,286 )   $ 11,138,200  
                                                                                 
Common stock retired
    (21,000,000 )     (21,000 )     -       -       -       -       -       21,000       -       -  
                                                                                 
Shares issues for compensation
    404,700       405                                               2,369,495               2,369,900  
                                                                                 
Shares issued and subscribed for in connection with private placement, $0.80 per share, net of issuance costs of $13,992
    1,259,910       1,160       (922,410 )     (737,928 )     737,928       -       -       912,776       -       913,936  
                                                                                 
Net loss
    -       -       -       -       -       -       -       -       (3,296,609 )     (3,296,609 )
                                                                                 
Balance - March 31, 2010
    50,118,450     $ 50,019       100,000     $ 80,000     $ (80,000 )     1,000,000     $ 1,000     $ 16,680,303     $ (5,605,895 )   $ 11,125,427  
                                                                                 
                                                                                 
                                                                                 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
 
7

 
 
JBI, Inc. and Subsidiaries
 
             
CONSOLIDATED STATEMENTS OF CASH FLOWS
 
             
Three Month Periods Ended March 31, 2010 and 2009
 
             
             
             
             
   
2010
   
2009
 
             
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (3,296,609 )   $ (4,056 )
Adjustments to reconcile net loss to net cash
               
used in operating activities:
               
Depreciation and amortization
    69,018       -  
Provision for uncollectible accounts
    53,000       -  
Common shares issued for services
    2,369,900       -  
Changes in:
               
Accounts receivable
    (479,708 )     -  
Inventories
    385,489       -  
Prepaid expenses, deposits and other
    (197,910 )     -  
Accounts payable and accrued expenses
    288,393       250  
                 
NET CASH USED IN  OPERATING ACTIVITIES
    (808,427 )     (3,806 )
 
               
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Decrease in escrow cash
    2,972,964       -  
Acquisition of property and equipment, net
    (656,118 )     -  
                 
NET CASH PROVIDED BY  INVESTING ACTIVITIES
    2,316,846       -  
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from issuance of common stock
    927,928       -  
Direct offering costs
    (13,992 )     -  
                 
NET CASH PROVIDED BY FINANCING ACTIVITIES
    913,936       -  
                 
                 
NET CHANGE IN CASH AND CASH EQUIVALENTS
    2,422,355       (3,806 )
                 
                 
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    26,307       3,806  
                 
                 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
  $ 2,448,662     $ -  
                 
 
The accompanying notes are an integral part of the consolidated financial statements.
 
8

 
 
NOTES TO FINANCIAL STATEMENTS

NOTE 1 – BASIS OF PRESENTANTION  
 
These consolidated financial statements include the accounts of the JBI, Inc. and its wholly owned subsidiaries, Javaco, Inc., Pak-It, LLC, JBI (Canada), Inc., JBI RE #1, Inc., JBI RE One, Inc., Plastic2Oil Land, Inc. and Plastic2Oil Marine, Inc. (the “Company”).   All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q of the Securities and Exchange Commission (the “Commission”). Accordingly, certain information and footnote disclosures required in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. Interim statements are subject to possible adjustment in connection with the annual audit of the Company’s accounts for the year ended December 31, 2010. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all necessary adjustments (consisting only of normal recurring adjustments) which the Company considers necessary for the fair presentation of the Company’s consolidated financial position as of March 31, 2010 and the results of its operations, cash flows and changes in stockholders’ equity for the three month periods ended March 31, 2010 and 2009. Results for the three months ended are not necessarily indicative of results that may be expected for the entire year. The unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company and notes thereto as of and for the year ended December 31, 2009 as included in the Company’s Form 10-K/A as filed with the commission on July 9, 2010.
 
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
The Company has disclosed its significant accounting policies in “Note 2: Significant Accounting Policies” in the Notes to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2009. The following significant accounting policies provide an update to those included under the same captions in the Company’s Annual Report on Form 10-K/A.

Estimates

The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. The most significant estimates relate to Goodwill, the value of assets and liabilities acquired, valuation of inventory, and the allowance for uncollectible accounts receivable. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant.

Impairments

If the carrying value of an asset, including goodwill and identifiable intangible assets exceeds the sum of estimated undiscounted future cash flows, an impairment loss is recognized for the difference between estimated fair value and carrying value. Management assesses assets for recoverability at least annually, or whenever changes in circumstances indicate that an asset’s carrying amount may not be recoverable
 
 
9

 

Goodwill

Goodwill resulted primarily from business acquisitions. In accordance with accounting rules, goodwill is not amortized, but is subject to an annual impairment test, which the Company performs in the 4th quarter. The Company evaluates the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The fair value of the reporting unit is estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value.  The Company does not believe that the current quarter operating loss has a negative impact on the current Goodwill valuation.
 
