Document_and_Entity_Informatio
Document and Entity Information (USD $) | 12 Months Ended | ||
Dec. 31, 2013 | 1-May-14 | Jun. 30, 2013 | |
Document and Entity Information: | ' | ' | ' |
Entity Registrant Name | 'N-Viro International Corporation | ' | ' |
Document Type | '10-K | ' | ' |
Document Period End Date | 31-Dec-13 | ' | ' |
Amendment Flag | 'false | ' | ' |
Entity Central Index Key | '0000904896 | ' | ' |
Current Fiscal Year End Date | '--12-31 | ' | ' |
Entity Common Stock, Shares Outstanding | ' | 7,055,196 | ' |
Entity Public Float | ' | ' | $6,661,000 |
Entity Filer Category | 'Smaller Reporting Company | ' | ' |
Entity Current Reporting Status | 'No | ' | ' |
Entity Voluntary Filers | 'No | ' | ' |
Entity Well-known Seasoned Issuer | 'No | ' | ' |
Document Fiscal Year Focus | '2013 | ' | ' |
Document Fiscal Period Focus | 'FY | ' | ' |
CONSOLIDATED_BALANCE_SHEETS
CONSOLIDATED BALANCE SHEETS (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
CURRENT ASSETS | ' | ' |
Cash and Cash Equivalents - Unrestricted | $14,344 | $52,625 |
Cash and Cash Equivalents - Restricted | 66,592 | 209,181 |
Accounts Receivable, net | 299,992 | 283,380 |
Other Receivable, net | 10,918 | 17,182 |
Prepaid expenses and other assets | 57,571 | 78,849 |
Deferred costs - stock and warrants issued for services | 258,613 | 343,480 |
Total current assets | 708,030 | 984,697 |
Property and equipment, net | 873,542 | 993,971 |
Deferred costs - stock and warrants issued for services, long-term | 125,251 | 280,872 |
Intangible and other assets, net | 68,294 | 78,969 |
TOTAL ASSETS | 1,775,117 | 2,338,509 |
CURRENT LIABILITIES | ' | ' |
Accounts Payable | 850,702 | 597,426 |
Line of Credit | 218,000 | 370,000 |
Current maturities of long-term debt | 92,249 | 188,902 |
Notes payable - related parties, net of discount | 228,000 | 200,000 |
Convertible debentures, net of discount | 455,000 | 446,816 |
Pension plan withdrawal liability, current | 404,672 | 27,003 |
Accrued liabilities | 130,608 | 81,343 |
Total current liabilities | 2,379,231 | 1,911,490 |
Long-term debt, less currrent maturities | 32,818 | 92,014 |
Pension plan withdrawal liability, long-term | 0 | 384,291 |
TOTAL LIABILITIES | 2,412,049 | 2,387,795 |
Commitments and Contingencies | 0 | 0 |
STOCKHOLDERS' DEFICIT | ' | ' |
Preferred stock, value | 0 | 0 |
Common stock, value | 70,475 | 66,641 |
Additional paid in capital | 29,864,113 | 28,630,416 |
Accumulated Deficit | -29,886,630 | -28,061,453 |
Total Stockholders' equity before treasury stock | 47,958 | 635,604 |
Treasury stock, at cost | 684,890 | 684,890 |
Total Stockholders' Deficit | -636,932 | -49,286 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $1,775,117 | $2,338,509 |
CONSOLIDATED_BALANCE_SHEETS_Pa
CONSOLIDATED BALANCE SHEETS - Parenthetical (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Consolidated Balance Sheets | ' | ' |
Preferred Stock, Par Value | $0.01 | $0.01 |
Preferred Stock, Shares Authorized | 2,000,000 | 2,000,000 |
Preferred Stock, Shares Issued | 0 | 0 |
Common Stock, Par Value | $0.01 | $0.01 |
Common Stock, Shares Authorized | 35,000,000 | 35,000,000 |
Common Stock, Shares Issued | 7,047,521 | 6,664,087 |
Treasury Stock, at cost - Shares | 123,500 | 123,500 |
CONSOLIDATED_STATEMENTS_OF_OPE
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Consolidated Statements of Operations | ' | ' |
REVENUES | $3,379,602 | $3,583,155 |
COST OF REVENUE | 2,990,995 | 3,006,140 |
GROSS PROFIT | 388,607 | 577,015 |
OPERATING EXPENSES | ' | ' |
Selling, General and Administrative | 2,045,111 | 2,283,314 |
Operating Loss | -1,656,504 | -1,706,299 |
OTHER INCOME (EXPENSE) | ' | ' |
Gain on extinguishment of liabilities | 115,202 | 158,175 |
Gain on fair value change of warrants issued | 0 | 12,196 |
Interest income | 894 | 1,486 |
Amortization of discount on convertible debentures | -8,184 | -16,368 |
Interest expense | -98,385 | -87,998 |
TOTAL OTHER INCOME | 9,527 | 67,491 |
LOSS BEFORE INCOME TAXES | -1,646,977 | -1,638,808 |
Federal and state income taxes | 0 | 0 |
NET LOSS | ($1,646,977) | ($1,638,808) |
Basic and diluted loss per share | ($0.24) | ($0.26) |
Weighted average common shares outstanding - basic and diluted | 6,840,060 | 6,218,623 |
CONSOLIDATED_STATEMENTS_OF_STO
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (USD $) | Common Stock | Additional Paid-in Capital | Retained Earnings | Treasury Stock | Total |
Stockholders' Equity (Deficit) at Dec. 31, 2011 | $61,914 | $26,883,156 | ($25,814,035) | ($684,890) | $446,145 |
Shares, Outstanding at Dec. 31, 2011 | 6,191,420 | ' | ' | ' | ' |
Issuance of common stock, Value | 720 | 84,745 | ' | ' | 85,465 |
Issuance of common stock, Shares | 72,000 | ' | ' | ' | ' |
Share-based compensation expense, Value | 4,000 | 1,052,927 | ' | ' | 1,056,927 |
Share-based compensatione expense, Shares | 399,963 | ' | ' | ' | ' |
Exercise of stock warrants, Value | 7 | 978 | ' | ' | 985 |
Exercise of stock warrants, Shares | 704 | ' | ' | ' | ' |
Deemed dividend on extension of stock warrants | ' | 608,610 | -608,610 | ' | ' |
Warrants issued on loans | 0 | 0 | 0 | 0 | 0 |
Net Loss | ' | ' | -1,638,808 | ' | -1,638,808 |
Stockholders' Equity (Deficit) at Dec. 31, 2012 | 66,641 | 28,630,416 | -28,061,453 | -684,890 | -49,286 |
Shares, Outstanding at Dec. 31, 2012 | 6,664,087 | ' | ' | ' | ' |
Issuance of common stock, Value | 248 | 24,942 | ' | ' | 25,190 |
Issuance of common stock, Shares | 24,760 | ' | ' | ' | ' |
Share-based compensation expense, Value | 2,301 | 875,502 | ' | ' | 877,803 |
Share-based compensatione expense, Shares | 230,135 | ' | ' | ' | ' |
Exercise of stock warrants, Value | 1,285 | 122,653 | ' | ' | 123,938 |
Exercise of stock warrants, Shares | 128,539 | ' | ' | ' | ' |
Deemed dividend on extension of stock warrants | ' | 178,200 | -178,200 | ' | ' |
Warrants issued on loans | ' | 32,400 | ' | ' | 32,400 |
Net Loss | ' | ' | -1,646,977 | ' | -1,646,977 |
Stockholders' Equity (Deficit) at Dec. 31, 2013 | $70,475 | $29,864,113 | ($29,886,630) | ($684,890) | ($636,932) |
Shares, Outstanding at Dec. 31, 2013 | 7,047,521 | ' | ' | ' | ' |
CONSOLIDATED_STATEMENTS_OF_CAS
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Cash Flows From Operating Activities | ' | ' |
Net Loss | ($1,646,977) | ($1,638,808) |
Adjustments to reconcile net loss to cash used in operating activities | ' | ' |
Depreciation and amortization | 193,125 | 283,651 |
Amortization of debenture stock discount | 8,184 | 16,368 |
Issuance of stock, stock options and warrants for sevices | 1,118,492 | 1,047,085 |
Loss on investment in Mahoning Valley N-Viro | ' | 146 |
Provision for bad debts | 26,260 | 20,000 |
Gain on the sale of fixed assets | -28,599 | -152,632 |
Increase in fair value of warrants issued | ' | -12,196 |
Changes in Operating Assets and Liabilities | ' | ' |
Decrease (increase) in trade receivables | -27,872 | 112,812 |
Decrease (increase) in prepaid expenses and other assets | -32,117 | 50,445 |
Increase (decrease) in accounts payable and accrued liabilities | 302,591 | -176,034 |
Increase (decrease) in pension withdrawal liability | -6,622 | 411,294 |
Net cash used in operating activities | -93,535 | -37,869 |
Cash Flows From Investing Activities | ' | ' |
Purchases of property and equipment | -4,628 | -8,606 |
Proceeds from sale of Property and Equipment | 20,000 | 217,056 |
Decrease (increase) from restricted cash | 142,589 | -671 |
Purchases of intangible assets | ' | -7,500 |
Decrease (increase) to notes receivable, net | 1,264 | -17,183 |
Net cash provided by investing activities | 159,225 | 183,096 |
Cash Flows From Financing Activities | ' | ' |
Net advances (repayments) on line of credit | -152,000 | 70,000 |
Borrowngs under long-term debt | 67,387 | 162,320 |
Principal payments on long-term obligations | -198,236 | -370,310 |
Borrowings from related parties - short-term | 55,000 | ' |
Net cost from issuance of common stock in private placement | -30 | -95 |
Proceeds from stock options exercised | ' | 985 |
Proceeds from stock warrant transactions | 123,908 | ' |
Net cash used in financing activities | -103,971 | -137,100 |
Net Increase (Decrease) in Cash and Cash Equivalents | -38,281 | 8,127 |
Cash and Cash Equivalents - Beginning | 52,625 | 44,498 |
Cash and Cash Equivalents - Ending | 14,344 | 52,625 |
Supplemental disclosure of cash flows information: | ' | ' |
Cash paid during the year for interest | $93,246 | $110,373 |
Note_1_Operations_and_Summary_
Note 1. Operations and Summary of Significant Accounting Policies | 12 Months Ended | ||
Dec. 31, 2013 | |||
Notes | ' | ||
Note 1. Operations and Summary of Significant Accounting Policies | ' | ||
Note 1. Operations and Summary of Significant Accounting Policies | |||
The following is a summary of certain accounting policies followed in the preparation of these financial statements. The policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements: | |||
A. Nature of Business – The Company owns and licenses the N-Viro Process, a patented technology to treat and recycle wastewater sludges and other bio-organic wastes, utilizing certain alkaline by-products produced by the cement, lime, electric utilities and other industries. Revenue and the related accounts receivable are due from companies acting as independent agents or licensees, principally municipalities. | |||
B. Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. | |||
C. Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. | |||
