Reportable Business Segments

9 Months Ended

Sep. 30, 2014

Segment Reporting [Abstract]

Reportable Business Segments

Note 3 – Reportable Business Segments

We purchased certain tangible and intangible assets of a plastics recycling company during November 2013, and began operating our second reportable business segment – reprocessed plastics. Prior to that purchase, we operated one reportable business segment – engineered products. Our segment reporting is consistent with the current manner of how our Chief Operating Decision Maker (“CODM”) and our board of directors view our business. Our business model has consisted of reprocessing recycled or waste plastics into plastic products to be sold to manufacturers who require certain plastics in their processes and we transfer certain of these reprocessed plastics to our other segment which produces engineered products utilizing recycled plastics and plastic composites. In order to allow our CODM and management to make business decisions, we report two segments –our reprocessed plastics segment and our engineered products segment. Decisions regarding allocation of resources and investment of capital have been made based on the reportable segments contribution to the financial success of the consolidated enterprise.

Beginning during the three months ended September 30, 2014, a decision was made to transition the facility where our reprocessed plastics segment operated into a facility which processed engineered products, thereby returning to one reportable business segment. For the three months and nine months ended September 30, 2014, we continued to report in two segments as the transition was not completed by September 30, 2014.

The significant accounting policies of each segment are described in note 1.

Segment Reporting - For the Three Months Ended September 30, 2014

	Engineered		Reprocessed		Corporate
	Products		Plastics		Activities		Combined
Statement of Operations
Revenue	$	1,667,668	$	1,455,244	$	-	$	3,122,912
Costs of sales:
Production		1,714,300		2,187,950		-		3,902,250
Excess capacity & inventory adjustments		369,806		-		-		369,806
Gross margin (loss)		(416,438)		(732,706)		-		(1,149,144)
Product development & quality management		-		-		52,219		52,219
Marketing & sales		-		-		126,047		126,047
General & administrative		-		-		1,069,672		1,069,672
Total operating expenses		-		-		1,247,938		1,247,938
Loss from operations		(416,438)		(732,706)		(1,247,938)		(2,397,082)
Other (income) expenses:
Interest expense		-		-		478,496		478,496
Amortization of debt discounts		-		-		1,196,807		1,196,807
Impairment of intangible assets		-		-		545,750		545,750
Fair value of common shares issued in excess of fair value of warrants tendered		-		-		(54)		(54)
Change in fair value of derivative liabilities		-		-		(7,337,983)		(7,337,983)
Total other (income)		-		-		(5,116,984)		(5,116,984)
Net income (loss)	$	(416,438)	$	(732,706)	$	3,869,046	$	2,719,902
Total assets at September 30, 2014	$	8,215,092	$	5,622,686	$	4,474,200	$	18,311,978

Segment Reporting - For the Nine Months Ended September 30, 2014

	Engineered		Reprocessed		Corporate
	Products		Plastics		Activities		Combined
Statement of Operations
Revenue	$	6,630,042	$	5,397,867	$	-	$	12,027,909
Costs of sales:
Production		6,412,835		8,305,532		-		14,718,367
Excess capacity & inventory adjustments		1,829,700		-		-		1,829,700
Gross margin (loss)		(1,612,493)		(2,907,665)		-		(4,520,158)
Product development & quality management		-		-		226,273		226,273
Marketing & sales		-		-		801,633		801,633
General & administrative		-		-		22,175,376		22,175,376
Total operating expenses		-		-		23,203,282		23,203,282
Loss from operations		(1,612,493)		(2,907,665)		(23,203,282)		(27,723,440)
Other (income) expenses:
Interest expense		-		-		1,320,127		1,320,127
Amortization of debt discounts		-		-		2,055,894		2,055,894
Impairment of intangible assets						545,750		545,750
Fair value of common shares issued in excess of fair value of warrants tendered		-		-		883,422		883,422
Change in fair value of derivative liabilities		-		-		(18,385,978)		(18,385,978)
Total other (income)		-		-		(13,580,785)		(13,580,785)
Net (loss)	$	(1,612,493)	$	(2,907,665)	$	(9,622,497)	$	(14,142,655)

(1) Since the plastics recycling company which provided the second segment to our business was acquired in November 2013, we did not report segment information for the three or nine months ended September 30, 2013.