Accounts Receivable

Accounts receivable represents unsecured obligations due from customers under terms requesting payments upon receipt of invoice 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 allocated to the specific invoices identified on the customer remittance, or if unspecified, are applied to the earliest unpaid invoice.

The allowance for uncollectible accounts reflects management’s best estimate of amounts that may not be collected based on an analysis of the age of receivables and the credit standing of individual customers.  Accounts receivable determined to be uncollectible are recognized using the allowance method.  The allowance for uncollectible accounts at March 31, 2010 was $112,000 and $59,000 at December 31, 2009.

Revenue Recognition

The Company recognizes revenue when it is realized or realizable and earned less estimated future doubtful accounts.  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.
 
Earnings 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.  There were no potentially dilutive shares outstanding as of March 31, 2010.
 
Research and Development

All research, development, and engineering costs are expensed when incurred.
 
Fair Value of Financial Instruments
 
The carrying value of cash and cash equivalents, accounts receivable and accounts payable approximate their fair value due to their short-term nature.
 
 
10

 
 
Recent Accounting Pronouncement
 
Improving Disclosures about Fair Value Measurements (Accounting Standards Update 2010-06)
 
In January 2010, the FASB issued ASU 2010-06, “Fair Value Measurements and Disclosures (Topic 820)—Improving Disclosures about Fair Value Measurements,” to require additional disclosures about transfers into and out of Levels 1 and 2 and separate disclosures about purchases, sales, issuances, and settlements relating to Level 3 measurements. The standard also clarifies existing disclosures about the level of disaggregation, valuation techniques and inputs to fair value measurements. As this standard only affects disclosures related to fair value, the adoption of this standard did not have a material effect on the Company’s consolidated balance sheets, results of operations, or cash flows.

NOTE 3 – EQUITY TRANSACTIONS
 
Through January 14, 2010, the Company consummated a confidential private placement with certain accredited investors for the issuance and sale of 8,439,893 shares of the common stock.  The offering was at $0.80 and the gross proceeds received by the Company were $6,751,914.    The total shares issued pursuant to the offering was 8,439,893. As a result of the private placement the Company paid all debt (except normal recurring accounts payable and accruals) and added in excess of $3.1 million in available cash.

The Company issued 404,700 shares as compensation during the quarter.  Of these, 4,700 were issued to employees of Pak-It, 100 shares per employee, on January 7, 2010.  On February 25, 2010, the Company issued a total of 400,000 shares to 5 key employees and consultants as bonuses and for past services.  All shares were valued at the closing share price on the respective issue dates and were reported as operating expenses in the statement of operations.
 
NOTE 4 – BUSINESS COMBINATIONS
 
During 2009, the Company acquired Javaco and Pak-It, and had completed internal valuations to support the allocation of the purchase price and the enterprise value of the entities. The Company expects to have third party valuations done on the subsidiaries of Javaco and Pak-It during 2010 but management does not expect the valuations to be materially different from those previously performed by Management.  Any difference will be adjusted when the valuations are completed and recorded as a current period charge as needed.

NOTE 5 – SEGMENT REPORTING
 
During the quarter, the Company had three principal operating segments, Data, Pak-It, and Javaco.

These operating segments were determined based on the nature of the products and services offered. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision-maker in deciding how to allocate resources and in assessing performance. The Company’s chief executive officer has been identified as the chief operating decision maker, and directs the allocation of resources to operating segments based on the profitability and cash flows of each respective segment.

The Company evaluates performance based on several factors, of which the primary financial measure is net income. The accounting policies of the business segments are the same as those described in “Note 2: Summary of Significant Accounting Policies.” Intersegment sales are accounted for at fair value as if sales were to third parties. The following tables show the operations of the Company’s reportable segments for the three months ended March 31, 2010:
 
 
11

 
 
                                                                                                        
          
   
 JBI 
(P2O and Data)
    Pak-It     Javaco     Total  
                         
Net sales
  $ 26,120     $ 1,552,737     $ 1,994,573     $ 3,573,430  
Net income/ (loss)
  $ (2,709,931 )   $ (644,867 )   $ 58,189     $ (3,296,609 )
Total assets
  $ 2,938,069     $ 5,573,873     $ 4,414,811     $ 12,926,573  
Accounts receivable
  $ -     $ 624,643     $ 1,464,267     $ 2,088,910  
Inventories
  $ -     $ 585,305     $ 444,019     $ 1,029,324  

 
Information as to the Company’s quarterly sales in different geographical areas is as follows:

       
Net Sales:
     
 United States
  $ 2,267,429  
 Mexico
    454,114  
 Peru
    502,656  
 Costa Rica
    349,231  
    $ 3,573,430  

Sales are attributable to geographic areas based on location of customer. Neither the Company nor any of its segments depends on any single customer, small group of customers, or government for more than 10% of its sales.