D. Going Concern - The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has negative working capital of approximately ($1,683,000) at December 31, 2013, and has incurred recurring losses and negative cash flow from operations for the year ended December 31, 2013. Moreover, while the Company expects to arrange for replacement financing with other lending institutions, there is no borrowing availability under the line of credit. The Company has borrowed money from third parties and related parties and expects to be able to generate future cash from the exercise of common stock warrants and new equity issuances, though there can be no assurance given that such issuances or exercises will be realized. The Company has slowed payments to trade vendors, and has renegotiated payment terms with several existing and prior vendors to lengthen the time and/or reduce the amount of cash to repay these trade payables. In 2012 the Company modified all outstanding common stock warrants to reduce their weighted average exercise price. In 2013 the Company further modified all outstanding warrants to enhance their exercisability and realized $123,908 in exercises in 2013. Beginning in March 2014, the Company’s operations in Volusia County, Florida, which now represent substantially all of its revenue, have been voluntarily delayed for a short time while the Company moves assets and employs personnel to the Company’s new site in Bradley, Florida. The Company considers its relationship with the current landlord to be satisfactory overall as we work together to reduce and eventually terminate operations on their site. While operations are expected to resume in June 2014, this reduction in revenue, while temporary, has materially reduced available cash to fund current or prior expenses incurred. | |||
E. Cash and Cash Equivalents – The Company has cash on deposit primarily in one financial institution which, at times, may be in excess of FDIC insurance limits. For purposes of the statements of cash flows, the Company considers all certificates of deposit with initial maturities of 90 days or less to be cash equivalents. Restricted cash consists of: two certificates of deposit and corresponding accrued interest which were held as collateral against the Company's line-of-credit through August 2013; one certificate of deposit and corresponding accrued interest which is held as collateral with a performance bond on behalf of one of the Company’s licensees; one certificate of deposit and corresponding accrued interest which is held as collateral on behalf of the Florida Department of Agriculture for the Company’s soil distribution license. | |||
F. Accounts Receivable – The Company extends unsecured credit to customers under normal trade agreements, which require payment within 30 days. Accounts greater than 90 days past due amounted to $104,025 and $80,106 of receivables for the years ended December 31, 2013 and 2012, respectively. The Company's policy is not to accrue and record interest income on past due trade receivables. The Company does bill the customer finance charges on past due accounts and records the interest income when collected. Credit is generally granted on an unsecured basis. Periodic credit evaluations of customers are conducted and appropriate allowances are established. Management estimates an allowance for doubtful accounts, which was $101,260 and $90,000 as of December 31, 2013 and 2012, respectively. The estimate is based upon management’s review of delinquent accounts and an assessment of the Company’s historical evidence of collections. | |||
G. Property and Equipment – Property, machinery and equipment are stated at cost less accumulated depreciation. Depreciation has been computed primarily by the straight-line method over the estimated useful lives of the assets. Generally, useful lives are five to fifteen years. Leasehold improvements are capitalized and amortized over the lesser of the life of the lease or the estimated useful life of the asset. Depreciation expense amounted to $178,688 and $269,215 in 2013 and 2012, respectively. Management has reviewed property and equipment for impairment when events and circumstances indicate that the assets might be impaired and the carrying values of those assets may not be recoverable. Management believes the carrying amount is not impaired based upon estimated undiscounted future cash flows. | |||
H. Intangible Assets – Patent costs and territory rights are recorded at cost and then amortized by the straight-line method over their estimated useful lives (periods ranging from one and one-half to seventeen years; weighted-average amortization periods for patents/related intangibles and territory rights were 14.1 years for both December 31, 2013 and 2012). Amortization expense amounted to $14,438 for both 2013 and 2012. Estimated amortization expense, based on these patent costs and territory rights at December 31, 2013, for each of the ensuing five years is as follows: 2014 - $11,000; 2015 - $11,000; 2016 - $9,000; 2017 - $7,000; 2018 - $4,000. Management has reviewed intangible assets for impairment when events and circumstances indicate that the assets might be impaired and the carrying values of those assets may not be recoverable. The Company has capitalized the cost of acquiring certain customer licenses and contracts as part of the acquisition of Florida N-Viro on December 31, 2006. Amortization expense amounted to $3,219 in both 2013 and 2012. Estimated amortization expense, based on these capitalized license and contracts at December 31, 2013, for each of the ensuing five years is as follows: 2014 - $1,700; 2015 - $1,700; 2016 - $500; 2017 - $-0-; 2018 - $-0-. | |||
I. Revenue Recognition – Facility management revenue and royalty fees are recognized under contracts where the Company or licensees utilize the N Viro Process to treat sludge, either pursuant to a fixed-price contract or based on volumes of sludge processed. Revenue is recognized as services are performed. Alkaline admixture sales, alkaline admixture management service revenue and N-Viro SoilTM revenue are recognized upon shipment. License and territory fees are generated by selling the right to market or use the N-Viro Process in a specified territory. The Company's policy is to record revenue for the license agreements when all material services relating to the revenue have been substantially performed, conditions related to the contract have been met and no material contingencies exist. We do not recognize revenue on any non-domestic license or territory fee contracts until the cash is received, assuming all other tests of revenue recognition are met. Canada and Israel are excluded from this definition of non-domestic. Research and development revenue is recognized as work is performed to the contracting entity in accordance with the contract. | |||
J. Loss Per Common Share – Loss per common share has been computed on the basis of the weighted-average number of common shares outstanding during each period presented. For the years ended December 31, 2013 and 2012, the effects of 2,555,981 and 2,905,981 stock options outstanding, respectively, 1,849,585 and 1,619,585 warrants to purchase common stock, respectively, and, debentures that are convertible to 227,500 shares of common stock are excluded from the diluted per share calculation because they would be antidilutive. | |||
K. Stock Options – The Company records share-based compensation expense using a fair-value based method of measurement that results in compensation costs for essentially all awards of stock-based compensation. Compensation costs are recognized over the requisite period or periods that services are rendered. | |||
L. New Accounting Standards – There are no Accounting Standards Updates expected to have a significant effect on the Company’s consolidated financial position or results of operations. | |||
M. Income Taxes – Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the current period plus or minus the change during the period in deferred tax assets and liabilities. The accounting for uncertain tax positions requires the Company to evaluate each income tax position using a two step process which includes a determination as to whether it is more likely than not that the income tax position will be sustained, based upon technical merit and upon examination by the taxing authorities. At December 31, 2013 and 2012, there were no uncertain tax positions that required accrual. None of the Company’s federal or state income tax returns are currently under examination by the Internal Revenue Service (“IRS”) or state authorities. However, fiscal years 2010 and later remain subject to examination by the IRS and respective states. | |||
N. Supplemental Disclosure of Non-Cash Activity: | |||
2013 | 2012 | ||
Rakgear, Inc. - value of stock and warrants issued on consulting agreement | $ 487,900 | $ 0 | |
Oregon Resource Innovations - value of stock issued on consulting agreement | 70,000 | 0 | |
Catalyst Corner, LLC - value of stock issued on consulting agreement | 3,600 | 0 | |
Newport Coast Securities - value of stock issued on agreement | 0 | 104,000 | |
Equiti-trend Advisors, LLC - value of stock issued on agreement | 0 | 75,000 | |
SAMI - value of stock and warrants issued on public relations agreement | 0 | 421,300 | |
Totals | $ 561,500 | $ 600,300 | |
O. Segment Information – During 2013, the Company determined that it currently operates in one segment based on the financial information upon which the chief operating decision maker regularly assesses performance and allocates resources. The chief operating decision maker is the Chief Executive Officer. | |||
Note_2_Balance_Sheet_Data
Note 2. Balance Sheet Data | 12 Months Ended | ||
Dec. 31, 2013 | |||
Notes | ' | ||
Note 2. Balance Sheet Data | ' | ||
Note 2. Balance Sheet Data | |||
The Company is at present not taking a charge for depreciation on certain assets located at its demo fuel site in Pennsylvania because these assets were not producing revenue in either 2012 or 2013. | |||
Property and equipment (at cost): | |||
2013 | 2012 | ||
Buildings and leasehold improvements | $ 119,445 | $ 119,445 | |
Equipment | 2,118,863 | 2,060,605 | |
Equipment - idle | 722,559 | 847,621 | |
Furniture, fixtures and computers | 59,896 | 59,896 | |
3,020,763 | 3,087,567 | ||
Less accumulated depreciation | 2,147,221 | 2,093,596 | |
Totals | $ 873,542 | $ 993,971 | |
Deferred costs: | |||