Also, because a substantial portion of the Company’s sales are derived from the sales of product manufactured in the United States, long-lived assets located outside the United States are less than 10%.
 
Segment information for the three months ended March 31, 2009 was not significant to the financial statements.
 
NOTE 6 – RELATED PARTY TRANSACTIONS
 
The President and CEO returned 21 million shares of Common stock in March 2010.
 
NOTE 7 – COMMITMENTS AND CONTINGENCIES

The Company is not a party to any legal proceedings, there are no known judgments against the Company, nor are there any known actions or suits filed or threatened against it or its officers and directors, in their capacities as such.   We are not aware of any claims against the Company or any reputed claims against it at this time except for claims of two former employees of the Pak-It subsidiary. These former employees have alleged that certain monies are due them pursuant to their employment agreements and the Company has retained legal counsel to handle the claims.  The amounts of the claims are deemed immaterial to the Company.

The Company signed and Area Development Agreement in February with AS PTO, LLC.  This agreement is contingent upon the issuance of an air permit for the Company’s P2O processor in New York.  Failure to obtain the air permit makes the agreement null and void.

The Company has employment agreements with its officers and key employees that provide for minimum compensation and severance payments due upon termination.
 
 
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NOTE 8 – SUBSEQUENT EVENTS
 
The Company has evaluated subsequent events occurring after the balance sheet date and has identified the following:

In May, 2010 the Company formed a wholly-owned New York limited liability company, Plastic2Oil of NY #1, LLC, to operate the P2O operations and R&D functions at the Niagara Falls, NY facility.

In May, 2010, the Company consummated a confidential private placement with certain accredited investors for the issuance and sale of 1,000,000 shares of common stock, $0.001 par value per share at per share price of $4.00.  The gross proceeds received by the Company in the amount of $1,915,116 for the sale of 478,779 shares will be utilized for the implementation of the Company’s business plan regarding commercial deployment of the P2O process in the U.S., Canada and Europe.

In May, the Board of Directors approved compensation for its independent members.  Compensation includes the one-time issuance of restricted stock and annual stock options for which the strike price will be set each year.

On May 19, 2010, the Company executed an Employment Agreement with CEO John Bordynuik which takes effect upon issuance of an air permit for the Company’s P2O processor.  The agreement provides for minimum annual compensation as well as the issuance of stock options contingent upon the achievement of certain milestones, none of which have been met as of July 16, 2009.

On June 17, 2010, the Company purchased a building to be used as a corporate office. The purchase price was $369,769.  The Company put $97,308 down and the vendor took back a five-year mortgage for $272,461 at an interest rate of 7%.  The mortgage is denominated in Canadian dollars and will fluctuate based on the exchange rate in effect.

On June 29, 2010, the Company was notified by FINRA that the Company stock was not eligible for quotation on and would be removed from the OTC Bulletin Board, due to its delinquency in filing this Form 10-Q. 
 
 
 
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
 
JBI, Inc. (“JBI” or the “Company”) was originally incorporated on April 20, 2006 in the State of Nevada as 310 Holdings Inc. (“310”). 310 had no significant activity from inception through March 2009. In April 2009, John Bordynuik purchased 63% of the issued and outstanding shares of 310, and was subsequently appointed President and CEO of the Company.

During 2009, JBI acquired three revenue sources, and began researching opportunities for continued expansion and development.

During June, 2009, the Company purchased certain assets of John Bordynuik, Inc. (“Data”), a Delaware corporation.  The assets acquired from Data included custom tape drives, computer hardware, servers, and a mobile data recovery container to read and transfer data from computer tapes.

During August 2009, the Company purchased 100% of the outstanding shares of Javaco, Inc. (“Javaco”). Javaco distributes over 100 lines of equipment including fiber optic transmitters and radio frequency connectors used in the telecommunications industry.

During September, 2009, the Company purchased 100% of the membership interests of Pak-It, LLC (“Pak-It”).   Pak-It manufactures cleaning chemicals, and owns a patent that allows for delivery of condensed cleaning chemicals in water soluble film, most often currently used in industrial cleaning operations.  All U.S. Home Depots are cleaned using Pak-It products. Pak-It expects to expand into retail markets during the third quarter of 2010.
 
The Company currently owns three P2O processing machines. The Company believes that these machines are capable of converting waste plastic to oil through a process using a chemical catalyst.   One machine is a 20 metric-ton (20T) processor intended for commercial use.  The other two machines are smaller prototypes intended for research and development purposes.  The Company intends to assemble more of these machines, which it will own and manage itself, or license them to commercial operators in the United States, Canada and elsewhere.  Through a joint venture with a third party, the Company plans to install machines intended for international use on ships that will travel overseas.  The machines have undergone extensive testing to determine whether, among other things, they satisfy air quality standards enforced by the New York Department of Environmental Conservation (“DEC”).  To date, test results indicate that the machines comply with these standards.   The Company is operating its large processor to gather data for a DEC air permit to allow full commercial production.
 
 
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During February, 2010, the Company formed two Nevada corporations as wholly owned subsidiaries: Plastic2Oil Land, Inc., and Plastic2Oil Marine, Inc. to operate Plastic2Oil (“P2O”) operations on land and sea, respectively.  The  Company hopes to begin commercial operations of converting waste plastic to oil in the third quarter of 2010.  In addition, the Company entered into its first Area Development Agreement with AS PTO, LLC to promote licensing and P2O operations in Florida using a combination of Joint Ventures (JV’s) and Company owned sites.  In February, Plastic 2 Oil of Clearwater 1, LLC (a Delaware LLC) was formed as a joint venture and a licensing agreement was executed with members Plastic2Oil Land, Inc., AS PTO, LLC and ES Resources, LLC. We are presently negotiating an agreement with former management team of Pak-It to roll out P2O in Florida.  These ongoing discussions could potentially result in further agreements covering additional geographical areas.
 
During February, 2010, the Company formed a wholly owned New York corporation, JBI RE #1, Inc. to secure an industrial building in Niagara Falls, NY.  This building will house the first commercial operation of the P2O entities. During February, 2010, the Company formed a wholly-owned Ontario corporation, JBI (Canada), Inc., to produce, market and sell the Pak-It™ products in Canada.  During February, 2010, the Company formed a wholly owned Ontario corporation, JBI RE One, Inc., to purchase an industrial building in Thorold, Ontario.

In May, 2010 the Company formed a wholly-owned New York limited liability company, Plastic2Oil of NY #1, LLC, to operate the P2O operations and R&D functions at the Niagara Falls, NY facility.

Products and Competition

The data migration business faces competition from industry specialists who may seek to develop 7 & 9 track computer-reading technologies to gain access to data that has not been recoverable to date.

Javaco operates in a very competitive environment in the distribution of fiber optic transmitters and RF connectors. Competition in Mexico and South America can come from local and international suppliers of similar technologies and products. As Javaco adds new lines of products, it faces new risks and competition associated with diversifying its product offerings.

Pak-It provides an innovative, technological approach to chemicals, both in terms of portion control solutions and product breadth that constantly seeks to improve quality and consistency.  

Pak-It™ uses patented technology to deliver liquid cleaner in a water soluble sachet. The products are fully biodegradable and much easier to ship than bulky liquid products. The user simply adds water to the container without measuring or cutting the Pak-It™.  Large retailers (like Home Depot and Office Depot) and many national Building Service Contractors already using the product have documented significant cost savings from shipping, training, inventory controls and space utilization.
 
 
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Pak-It also produces private label liquid cleaning supplies for a variety of well known companies, including a retail marine supply company and an international company that sells Pak-It’s with its pressure washers. Pak-It also provides an operational focus on logistics that offers individual “kits” designed to meet specific cleaning requirements, delivered directly to each location, while remaining flexible toward meeting other customer needs.

The renewable energy sector and recycled products sectors are highly competitive. Plastic2Oil is in the process of commercializing its processor and catalyst technologies and there is risk associated with being a new entrant into the alternative energy sector. Profitability in the Plastic2Oil business will depend largely on the access to waste plastic feedstock where prices can fluctuate significantly. Plastic2Oil faces competition from other recycling solution products for access to feedstock in addition to facing competition from the traditional refined products industry.

Plan of Operations

Overview

Management began executing its business plan in 2009 by acquiring three revenue generating sources in 2009 and concentrating R & D resources on scaling P2O for an anticipated launch in 2010. Detailed summaries of each acquisition and P2O are described in detail below.
 
Through recruiting efforts and these acquisitions, management believes that it has quickly assembled an experienced team of professionals that will allow the Company to grow both organically (within each subsidiary) and through synergistic acquisitions that have a demonstrated propensity towards being eco-friendly.
 
The company believes that both private and public entities will see the environmental benefit, positive cost analysis, and potential savings from unnecessary disposal of waste plastic using Plastic2Oil, which will provide incentives for expansion of sites.   By offering “green” products and continuing to use its proprietary technologies the Company hopes to create solutions to enormous problems.  From Pak-It™ products, where we save fuel by “not shipping water”, to Plastic2Oil where we will create fuel from what is currently a costly plastics disposal problem, the Company believes it is well positioned for growth.
 
In addition to the management expertise that came with the acquisitions, the Company hired Ronald C. Baldwin, Jr. as CFO and Jacob Smith as COO.  These seasoned executives have already identified areas for improvement and have acted to make the acquisitions more profitable.