In December 2010, the Company executed a Financial Public Relations Agreement with Strategic Asset Management, Inc., or SAMI. The Company engaged SAMI as its non-exclusive financial public relations counsel for a term of three years. For its services, the Company issued SAMI 150,000 shares of the Company's unregistered common stock. The Company is recording a non-cash charge to earnings of approximately $305,000 ratably over a 36-month period starting in December 2010. For the years ended December 31, 2013 and 2012, the charge to earnings was approximately $97,271 and $101,500, respectively. | |||
In August 2011, the Company issued 100,000 shares of common stock and granted 100,000 fully vested stock warrants to SAMI for additional services performed in connection with the December 2010 Financial Public Relations Agreement. To reflect the entire value of the stock and warrants issued, the Company took a non-cash charge to earnings of $285,700 through December 2013, the ending date of the agreement. For the years ended December 31, 2013 and 2012, the charge to earnings was approximately $91,300 and $95,200, respectively. | |||
In October 2012, the Company issued 300,000 shares of common stock and granted 150,000 fully vested stock warrants to SAMI to extend the period of services performed in connection with the December 2010 Financial Public Relations Agreement for an additional two years, through December 2015. To reflect the entire value of the stock and warrants issued, the Company is taking a non-cash charge to earnings of $421,300 starting in 2013, over a 36 month period. For the year ended December 31, 2013, the charge to earnings was approximately $125,300. | |||
In December 2010, the Company executed a Consulting Agreement, with SLD Capital Corporation, or SLD. The Company engaged SLD to provide business consulting services for a term of eighteen months. For its services, the Company issued SLD 110,000 shares of the Company's unregistered common stock. The Company recorded a non-cash charge to earnings of approximately $334,000 ratably over an 18-month period starting in December 2010. For the years ended December 31, 2013 and 2012, the charge to earnings was approximately $-0- and $99,000, respectively. | |||
In November, 2011, the Company executed a Consulting Agreement with Rakgear, Inc. The Company engaged Rakgear to provide business consulting services for a term of one year. For its services, the Company issued Rakgear 50,000 shares of the Company's unregistered common stock. The Company recorded a non-cash charge to earnings of $73,000 ratably over a 12-month period starting in November 2011. For the years ended December 31, 2013 and 2012, the charge to earnings was approximately $-0- and $63,000, respectively. | |||
In April 2013, the Company executed a Consulting Agreement with Rakgear, Inc. The Company engaged Rakgear to provide financial consulting services for a term of one year. For its services, the Company issued Rakgear 150,000 shares of the Company's unregistered common stock and 150,000 fully vested warrants to purchase unregistered shares of common stock at a price of $1.49 per warrant. To reflect the entire value of the stock issued, the Company is recording a non-cash charge to earnings of $487,900 ratably through March 2014, the ending date of the agreement. For the year ended December 31, 2013 the charge to earnings was approximately $365,900. | |||
In February 2012, the Company issued 15,000 shares of unregistered common stock to Financial Insights, for investor relations services for a three month period. The Company recorded a non-cash charge to earnings of $19,500 ratably during the subsequent three month period for these shares. In July 2012, Financial Insights returned all of these shares of common stock to the Company as part of an agreement and the Company reversed this charge to earnings in the third quarter of 2012. | |||
In March 2012, the Company issued 80,000 shares of unregistered common stock to Newport Coast Securities for financial and investor relations services for a three month period. To reflect the entire value of the stock issued, the Company recorded a non-cash charge to earnings of $104,000 ratably during the subsequent three month period. | |||
In August 2012, the Company issued 60,000 shares of unregistered common stock to Equiti-trend Advisors LLC/JT Trading, LLC for public relations and corporate communication services. To reflect the entire value of the stock issued, the Company recorded a non-cash charge to earnings of $75,000 ratably through January 2013, the ending date of the agreement. For the years ended December 31, 2013 and 2012, the charge to earnings was approximately $14,500 and $60,500, respectively. | |||
In January 2013, the Company issued 70,000 shares of unregistered common stock to Webracadabra Internet Works, LLC, dba Oregon Resource Innovations, for financial consulting services to be performed over a six month period. To reflect the entire value of the stock issued, the Company recorded a non-cash charge to earnings of $70,000 ratably through July 2013, the ending date of the agreement. | |||
The following is a summary of Deferred Costs – stock and warrants issued for services as of December 31: | |||
2013 | 2012 | ||
Deferred costs - Rakgear, Inc., less accumulated amortization (2013 - $365,925; 2012 - $73,000) | $ 121,975 | $ 0 | |
Deferred costs - SAMI, less accumulated amortization (2013 - $749,611; 2012 - $401,664) | 261,889 | 609,836 | |
Deferred costs - Equiti-trend Advisors, less accumulated amortization (2013 - $75,000; 2012 - $60,484) | 0 | 14,516 | |
Totals | $ 383,864 | $ 624,352 | |
Intangible and Other Assets, Net: | |||
The following is a summary of Intangible and Other Assets, Net as of December 31: | |||
2013 | 2012 | ||
Patents and related intangibles, less accumulated amortization (2013 - $126,346; 2012 - $115,127) | $ 42,143 | $ 53,362 | |
Customer list, less accumulated amortization (2013 - $61,803; 2012 - $58,584) | 8,453 | 11,672 | |
Other | 17,698 | 13,935 | |
Totals | $ 68,294 | $ 78,969 | |
Accrued liabilities: | |||
2013 | 2012 | ||
Accrued payroll and employee benefits | $ 35,112 | $ 31,818 | |
Sales tax payable | 0 | 82 | |
Deferred compensation payable | 84,658 | 38,440 | |
Interest payable | 10,838 | 11,003 | |
Totals | $ 130,608 | $ 81,343 | |
Note_3_Pledged_Assets_Line_of_
Note 3. Pledged Assets, Line of Credit and Long-term Debt | 12 Months Ended | ||
Dec. 31, 2013 | |||
Notes | ' | ||
Note 3. Pledged Assets, Line of Credit and Long-term Debt | ' | ||
Note 3. Pledged Assets, Line of Credit and Long-Term Debt | |||
Until August 2013, the Company had a Commercial Line of Credit Agreement, or the Line, with Monroe Bank + Trust, or the Bank, up to $400,000 bearing interest at the Wall Street Journal Prime Rate (3.25% throughout 2013) plus 0.75%, but in no event less than 5.00%, and secured by a first lien on substantially all assets (except equipment) of the Company. Two certificates of deposit totaling approximately $142,000 from the Bank were held as a condition of maintaining the Line. In August 2013, the Line was renewed with a new maturity date of October 2013 and a borrowing limit of $233,067. The Bank cashed in the two certificates of deposit held totaling approximately $142,000 and used them to pay down the Line, effectively reducing the borrowing capacity by $25,000. In October 2013, the Line was renewed again with a new maturity date of December 2013 and a borrowing limit of $218,067, further reducing the borrowing capacity by $15,000. In December 2013 the Company defaulted on the Line, and in April 2014 the Company signed a forbearance agreement with the Bank, temporarily restricting them from exercising certain rights and remedies available after the Company’s default. In addition to retaining certain rights and remedies, the Bank agreed to allow the Company to repay the Line over six months, with an immediate payment of approximately $39,000 including accrued interest, and successive monthly payments of $36,784 plus accrued interest at 5%, up to and including September 7, 2014 until a total of $218,000 in principal is repaid. | |||
In December 2013, the Company borrowed a total of $28,000, net of debt discount of $27,000, from two existing stockholders to provide operating capital. Both notes payable were for a term of three months at an interest rate of 12%, and included warrants to purchase common stock of the Company. In the second quarter of 2014, both stockholders converted their respective note to common stock of the Company at the fair market value of the stock at the time of conversion. | |||
In August 2011, the Company borrowed $200,000 with a Promissory Note payable to David and Edna Kasmoch, the parents of Timothy Kasmoch, the Company’s President and Chief Executive Officer, at 12% interest and prepaid for a period of three months, renewable for an additional three months by the prepayment of additional interest and secured by certain equipment. Mr. Kasmoch has personally guaranteed the repayment of this Note. The Company extended the Note on all four due dates during 2012 and 2013, and the January and April due dates in 2014, and the Note is now due July 30, 2014. The Company expects to extend the Note on or before the due date but pay the Note in full during 2014 or early 2015. | |||
During 2013, the Company borrowed a total of $67,387 from two lenders to purchase insurance policies for general, property and directors & officers’ insurance coverage during the year. A total of two term notes were issued, ranging from 6.6% to 8.8% interest for a term not more than one year, monthly payments totaling $6,970 and each are unsecured. The total amount owed on these notes as of December 31, 2013 was approximately $31,600 and these notes are expected to be paid in full on the applicable maturity date, the last of which is August 2014. | |||
From the beginning of 2006 through 2013, the Company has borrowed a total of $1,677,100 from ten lenders to purchase processing and automotive equipment. As of December 31, 2013, a total of three term notes are outstanding, ranging from 6.2% to 7.1% interest for terms ranging three to five years, monthly payments totaling approximately $6,000 and all secured by equipment. The total amount owed on all equipment-secured notes as of December 31, 2013 was approximately $93,400 and all notes are expected to be paid in full on the applicable maturity date, the last of which is in March 2016. | |||
In November 2012, the Company received a Notice and Demand of Payment Withdrawal Liability from Central States Southeast and Southwest Areas Pension Fund (the “Notice”), the pension trustee that was funded by the Company for the benefit of its former employees at its City of Toledo operation. The Notice demanded a payment of $412,576, payable monthly over 20 years at an interest rate of approximately 2.8% at $2,250 per month, or approximately $27,000 per year. Payments at the end of the 20 year period would total $540,065. In December 2013, the Company received a Notice of Default from Central States, and subsequently the Fund’s trustee served the Company with a summons in a civil matter, and together with the Notice demanded all amounts owed in withdrawal liability plus interest and penalties. The Company remains in negotiations with Central States to agree on terms and conditions of repayment. | |||
In December 2012, the Company borrowed $25,000 from a stockholder to provide operating capital. The Note Payable was for a term of three months at an interest rate of 12%. In February 2013, the stockholder converted the Note Payable to common stock at the fair market value of the stock at the time of conversion. | |||
In 2009 the Company approved an offering of up to $1,000,000 of Convertible Debentures (the “Debentures”), convertible at any time into our unregistered common stock at $2.00 per share. The Debentures were issuable in $5,000 denominations, are unsecured and have a stated interest rate of 8%, payable quarterly to holders of record. The Company has timely paid all accrued interest due to all Debenture holders of record as of each quarter-end date starting in July 2009. At any time, the Company may redeem all or a part of the Debentures at face value plus unpaid interest. | |||
During 2009 the Company issued $765,000 of Debentures to a total of twenty-three accredited investors, and one investor converted $10,000 of Debentures into unregistered common stock. During 2010 the Company issued $55,000 of Debentures, and three investors converted a total of $90,000 of Debentures into unregistered common stock. The Debentures matured at June 30, 2011, however sixteen investors holding Debentures totaling $455,000 elected to replace them with new ones that matured at June 30, 2013. All other features of the “expired” Debentures remained the same in the replacement ones, except for the new maturity date. Of the three investors totaling $265,000 who did not replace their existing Debentures with new ones, two investors totaling $215,000 had their Debentures repaid and one investor converted $50,000 into unregistered common stock concurrent at June 30, 2011. | |||
At June 30, 2013, the Company held $455,000 of Debentures but defaulted and did not pay the holders the principal amount due, all of which currently remain outstanding. The Company will continue to accrue additional interest on the principal amount at the rate set forth in the Debentures until the principal amount is paid in full. Subsequent to June 30, 2013, the Company has paid and expects to pay all accrued interest due and the principal amount to all outstanding holders of the Debentures, after completing substitute financial arrangements, though there can be no assurance of the timing of receipt of these funds and amounts available from these substitute arrangements. | |||
Because the fair market value of the Company’s common stock (the underlying security in the Debentures) may have been above the conversion price of $2.00 per share at the date of issuance, the Company was required under GAAP to record a discount given for certain (now) “expired” Debentures sold, which totaled $184,975. The discount was then required to be amortized as a period expense over the periods the Debentures were scheduled to be outstanding, which averaged 20 months, through the maturity date of June 30, 2011. Amortization expense on these “expired” Debentures for each of the twelve months ended December 31, 2013 and 2012 was $-0-. | |||
For periods subsequent to June 30, 2011, the Company is required under GAAP to record a discount for certain Debentures replaced, which totals $32,737 and was recorded as a gain on debt modification during the quarter ended June 30, 2011. The discount is required to be amortized as a period expense over the next eight quarters the Debentures are scheduled to be outstanding. Amortization expense for each of the twelve months ended December 31, 2013 and 2012 was $8,184 and $16,368, respectively. | |||
Approximate aggregate maturities of long-term debt for the years ending December 31 are as follows: 2014 - $1,207,000; 2015 - $27,000; 2016 - $6,000; 2017 - $-0-; 2018 - $-0-. | |||
Long-term debt at December 31, 2013 and 2012 is as follows: | |||
2013 | 2012 | ||
Notes payable - banks | $ 31,632 | $ 130,044 | |
Notes payable - equipment vendors | 93,435 | 125,872 | |
Pension plan withdrawal liability | 404,672 | 411,294 | |
Notes payable - related party and stockholders, net of discount | 228,000 | 225,000 | |
Convertible debentures, net of discount of $-0- in 2013 and $8,184 in 2012 | 455,000 | 446,816 | |
Total Long Term debt | 1,212,739 | 1,339,026 | |
Less current maturities | -1,179,921 | -862,721 | |
Totals | $ 32,818 | $ 476,305 | |
Note_4_Related_Party_Transacti
Note 4. Related Party Transactions | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Notes | ' | ||||||
Note 4. Related Party Transactions | ' | ||||||
Note 4. Related Party Transactions | |||||||
In August 2011, the Company borrowed $200,000 with a Promissory Note payable to David and Edna Kasmoch, the parents of Timothy Kasmoch, the Company’s President and Chief Executive Officer. More details can be found in Note 3, Pledged Assets, Line of Credit and Long-Term Debt. | |||||||
During 2012 the Company paid Terri Kasmoch, the spouse of Timothy Kasmoch, as an employee for business development, web site and company media marketing and stock promotion efforts for the Company. From February 2012 through her ending employment date of October 31, 2012, Ms. Kasmoch participated with the executives of the Company in reducing the salary paid to her by 10% and deferring this to a future date. Effective November 1, 2012, Ms. Kasmoch resigned from employment from the Company. Her deferred salary remains unpaid as of December 31, 2013. | |||||||
During 2013, the Company sold used equipment to Tri-State Garden Supply dba Gardenscape, a company owned and managed by the extended family of the Company’s Chief Executive Officer, Timothy Kasmoch. Cash proceeds realized totaled $30,000 on the sale, of which $10,000 was classified as an Other Receivable at December 31, 2013. | |||||||
The following table summarizes these payments for 2013 and 2012 and the balance to each of any monies owed as of December 31, 2013: | |||||||
Payee | Year | Gross Payroll | Gross Proceeds sale of equipment | Total | Account payable bal. at December 31 | Account receivable bal. at December 31 | |
Terri Kasmoch | 2012 | $ 43,333 | $ - | $ 43,333 | $ 3,900 | - | |
Gardenscape | 2013 | - | 30,000 | 30,000 | - | $ 10,000 | |
Note_5_Equity_Transactions
Note 5. Equity Transactions | 12 Months Ended | |||||
Dec. 31, 2013 | ||||||
Notes | ' | |||||
Note 5. Equity Transactions | ' | |||||
Note 5. Equity Transactions | ||||||
In July 2010, the Company executed a Purchase Agreement, License and Development Agreement and Registration Rights Agreement (the “Agreements”), with VC Energy I, LLC of Las Vegas, NV, or VC Energy. Concurrently, the Company sold VC Energy 200,000 shares of the Company's unregistered common stock, issued VC Energy 200,000 warrants and granted VC Energy an option to acquire another 400,000 common shares and 400,000 warrants. | ||||||
In August 2011, the Company and VC Energy signed a Termination Agreement and terminated the License and Development Agreement, a Promissory Note and an Escrow Agreement. All other agreements between the Company and VC Energy remained in force, with certain exceptions. In April 2012, the Company and VC Energy terminated the remaining agreements in effect. As a result, the Company was no longer required to account for the future changes in the Company’s stock price after the second quarter of 2012, with regards to the warrants previously held by VC Energy. | ||||||
In April 2012, the Company and VC Energy terminated the remaining agreements in effect, and VC Energy waived certain provisions regarding the remaining warrants held, including the removal of the “down-round” provision, and subsequently assigned those warrants to other, non-VC Energy holders. As a result, the Company was no longer required to account for the future changes in the Company’s stock price after the second quarter of 2012, with regards to the fair value of the warrants previously held by VC Energy. | ||||||
In both the VC Energy Agreements and its Amendment, the Company accounted for the warrants issued within the transaction with a provision that protects holders from declines in the stock price (“down-round” provisions) as a derivative security at fair value with future changes in fair value recorded in earnings. As of December 31, 2013, VC Energy owns no warrants and correspondingly the Company has no liability recorded. However, through the second quarter of 2012, the Company was periodically required to re-measure the fair value of the remaining warrants at the Balance Sheet date, with adjustments in the value recorded through the income statement as a gain or loss. During the twelve months ended December 31, 2013 and 2012, the Company recorded a gain of $-0- and $12,196, respectively, on the revaluation and partial cancellation from the two issuances of the warrants to the end of the period. | ||||||