For instance, on or about January 20, 2010, Pak-It reduced its workforce from 49 to 36 employees as part of a corporate restructuring of the bulk cleaning component of the business.  The Company’s Chief Operating Officer, Jacob Smith, is overseeing the transition of the plant from primarily a labor intensive bulk chemical manufacturing company to a highly automated plant focused on production of our line of water soluble chemical Pak-Its.  The automation being put in place will allow the Company to operate more efficiently as well as satisfy the production rate necessary to support our national retail launch.

Significant Developments and Strategic Actions

In April 2009, John Bordynuik purchased 63% of the issued and outstanding shares of 310 Holdings on April 24, 2009. Subsequently, John Bordynuik was appointed President and CEO of the Company.

On August 24, 2009, the Company acquired Javaco, Inc.(“Javaco”), for its know-how in world-wide communications and its business experience in Mexico and South America. Management hopes to utilize Javaco’s expertise to launch Plastic2Oil sites in Mexico and South America and to develop a secure communications infrastructure between the Plastic2Oil sites and the Company.  Javaco currently distributes over 100 lines of equipment from fiber optic transmitters to RF connectors. To further enhance business in the United States, new distribution lines are frequently being added including a line of home theater and audio video products.
 
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On September 30, 2009, the Company acquired Pak-It, LLC, a Florida limited liability company. Pak-It operates two business units: 1) a bulk chemical processing, mixing, and packaging facility, and 2) a patented delivery system that packages condensed cleaners in small water-soluble packages. The acquisition of Pak-It, LLC was primarily driven by the Company’s desire to access the experience that the Pak-It management team has in chemistry, marketing, sales, operations, and finance. The Pak-It team was used to centralize JBI’s accounting in Clearwater, Florida for controls and reporting.  Management intends to utilize the Pak-It team to help grow all of the Company’s business segments, including the Philadelphia plant, which is expected to perform the following:

·  
Bulk packaging facility will mix and package the catalyst used in the Plastic2Oil process.
·  
Continue to manufacture Pak-It™ water-soluble sachets and assist in setting up Canada operations for manufacturing and sale of Pak-It products in Canada.
·  
To sell cleaners using Pak-It technology in the retail market.

The Company has also been focusing on restructuring the Philadelphia plant and revised the business plan for growth into the retail market. Management is going forward with a full retail rollout of Pak-It products. The company engaged Western Creative Inc. on January 12, 2010 to assist in planning and marketing the retail launch. In anticipation of increased demand for product from the retail launch, management is also reconfiguring the plant and updating its equipment.

We also procured a 20 MT (metric ton) Plastic2Oil Processor and are now developing all aspects of the process from procurement, to automated systems of feeding, processing, and collecting oil.   IsleChem was engaged by the Company on December 9, 2009 to verify the Company’s Plastic2Oil process. During 40 runs of tests, IsleChem was able to isolate the conditions that allowed the process to run optimally and provide engineering support to gather data to apply for a New York state DEC air permit. IsleChem verified our Plastic2Oil process is scalable and repeatable.

In 2010, the Company assembled its 20T Plastic2Oil processor at its P2O factory in Niagara Falls, NY. The Company purchased a shredder and granulator to preprocess bulk plastic. A complete automation system with 63 sensors was installed on the Plastic2Oil processor for control, data logging, and management. The processor was run to gather operational steady state data for a stack test. Oxygen sensors supplied by a major US sensor manufacturer failed when exposed to the process over time and delayed our permit application process. A number of oxygen sensors were tested until a suitable replacement was found. Sensors on the processor are now functioning properly.

A minor by-product of the process is an off-gas much like natural gas. The process consumes much less off-gas to operate than is generated when operating at maximum capacity. Further testing at high processing rates proved that all the off-gas could not be burned (temporarily for a stack test) in the process furnace. Flaring the excess off-gas is common in the oil and gas industry but is not environmentally friendly, would waste the fuel value, and would require a separate permit. To avoid flaring the excess gas, the Company purchased a gas compression system to buffer and regulate the off-gas to 1) resell or 2) to cold start the process. The gas compression system and mobile storage tanks were installed on the Company’s 20T Plastic2Oil processor in June, 2010.

In May 2010, IsleChem engineered and had manufactured a simple solution to separate diesel and gasoline fractions into separate fuel tanks to remove the gasoline fraction from our diesel-like fuel. IsleChem is presently testing this solution with various plastic feedstock and, if viable, it will be scaled to work on our 20T Plastic2Oil processor. The Company will not delay work and testing for an air permit by waiting for a large scale gas/diesel separator.