In 2010 through 2012, the Company issued stock warrants and shares of unregistered Common Stock to Strategic Asset Management, Inc., (“SAMI”), as compensation for services rendered by SAMI to the Company under a Financial Public Relations Agreement, effective as of December 15, 2010. More details of this Agreement are contained in Note 2. | ||||||
In February 2012, the Company issued 15,000 shares of unregistered common stock to Financial Insights, for investor relations services. In July 2012, Financial Insights returned all of these shares of common stock to the Company as part of an agreement. More details of this Agreement are contained in Note 2. | ||||||
In March 2012, the Company issued 80,000 shares of unregistered common stock to Newport Coast Securities for financial and investor relations services for a three month period. More details of this Agreement are contained in Note 2. | ||||||
In August 2012, the Company issued 60,000 shares of unregistered common stock to Equiti-trend Advisors LLC/JT Trading, LLC for public relations and corporate communication services over a six month period. More details of this Agreement are contained in Note 2. | ||||||
In January 2013, the Company issued 70,000 shares of unregistered common stock to Webracadabra Internet Works, LLC, dba Oregon Resource Innovations, for financial consulting services over a six month period. More details of this Agreement are contained in Note 2. | ||||||
In April 2013, the Company issued 150,000 shares of unregistered common stock and 150,000 warrants to purchase unregistered shares of common stock to Rakgear, Inc. for financial consulting services. More details of this Agreement are contained in Note 2. | ||||||
In March 2012, the Company automatically extended the expiration date of the warrants by one (1) year to two warrant holders, Timothy R. Kasmoch, President and CEO of the Company, and, Strategic Asset Management Co, Inc., holders of 50,000 and 120,000 warrants, respectively, and both were extended to March 2013. | ||||||
In April 2012, the Company modified all Company warrants whose expiration date was before December 31, 2015, by extending that expiration date to December 31, 2015, and to modify all Company warrants, regardless of their expiration date, by reducing the exercise price to $1.00. All other terms and conditions of each class of warrant remain unchanged. | ||||||
During 2013 a total of 128,539 warrants were exercised and shares of unregistered restricted stock were issued to one insider and four non-insider owners for total net cash proceeds of $124,000. These proceeds were all used for operating expenses. Simultaneously and subject to the same terms and conditions and as further inducement to exercise the warrants, the Company issued a total of 128,539 warrants to these same owners as “replacement warrants” to acquire shares of our common stock at $1.00 per share, a price which was below the closing price of the stock on the date of each transaction. In all instances the shares and the warrants issued and sold were in a private offering transaction pursuant to an exemption under Section 4(2) of the Securities Act of 1933 for transactions by an issuer not involving a public offering. | ||||||
For the March and April 2012 extensions as well as the 2013 replacement warrants, the incremental fair value associated with these transactions has been determined using the Black-Scholes model and has been recorded as a deemed dividend to common stockholders in the accompanying Statement of Stockholders’ Equity (Deficit). For the years ended December 31, 2013 and 2012, the deemed dividend was $178,200 and $608,610, respectively. | ||||||
In addition to its first stock option plan approved in 1993, the Company has a stock option plan approved in May 2004, amended in June 2008 and again in August 2009 (the “2004 Plan”), for directors and key employees under which 2,500,000 shares of common stock may be issued. The Company also has a stock option plan approved in July 2010 (the “2010 Plan”), for directors and key employees under which 5,000,000 shares of common stock may be issued. Unless otherwise stated in the stock option agreement, options are 20% vested on the date of grant, with the balance vesting 20% per year over the next four years, except for directors whose options vest six months from the date of grant. Options were granted in 2012 and 2013 from both the 2004 and 2010 Plans at the approximate market value of the stock at date of grant, as defined in each of the plans. | ||||||
Pursuant to their respective five-year employment agreements, in March 2010 a total of 890,000 stock options were granted to the three executive officers of the Company. Twenty percent of the options vested immediately on the date of grant, with the balance of the options to vest in equal annual installments over the next four years on the anniversary date of the original grant. These options were granted pursuant to the 2004 Plan, are for a period of ten years and are intended as Incentive Stock Options. To reflect the value of the stock options granted for the employment services provided, the Company was taking a charge to earnings totaling approximately $2,358,000 through March 2014. For the years ended December 31, 2013 and 2012, this charge was $176,800 and $471,539, respectively. | ||||||
In May 2013, in connection and effective with their respective Amendment to Employment Agreement, the Board approved both a return of previously granted options and a new grant of stock options to Messrs. Kasmoch, Bohmer and McHugh, which are immediately exercisable for shares of the Company's common stock. The grants were made pursuant to both the 2004 Plan and the 2010 Plan. | ||||||
All grants awarded were priced at $1.25, in accordance with both the 2004 Plan and 2010 Plan. Future grants required under each officer’s Amendment will be priced at the time of grant. The Company took a non-cash charge to earnings of approximately $6,500 in the second quarter of 2013 to reflect the grant awarded to Mr. McHugh only, to reflect the net increase to him of 5,000 options granted currently. More information on these equity transactions is contained in this Form 10-K under Item 11, “Executive Compensation”. | ||||||
During the year ended December 31, 2013, the Company granted stock options totaling 50,000 shares, for 25,000 shares each in May and December, exclusive of the officers, to all outside directors. All options granted are for a period of ten years. The options became fully vested six months after the date of grant, and were priced, pursuant to the 2010 Plan, at $1.30 and $1.52, respectively, for a total expense of approximately $70,000, expensed ratably in 2013 and 2014 over each subsequent six-month period. More information on these equity transactions is contained in this Form 10-K under Item 10, “Directors, Executive Officers and Corporate Governance”. | ||||||
During the year ended December 31, 2012, the Company granted stock options totaling 45,000 shares, for 25,000 and 20,000 shares in April and November, respectively, exclusive of the officers, to all outside directors. All options granted are for a period of ten years. The options became fully vested six months after the date of grant, and were priced, pursuant to the 2010 Plan, at $1.12 and $0.88, respectively, for a total expense of approximately $47,000, expensed ratably in 2012 and 2013 over each subsequent six-month period. More information on these equity transactions is contained in this Form 10-K under Item 10, “Directors, Executive Officers and Corporate Governance”. | ||||||
In May 2013, the Company appointed Michael Burton-Prateley as a special advisor to the Board of Directors for a term of one year. For his services, the Company issued Mr. Burton-Prateley 25,000 stock options under the Company’s 2004 Plan at a price of $1.28 per option that vested immediately. To reflect the entire value of the options issued, the Company recorded a non-cash charge to earnings of $31,240 during the second quarter of 2013. | ||||||
Also in May 2013, the Company granted 25,000 stock options to one employee. The options granted are for a period of ten years, are exercisable at $1.28 per share and vested immediately at the date of grant. These options were granted pursuant to the 2004 Plan and are intended as Incentive Stock Options. To reflect the entire value of the stock options granted, the Company recorded a charge to earnings of approximately $32,500 in the second quarter of 2013. | ||||||
The following summarizes the stock options activity for the years ended December 31, 2013 and 2012: | ||||||
2013 | 2012 | |||||
Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||
Outstanding, beginning of year | 2,905,981 | 2.42 | 2,924,985 | 2.44 | ||
Granted | 395,000 | 1.27 | 45,000 | 1.01 | ||
Exercised | 0 | 0.00 | 704 | 1.42 | ||
Forfeited/expired during the year | 1,090,000 | 2.66 | 63,300 | 2.5 | ||
Outstanding, end of year | 2,210,981 | 2.1 | 2,905,981 | 2.42 | ||
Eligible for exercise at end of year | 2,185,981 | 2.11 | 2,519,981 | 2.32 | ||
Weighted average fair value per option for options granted during the year | 1.27 | 1.01 | ||||
Options expected to vest over the life of the Plan | 2,210,981 | 2,905,981 | ||||
The Company records compensation expense for stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes valuation model. The Company uses historical data among other factors to estimate the expected price volatility, the expected term and the expected forfeiture rate of the option. The risk-free rate is based on the U.S. Treasury yield curve in effect at the date of grant for the expected term of the option. | ||||||