On December 22, 2009, the Company and Rick Heddle agreed to a Joint Venture whereby Heddle Marine Service, Inc. will retrofit ships with P2O processors. The Company is now finalizing a JV Agreement for production of its first P2O ship with Heddle. JBI anticipates contracting with various countries to convert their plastic waste into oil. Also, JBI has signed a Letter of Intent for the establishment of an Area Development Agreement (ADA) for 45 P2O sites in the State of Florida with AS PTO, LLC, an entity controlled by Al Sousa of Largo, Florida.  Both Heddle and Sousa have strong management capabilities and are expected to be essential to the scaling up of a nationwide P2O launch.
 
 
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JBI continues to maintain its data recovery and migration business through the use of its tape drives. It currently has a mobile data container that can be deployed to transfer data onsite for customers with highly sensitive data. It acquired tape drives, servers, and the mobile data container through the acquisition of certain assets from John Bordynuik, Inc.  The Company has a large backlog of tapes to be migrated and is seeking strategic partnerships with international companies that will allow the Company to realize tape revenues faster, thereby decreasing the backlog.

The Company’s change of auditors and appointment of WithumSmith + Brown, PC as the Company’s new independent registered public accounting firm on May 14, 2010 contributed to a delay in filing the Company’s Form 10-Q for the quarter ended March 31, 2010.  As a result of this delay, on approximately May 25, 2010 the FINRA staff notified the Company that it if it did not file this Form 10-Q by June 24, 2010, its common stock would become ineligible for quotation on, and would be removed from, the OTC Bulletin Board. On approximately June 29, 2010, the FINRA staff notified the Company of its determination that its stock was ineligible for such quotation.  The Company appealed the FINRA staff’s removal determination to a hearing officer, who has not yet ruled on the appeal.  The Company believes that, as of the date of this filing, its stock is again eligible for such quotation, and further believes that a FINRA member firm will file a Form 211 seeking authorization to initiate or resume quotations of the Company’s stock on the OTC Bulletin Board.  At this time, the Company does not know whether its stock will continue to be quoted on the OTC Bulletin Board.

Results of Operations

Quarter ended March 31, 2010 compared to March 31, 2009

For the quarter year ended March 31, 2010, we generated $3,573,430 in revenues, and incurred a net loss of $3,296,609, of which $2,369,900 was attributable to shares issued to various JBI Inc. employees as stock compensation. These share issues were expensed by the Company even though they did not cause any dilutive impact for existing shareholders due to the return of 21 million shares to treasury from the CEO's personal shares.  We had no significant activity during the quarter ended March 31, 2009.

Revenue Sources

We derive revenues from the sale of bulk cleaning chemicals and patented cleaning solutions in water soluble sachets through our Pak-It subsidiary, which comprised $1.5 million of total revenues during the quarter ended March 31, 2010.

Additionally, we derive revenues through Javaco through the sales and distribution of electronic components marketed in Mexico and Latin America, which comprised $2.0 million of total revenues during the quarter ended March 31, 2010.

Finally, we generate sales through reading high volume legacy data computer tapes for large institutions and corporations.  We expect that the commercial launch of Plastic2Oil will result in sales of the product produced by our 20T units.

Operating Expenses

The major source of operating expenses for the quarter was the charge to operations of $2.37 million for the 404,700 shares issued for services and to employees during the quarter.
 
 
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Expenses for subsidiaries Pak-It and Javaco have been higher than expected in connection with restructuring costs associated with the acquisitions.  The Company considers these expenses to be one-time charges.

Stock-Based Compensation

The Company periodically issues shares of common stock for services rendered or for financing costs. Such shares are valued based on the market price on the transaction date.

The Company plans to adopt a formal plan which addresses all forms of share-based payment awards, including shares issued under employee stock purchase plans, stock options, restricted stock and stock appreciation rights. No such plan had been adopted as of June 25, 2010.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2010, we have approximately $2.6 million cash on hand.

During the quarter the Company purchased property and equipment of $656k principally relating to development of the P2O processor and the automation of the Pak-It facility.  The Company expects to make significant investments in property and equipment in the future.

Historically, we have funded our operations through financing activities consisting primarily of private placements of debt and equity securities with existing shareholders and outside investors. Our principal use of funds has been for capital expenditures and general corporate expenses.

We expect to rely upon funds raised from private placements, as well as future equity and debt offerings to implement our growth plan and meet our liquidity needs going forward.  Management believes that our Company’s cash will be sufficient to meet our working capital requirements for the next twelve month period at which point further funding will be necessary. However, we cannot assure you that such financing will be available to us on favorable terms, or at all.