The following assumptions were used to estimate the fair value of options granted: | ||||||
Year Ended December 31, | ||||||
2013 | 2012 | |||||
Expected dividend yield | 0.00% | 0.00% | ||||
Weighted average volatility | 267.60% | 247.70% | ||||
Risk free interest rate | 2.30% | 1.80% | ||||
Expected term (in years) | 7 | 7 | ||||
Note_6_Revenue_and_Major_Custo
Note 6. Revenue and Major Customers | 12 Months Ended |
Dec. 31, 2013 | |
Notes | ' |
Note 6. Revenue and Major Customers | ' |
Note 6. Revenue and Major Customers | |
For the years ended December 31, 2013 and 2012, the Company’s largest customer accounted for approximately 41% and 33% of our revenues, respectively. For the years ended December 31, 2013 and 2012, the top three customers accounted for approximately 68% and 60%, respectively, of the Company’s revenues. Florida operations accounted for approximately 97% and 94% of consolidated revenue during the years ended December 31, 2013 and 2012, respectively. The accounts receivable balance due (which are unsecured) for these three Florida customers at December 31, 2013 and 2012 was approximately $211,000 and $124,000, respectively. Beginning in March 2014, the Company’s operations in Florida have been voluntarily delayed for a short time while the Company moves assets and employs personnel to a new site in Bradley, Florida. While operations are expected to resume in Bradley in June 2014, this reduction in revenue, while temporary, has materially reduced available cash to fund current or prior expenses incurred. | |
The sludge processing agreement with the City of Toledo, Ohio, who was the Company’s largest customer for many years through 2010 and represented approximately 17% of the consolidated revenues in 2011, was not renewed at the end of 2011. The City of Toledo’s failure to renew that agreement has had a material adverse effect on the Company’s business, financial conditions and results of operations. | |
Additionally, economic considerations have made the supply of admixtures used in our processes more difficult to acquire due to coal-burning facilities operating less or not at all, primarily from the decrease in natural gas prices in the commercial marketplace. | |
A substantial portion of the Company's revenue is derived from services provided under contracts and agreements with existing licensees. Some of these contracts, especially those contracts with large municipalities, provide for termination of the contract by the customer after giving relatively short notice (in some cases as little as ten days). In addition, some of these contracts contain liquidated damages clauses, which may or may not be enforceable in the event of early termination of the contracts. If one or more of these contracts are terminated prior to the expiration of its term, and the Company is not able to replace revenues from the terminated contract or receive liquidated damages pursuant to the terms of the contract, the lost revenue could have a material and adverse effect on its business and financial condition. | |
Note_7_Commitments_and_Conting
Note 7. Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2013 | |
Notes | ' |
Note 7. Commitments and Contingencies | ' |
Note 7. Commitments and Contingencies | |
In 2010, the Company and Timothy R. Kasmoch, the President and Chief Executive Officer, entered into an Employment Agreement for a five-year term. Mr. Kasmoch is to receive an annual base salary of $150,000, subject to an annual discretionary increase. In addition, Mr. Kasmoch is eligible for an annual cash bonus and was granted stock options from the Company’s Second Amended and Restated 2004 Stock Option Plan. Generally, the Agreement may be terminated by the Company with or without cause or by the Employee for any reason. | |
In 2010, the Company and Robert W. Bohmer, the Executive Vice President and General Counsel, entered into an Employment Agreement for a five-year term. Mr. Bohmer is to receive an annual base salary of $150,000, subject to an annual discretionary increase. In addition, Mr. Bohmer is eligible for an annual cash bonus and was granted stock options from the Company’s Second Amended and Restated 2004 Stock Option Plan. Generally, the Agreement may be terminated by the Company with or without cause or by the Employee for any reason. | |
In May 2014, the Company and Mr. Bohmer agreed to an adjustment to his employment contract, making him a part-time employee and adjusting his salary to $57,200. Additional information is available in “Item 11 Executive Compensation” in this Form 10-K. | |
In 2010, the Company and James K. McHugh, the Chief Financial Officer, Secretary and Treasurer, entered into an Employment Agreement for a five-year term. Mr. McHugh is to receive an annual base salary of $125,000, subject to an annual discretionary increase. In addition, Mr. McHugh is eligible for an annual cash bonus and was granted stock options from the Company’s Second Amended and Restated 2004 Stock Option Plan. Generally, the Agreement may be terminated by the Company with or without cause or by the Employee for any reason. | |
On May 16, 2013, the Company’s Board of Directors approved an amendment to each of the Company’s executive officer’s respective employment agreement only as it applied to the stock option grant. Additional information is available in “Item 11 Executive Compensation” in this Form 10-K. | |
In February 2013, the Company received a letter from counsel on behalf of one of its stockholders (“Counsel letter”), demanding a review by the Board of option plan issuances in 2010 and 2011 to members of management. In response, the Board formed a Special Committee to evaluate the 2004 and 2010 Stock Option Plans for the issuances in 2010 pursuant to the multi-year employment agreements with Messrs. Kasmoch, Bohmer and McHugh under the 2004 Option Plan, and the 2011 award to Mr. Kasmoch under the 2010 Option Plan. In May 2013, the Special Committee and the Board finished reviewing the awards and sent a letter in reply to the Counsel letter. The Board also approved an amendment to each the executive officer’s respective employment agreement, and renegotiated their option grants such that (i) no grant in any single year exceeds the Plan Limits, and, (ii) each employee return to respective Option Plan the number of options by which his annual grant exceeded the Plan Limits for any single year. Additional information is available in Item 11 “Executive Compensation” of this Form 10-K. As a result of these actions, there is currently a proposed settlement agreement in negotiation to resolve all claims arising out of the demand, and the Company anticipates a satisfactory resolution. The Company has accrued an estimated expense of $86,500, recorded as a trade account payable, at December 31, 2013 to recognize the likely cost when a final settlement is reached. All but $20,000 of this expense will be for a non-cash component. | |
On May 16, 2013, the Company’s Board of Directors approved an amendment to each of the Company’s executive officer’s respective employment agreement. Additional information is available in the Form 8-K filed by the Company on May 22, 2013. | |
The Company’s executive and administrative offices are located in Toledo, Ohio. In April 2011, the Company signed a 68 month lease with Deerpoint Development Co., Ltd. The total minimum rental commitment for the years 2014 through 2016 is $40,800 each year. The total rental expense included in the statements of operations for the year ended December 31, 2013 and 2012 is approximately $30,600 and $38,600, respectively. Additional information is available in “Item 2 Properties” in this Form 10-K. | |
In October 2010, the Company began to lease property in Emlenton, Pennsylvania under a lease with A-C Valley Industrial Park, for one year. After September 2011, the Company operated under a month-to-month lease agreement, for a reduced rate. The total rental expense included in the statements of operations for each of the years ended December 31, 2013 and 2012 is $12,000. | |
In June 2009, the Company began to maintain an office in West Unity, Ohio under a lease with D&B Colon Leasing, LLC, for one year. In June 2010, the Company renewed the lease for an additional year through May 31, 2011, and is currently operating under a month to month lease. The total rental expense included in the statements of operations for each of the years ended December 31, 2013 and 2012 is $30,000. | |
The Company maintains an office in Daytona Beach under a lease with the County of Volusia, Florida, which was renewed in March, 2009 for five years. The total minimum rental commitment for the year ending December 31, 2014 is $12,000. The total rental expense included in the statements of operations for each of the years ended December 31, 2013 and 2012 is $48,000. Effective and subsequent to April 2014, we are operating on a month to month lease with Volusia County, until such time all of our assets and finished product have been moved off the site as approved by the County. | |
Management believes that all of the Company’s properties are adequately covered by insurance. | |
The Company operates in an environment with many financial risks, including, but not limited to, major customer concentrations, customer contract termination provisions, competing technologies, infringement and/or misappropriation of intellectual property rights, the highly competitive and, at times, seasonal nature of the industry and worldwide economic conditions. Various federal, state and governmental agencies are considering, and some have adopted, laws and regulations regarding environmental protection which could adversely affect the business activities of the Company. The Company cannot predict what effect, if any, current and future regulations may have on the operations of the Company. | |