Forward-Looking Statements
This Form 10-Q Report and the Company’s other communications and statements may contain “forward-looking statements,” including statements about the Company’s beliefs, plans, objectives, goals, expectations, estimates, projections and intentions. These statements are subject to significant risks and uncertainties and are subject to change based on various factors, many of which are beyond the Company’s control. The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan,” “target,” “goal,” and similar expressions are intended to identify forward-looking statements. All forward-looking statements, by their nature, are subject to risks and uncertainties. The Company’s actual future results may differ materially from those set forth in its forward-looking statements. For information concerning these factors and related matters, see Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” in this Report, and the following sections of the Company’s Annual Report on Form 10-K for the year ended December 31, 2009: (a) “Risk Factors” in Part I, and (b) “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II. However, other factors besides those referenced could adversely affect the Company’s results, and you should not consider any such list of factors to be a complete set of all potential risks or uncertainties. Any forward-looking statements made by the Company herein speak as of the date of this Report. The Company does not undertake to update any forward-looking statement, except as required by law.
 
 
19

 
 
Critical Accounting Policies, Estimates and Assumptions
 
The Company believes the following discussion addresses its most critical accounting policies, which are those that are most important to the portrayal of the financial condition and results of operations and require management’s most difficult, subjective, or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  Accounting policies, in addition to the critical accounting policies referenced below, are presented in Note 2 to the Company’s Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009,  “Summary of Accounting Policies.”

Estimates

The preparation of financial statements in conformity with U. S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and 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. The most significant estimates relate to Goodwill, the value of assets and liabilities acquired, valuation of inventory, and the allowance for uncollectible accounts receivable. These estimates may be adjusted as more current information becomes available, and any adjustment could be significant.
 
Inventories
 
Inventories, which consist primarily of electrical components and chemicals, are stated at the lower of cost or market. The Company uses the first-in, first-out (FIFO) method of determining cost.
 
Property and Equipment

Property 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 as follows:
 
 Leasehold improvements   lesser of useful life or term of the lease
 Machinery and office equipment              5-7 years
 Vehicles                   5 years
 Furniture and fixtures                7 years
 Office and industrial buildings                 25 years
 
Gains and losses on depreciable assets retired or sold are recognized in the statement of operations in the year of disposal. Repairs and maintenance expenditures are expensed as incurred.

Impairments

If the carrying value of an asset, including goodwill and identifiable intangible assets exceeds the sum of estimated undiscounted future cash flows, an impairment loss is recognized for the difference between estimated fair value and carrying value. Management assesses assets for recoverability at least annually, or whenever changes in circumstances indicate that an asset’s carrying amount may not be recoverable
 
 
20

 

Goodwill

Goodwill resulted primarily from business acquisitions. In accordance with accounting rules, goodwill is not amortized, but is subject to an annual impairment test, which the Company performs in the 4th quarter. The Company evaluates the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount. Such circumstances could include, but are not limited to (1) a significant adverse change in legal factors or in business climate, (2) unanticipated competition, or (3) an adverse action or assessment by a regulator. When evaluating whether goodwill is impaired, the Company compares the fair value of the reporting unit to which the goodwill is assigned to the reporting unit’s carrying amount, including goodwill. The fair value of the reporting unit is estimated using a combination of the income, or discounted cash flows, approach and the market approach, which utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of reporting unit goodwill to its carrying amount. In calculating the implied fair value of reporting unit goodwill, the fair value of the reporting unit is allocated to all of the other assets and liabilities of that unit based on their fair values. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value. The Company’s evaluation of goodwill completed during the year resulted in no impairment losses. The Company does not believe that the current quarter operating loss has a negative impact on the current Goodwill valuation.

Revenue Recognition
 
The Company recognizes revenue when it is realized or realizable and earned less estimated future doubtful accounts.  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.

Off-Balance Sheet Arrangements

None

Item 3. Quantitative and Qualitative Disclosures About Market Risk.
 
Not required for a Smaller Reporting Company.
 
Item 4. Controls and Procedures.
 
Management’s Report on Internal Control over Financial Reporting

Evaluation of Disclosure Controls and Procedures
 
The Company’s Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Rule 13a-15(e)) under the Exchange Act as of the end of the period covered by this Report.
 
Because of inherent limitations, the Company’s disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of such disclosure controls and procedures are met and no evaluation can provide absolute assurance that all control issues and instances of fraud, if any, within the Company has been detected.
 
 
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Management’s Discussion of Material Weakness
Management has identified the following groups of control deficiencies, each of which, in the aggregate, represents a material weakness in the Company’s internal control over financial reporting as of March 31, 2010:
 
o
Material journal entries identified and recorded as a result of audit procedures
 
o
 
o
Restatement of previously issued financial statements
 
Overall ineffective oversight of the financial reporting process including:
· Omitted disclosures for related party transactions, loss contingencies and accounting policies.
· Controls over accounting for acquisitions.
· Timing and proper recording of equity transactions.
· Documentation of material transactions related to acquisitions.
 

Management of the Company takes very seriously the strength and reliability of the of the internal control environment for the Company. During 2010, the Company has implemented internal policies and intends to undertake additional steps necessary to improve the control environment that include:

 
o
The Company has implemented an internal disclosure policy to govern the disclosure of material, non-public information in a manner designed to provide full and fair disclosure of information about the Company.  This disclosure policy is intended to ensure that management and employees of the Company comply with applicable laws including the U.S, Securities Exchange Commission (“SEC”) Fair Disclosure Rules (Regulation FD) governing disclosure of material, non-public information to the public.
 
 
o
 
o
 
o
 
Strengthening the effectiveness of corporate governance by hiring a new CFO and establishing an audit committee of the Board.
 
Engaging a non-independent PCAOB registered accounting firm to provide accounting advice to Management.
 
Assigning additional members of the Management team to assist in preparing and reviewing the ongoing financial reporting process.

Management acknowledges its responsibility for internal controls over financial reporting and seeks to continually improve these controls. In order to achieve compliance with Section 404 of the Sarbanes Oxley Act, we are performing system and process documentation and evaluation needed to comply with Section 404, which is both costly and challenging. We believe our process for documenting, evaluating and monitoring our internal control over financial reporting is consistent with the objectives of Section 404 of the Act.

Changes in Internal Controls
The Company has continued to take remediation steps to enhance its internal control over financial reporting and reduce control deficiencies. The remediation efforts were slowed as a result of trying to integrate the operations of the Company’s acquisitions and to streamline the resulting organization.  We will continue to work on the elimination of control weaknesses and deficiencies noted.
 
 
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Part II OTHER INFORMATION
 
 
Item 1.  Legal Proceedings
 
We are not a party to any legal proceedings, there are no known judgments against the Company, nor are there any known actions or suits filed or threatened against it or its officers and directors, in their capacities as such. We are not aware of any claims against the Company or any reported claims against it at this time except for claims of two former employees of the Pak-It subsidiary. These former employees have alleged that certain monies are due them pursuant to their employment agreements and the Company has retained legal counsel to handle the claims.  The amounts of the claims are deemed immaterial to the Company.
 
Item 1A.   Risk Factors

We believe there are no changes that constitute material changes from the risk factors previously disclosed in our annual report on Form 10-K/A for the year ended December 31, 2009, filed with the SEC on July 9, 2010.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
 
None.

Item 3.  Defaults Upon Senior Securities

None.

Item 4.  (Removed and Reserved)

None.
 
Item 5.  Other Information
 
The Employment Agreement between the Company and  John Bordynuik, originally executed on May 19,2010, was amended on July 13, 2010, to correct the employment term of five years from the effective date and to change the  vesting of the first tranche of 100,000 options issuable to Mr. Bordynuik upon the Company receiving full DEC approval for its P2O processor.
 
Item 6. Exhibits.
 
(a)           Exhibits


31.1
 
Certification of Chief Executive Officer Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as amended
     
31.2
 
Certification of Chief Financial Officer Pursuant to Rule 13a – 14(a) of the Securities Exchange Act of 1934, as amended
     
             32.1
 
Certification of Chief Executive Officer Pursuant to 18 U. S. C. Section 1350.
     
 32.2   Certification of Chief Financial Officer Pursuant to 18 U. S. C. Section 1350.

 
 
23

 
 
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.
 
Signatures

In accordance with the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements of filing on Form 10-K and authorized this registration statement to be signed on its behalf by the undersigned, on the 25th day of June, 2010.
 
Date: July 16, 2010
By:
/s/ John Bordynuik                                         
 
   
Name: John Bordynuik
 
   
Title: President, CEO, Director, Principal Executive Officer
 
 
 
Date: July 16, 2010
By:
/s/ Ron Baldwin, Jr.                                         
 
   
Name: Ron Baldwin, Jr.
 
   
Title: Chief Financial Officer, Principal Accounting Officer
 

In accordance with the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

Signature
 
Title
 
Date
         
         
/s/ John Bordynuik
 
Director and Chairman of the Board;
 
July 16, 2010
John Bordynuik
 
President and Chief Executive Officer
   
         
/s/ Ron Baldwin, Jr.
 
Chief Financial Officer
 
July 16, 2010
Ron Baldwin, Jr.
       
         
/s/ Jacob Smith
 
Chief Operating Officer and Director
 
July 16, 2010
Jacob Smith
       
         
/s/ Robin Bagai
 
Director
 
July 16, 2010
Robin Bagai
       
         
/s/ John Wesson
 
Director
 
July 16, 2010
John Wesson
       
     
 
 
 
s/ Gregory Goldberg
 
Director
 
July 16, 2010
Gregory Goldberg
 

 
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