From time to time the Company is involved in legal proceedings and subject to claims which may arise in the ordinary course of business. Certain unsecured creditors have brought civil action against the Company related to nonpayment. The Company has not accrued any additional amount related to these charges, but continue to negotiate payment plans to satisfy these creditors. | |
Note_8_Income_Tax_Matters
Note 8. Income Tax Matters | 12 Months Ended | ||
Dec. 31, 2013 | |||
Notes | ' | ||
Note 8. Income Tax Matters | ' | ||
Note 8. Income Tax Matters | |||
The composition of the deferred tax assets and liabilities at December 31, 2013 and 2012 is as follows: | |||
2013 | 2012 | ||
Gross deferred tax liabilities: | |||
Property and equipment and intangible assets | $ 64,600 | $ 48,700 | |
Gross deferred tax assets: | |||
Loss carryforwards | 5,542,300 | 4,795,300 | |
Pension plan withdrawal exp in excess of payments | 137,600 | 0 | |
Section 754 basis step up | 64,300 | 85,700 | |
Allowance for doubtful accounts | 34,400 | 30,600 | |
Deferred compensation | 28,800 | 0 | |
Litigation settlement - non-cash portion | 22,600 | 0 | |
Other | 500 | 500 | |
Less valuation allowance | -5,765,900 | -4,863,400 | |
Totals | $ 0 | $ 0 | |
The income tax provisions differ from the amount of income tax determined by applying the U.S. Federal income tax rate to pre-tax income from continuing operations for the years ended December 31, 2013 and 2012 and are as follows: | |||
2013 | 2012 | ||
Computed "expected" tax credit | $ (560,000) | $ (557,200) | |
State taxes, net of federal tax benefit | 0 | 0 | |
(Decrease) increase in income taxes resulting from: | |||
Change in valuation allowance | 1,135,300 | 164,000 | |
Nondeductible (return of) stock options and warrants | -582,700 | 174,800 | |
Net operating loss carryforward expiration | 0 | 232,800 | |
Other | 7,400 | -14,400 | |
Totals | $ 0 | $ 0 | |
The net operating losses available at December 31, 2013 to offset future taxable income total approximately $16,300,000 and expire principally in years 2018 - 2033. | |||
Note_9_Subsequent_Events
Note 9. Subsequent Events | 12 Months Ended |
Dec. 31, 2013 | |
Notes | ' |
Note 9. Subsequent Events | ' |
Note 9. Subsequent Events | |
In April 2014, the Company issued a total of $67,500 worth of its common stock under a private placement to two existing stockholders to provide operating capital. The issuances included warrants to purchase additional shares of common stock of the Company. | |
In April 2014, the Company extended the $200,000 Promissory Note payable to a related party of Timothy Kasmoch, for an additional three months. Additional details of this Note are provided in Note 3, Pledged Assets, Line of Credit and Long-Term Debt. | |
In October 2013, the Company entered into a contract to purchase real estate in Central Florida with a view towards the construction of a new facility. Due to financial constraints, in March 2014 the Company assigned the contract to purchase to a limited liability company (“BGH”) that is owned by David Kasmoch, the father of Timothy Kasmoch, the Company’s President and Chief Executive Officer. Concurrently, BGH closed on the purchase of the property, and as a condition to closing the seller of the property required the Company to guarantee payment of the financed portion of the purchase price of approximately $214,600. | |
In December 2013, the Company borrowed a total of $55,000 from two existing stockholders to provide operating capital. Both Notes Payable were for a term of three months at an interest rate of 12% and included warrants to purchase unregistered common stock of the Company. In the second quarter of 2014, the stockholders converted the Notes Payable to common stock at the fair market value of the stock at the time of each conversion, and each received warrants to purchase unregistered common stock of the Company. | |
Note_1_Operations_and_Summary_1
Note 1. Operations and Summary of Significant Accounting Policies: Nature of Operations, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Nature of Operations, Policy | ' |
A. Nature of Business – The Company owns and licenses the N-Viro Process, a patented technology to treat and recycle wastewater sludges and other bio-organic wastes, utilizing certain alkaline by-products produced by the cement, lime, electric utilities and other industries. Revenue and the related accounts receivable are due from companies acting as independent agents or licensees, principally municipalities. |
Note_1_Operations_and_Summary_2
Note 1. Operations and Summary of Significant Accounting Policies: Use of Estimates, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Use of Estimates, Policy | ' |
B. Use of Estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
Note_1_Operations_and_Summary_3
Note 1. Operations and Summary of Significant Accounting Policies: Principles of Consolidation, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Principles of Consolidation, Policy | ' |
C. Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. |
Note_1_Operations_and_Summary_4
Note 1. Operations and Summary of Significant Accounting Policies: Liquidity Disclosure, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Liquidity Disclosure, Policy | ' |
D. Going Concern - The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company has negative working capital of approximately ($1,683,000) at December 31, 2013, and has incurred recurring losses and negative cash flow from operations for the year ended December 31, 2013. Moreover, while the Company expects to arrange for replacement financing with other lending institutions, there is no borrowing availability under the line of credit. The Company has borrowed money from third parties and related parties and expects to be able to generate future cash from the exercise of common stock warrants and new equity issuances, though there can be no assurance given that such issuances or exercises will be realized. The Company has slowed payments to trade vendors, and has renegotiated payment terms with several existing and prior vendors to lengthen the time and/or reduce the amount of cash to repay these trade payables. In 2012 the Company modified all outstanding common stock warrants to reduce their weighted average exercise price. In 2013 the Company further modified all outstanding warrants to enhance their exercisability and realized $123,908 in exercises in 2013. Beginning in March 2014, the Company’s operations in Volusia County, Florida, which now represent substantially all of its revenue, have been voluntarily delayed for a short time while the Company moves assets and employs personnel to the Company’s new site in Bradley, Florida. The Company considers its relationship with the current landlord to be satisfactory overall as we work together to reduce and eventually terminate operations on their site. While operations are expected to resume in June 2014, this reduction in revenue, while temporary, has materially reduced available cash to fund current or prior expenses incurred. |
Note_1_Operations_and_Summary_5
Note 1. Operations and Summary of Significant Accounting Policies: Cash and Cash Equivalents, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Cash and Cash Equivalents, Policy | ' |
E. Cash and Cash Equivalents – The Company has cash on deposit primarily in one financial institution which, at times, may be in excess of FDIC insurance limits. For purposes of the statements of cash flows, the Company considers all certificates of deposit with initial maturities of 90 days or less to be cash equivalents. Restricted cash consists of: two certificates of deposit and corresponding accrued interest which were held as collateral against the Company's line-of-credit through August 2013; one certificate of deposit and corresponding accrued interest which is held as collateral with a performance bond on behalf of one of the Company’s licensees; one certificate of deposit and corresponding accrued interest which is held as collateral on behalf of the Florida Department of Agriculture for the Company’s soil distribution license. |
Note_1_Operations_and_Summary_6
Note 1. Operations and Summary of Significant Accounting Policies: Trade and Other Accounts Receivable, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Trade and Other Accounts Receivable, Policy | ' |
F. Accounts Receivable – The Company extends unsecured credit to customers under normal trade agreements, which require payment within 30 days. Accounts greater than 90 days past due amounted to $104,025 and $80,106 of receivables for the years ended December 31, 2013 and 2012, respectively. The Company's policy is not to accrue and record interest income on past due trade receivables. The Company does bill the customer finance charges on past due accounts and records the interest income when collected. Credit is generally granted on an unsecured basis. Periodic credit evaluations of customers are conducted and appropriate allowances are established. Management estimates an allowance for doubtful accounts, which was $101,260 and $90,000 as of December 31, 2013 and 2012, respectively. The estimate is based upon management’s review of delinquent accounts and an assessment of the Company’s historical evidence of collections. |
Note_1_Operations_and_Summary_7
Note 1. Operations and Summary of Significant Accounting Policies: Property, Plant and Equipment, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Property, Plant and Equipment, Policy | ' |
G. Property and Equipment – Property, machinery and equipment are stated at cost less accumulated depreciation. Depreciation has been computed primarily by the straight-line method over the estimated useful lives of the assets. Generally, useful lives are five to fifteen years. Leasehold improvements are capitalized and amortized over the lesser of the life of the lease or the estimated useful life of the asset. Depreciation expense amounted to $178,688 and $269,215 in 2013 and 2012, respectively. Management has reviewed property and equipment for impairment when events and circumstances indicate that the assets might be impaired and the carrying values of those assets may not be recoverable. Management believes the carrying amount is not impaired based upon estimated undiscounted future cash flows. |
Note_1_Operations_and_Summary_8
Note 1. Operations and Summary of Significant Accounting Policies: Intangible Assets, Finite-Lived, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Intangible Assets, Finite-Lived, Policy | ' |
H. Intangible Assets – Patent costs and territory rights are recorded at cost and then amortized by the straight-line method over their estimated useful lives (periods ranging from one and one-half to seventeen years; weighted-average amortization periods for patents/related intangibles and territory rights were 14.1 years for both December 31, 2013 and 2012). Amortization expense amounted to $14,438 for both 2013 and 2012. Estimated amortization expense, based on these patent costs and territory rights at December 31, 2013, for each of the ensuing five years is as follows: 2014 - $11,000; 2015 - $11,000; 2016 - $9,000; 2017 - $7,000; 2018 - $4,000. Management has reviewed intangible assets for impairment when events and circumstances indicate that the assets might be impaired and the carrying values of those assets may not be recoverable. The Company has capitalized the cost of acquiring certain customer licenses and contracts as part of the acquisition of Florida N-Viro on December 31, 2006. Amortization expense amounted to $3,219 in both 2013 and 2012. Estimated amortization expense, based on these capitalized license and contracts at December 31, 2013, for each of the ensuing five years is as follows: 2014 - $1,700; 2015 - $1,700; 2016 - $500; 2017 - $-0-; 2018 - $-0-. |
Note_1_Operations_and_Summary_9
Note 1. Operations and Summary of Significant Accounting Policies: Revenue Recognition, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Revenue Recognition, Policy | ' |
I. Revenue Recognition – Facility management revenue and royalty fees are recognized under contracts where the Company or licensees utilize the N Viro Process to treat sludge, either pursuant to a fixed-price contract or based on volumes of sludge processed. Revenue is recognized as services are performed. Alkaline admixture sales, alkaline admixture management service revenue and N-Viro SoilTM revenue are recognized upon shipment. License and territory fees are generated by selling the right to market or use the N-Viro Process in a specified territory. The Company's policy is to record revenue for the license agreements when all material services relating to the revenue have been substantially performed, conditions related to the contract have been met and no material contingencies exist. We do not recognize revenue on any non-domestic license or territory fee contracts until the cash is received, assuming all other tests of revenue recognition are met. Canada and Israel are excluded from this definition of non-domestic. Research and development revenue is recognized as work is performed to the contracting entity in accordance with the contract. |
Recovered_Sheet1
Note 1. Operations and Summary of Significant Accounting Policies: Earnings Per Share, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Earnings Per Share, Policy | ' |
J. Loss Per Common Share – Loss per common share has been computed on the basis of the weighted-average number of common shares outstanding during each period presented. For the years ended December 31, 2013 and 2012, the effects of 2,555,981 and 2,905,981 stock options outstanding, respectively, 1,849,585 and 1,619,585 warrants to purchase common stock, respectively, and, debentures that are convertible to 227,500 shares of common stock are excluded from the diluted per share calculation because they would be antidilutive. |
Recovered_Sheet2
Note 1. Operations and Summary of Significant Accounting Policies: Share-based Compensation, Option and Incentive Plans Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Share-based Compensation, Option and Incentive Plans Policy | ' |
K. Stock Options – The Company records share-based compensation expense using a fair-value based method of measurement that results in compensation costs for essentially all awards of stock-based compensation. Compensation costs are recognized over the requisite period or periods that services are rendered. |
Recovered_Sheet3
Note 1. Operations and Summary of Significant Accounting Policies: New Accounting Standards, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
New Accounting Standards, Policy | ' |
L. New Accounting Standards – There are no Accounting Standards Updates expected to have a significant effect on the Company’s consolidated financial position or results of operations. |
Recovered_Sheet4
Note 1. Operations and Summary of Significant Accounting Policies: Income Tax, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Income Tax, Policy | ' |
M. Income Taxes – Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the current period plus or minus the change during the period in deferred tax assets and liabilities. The accounting for uncertain tax positions requires the Company to evaluate each income tax position using a two step process which includes a determination as to whether it is more likely than not that the income tax position will be sustained, based upon technical merit and upon examination by the taxing authorities. At December 31, 2013 and 2012, there were no uncertain tax positions that required accrual. None of the Company’s federal or state income tax returns are currently under examination by the Internal Revenue Service (“IRS”) or state authorities. However, fiscal years 2010 and later remain subject to examination by the IRS and respective states. |
Recovered_Sheet5
Note 1. Operations and Summary of Significant Accounting Policies: Segment Reporting, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Segment Reporting, Policy | ' |
O. Segment Information – During 2013, the Company determined that it currently operates in one segment based on the financial information upon which the chief operating decision maker regularly assesses performance and allocates resources. The chief operating decision maker is the Chief Executive Officer. |
Note_2_Balance_Sheet_Data_Asse
Note 2. Balance Sheet Data: Assets Not Producing Revenue, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Assets Not Producing Revenue, Policy | ' |
The Company is at present not taking a charge for depreciation on certain assets located at its demo fuel site in Pennsylvania because these assets were not producing revenue in either 2012 or 2013. |
Note_3_Pledged_Assets_Line_of_1
Note 3. Pledged Assets, Line of Credit and Long-term Debt: Derivatives, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Derivatives, Policy | ' |
Because the fair market value of the Company’s common stock (the underlying security in the Debentures) may have been above the conversion price of $2.00 per share at the date of issuance, the Company was required under GAAP to record a discount given for certain (now) “expired” Debentures sold, which totaled $184,975. The discount was then required to be amortized as a period expense over the periods the Debentures were scheduled to be outstanding, which averaged 20 months, through the maturity date of June 30, 2011. Amortization expense on these “expired” Debentures for each of the twelve months ended December 31, 2013 and 2012 was $-0-. | |
For periods subsequent to June 30, 2011, the Company is required under GAAP to record a discount for certain Debentures replaced, which totals $32,737 and was recorded as a gain on debt modification during the quarter ended June 30, 2011. The discount is required to be amortized as a period expense over the next eight quarters the Debentures are scheduled to be outstanding. Amortization expense for each of the twelve months ended December 31, 2013 and 2012 was $8,184 and $16,368, respectively. |
Note_6_Revenue_and_Major_Custo1
Note 6. Revenue and Major Customers: Major Customers, Policy (Policies) | 12 Months Ended |
Dec. 31, 2013 | |
Policies | ' |
Major Customers, Policy | ' |
A substantial portion of the Company's revenue is derived from services provided under contracts and agreements with existing licensees. Some of these contracts, especially those contracts with large municipalities, provide for termination of the contract by the customer after giving relatively short notice (in some cases as little as ten days). In addition, some of these contracts contain liquidated damages clauses, which may or may not be enforceable in the event of early termination of the contracts. If one or more of these contracts are terminated prior to the expiration of its term, and the Company is not able to replace revenues from the terminated contract or receive liquidated damages pursuant to the terms of the contract, the lost revenue could have a material and adverse effect on its business and financial condition. |
Recovered_Sheet6
Note 1. Operations and Summary of Significant Accounting Policies: Schedule of Other Significant Noncash Transactions (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Tables/Schedules | ' | ||
Schedule of Other Significant Noncash Transactions | ' | ||
2013 | 2012 | ||
Rakgear, Inc. - value of stock and warrants issued on consulting agreement | $ 487,900 | $ 0 | |
Oregon Resource Innovations - value of stock issued on consulting agreement | 70,000 | 0 | |
Catalyst Corner, LLC - value of stock issued on consulting agreement | 3,600 | 0 | |
Newport Coast Securities - value of stock issued on agreement | 0 | 104,000 | |
Equiti-trend Advisors, LLC - value of stock issued on agreement | 0 | 75,000 | |
SAMI - value of stock and warrants issued on public relations agreement | 0 | 421,300 | |
Totals | $ 561,500 | $ 600,300 |
Note_2_Balance_Sheet_Data_Prop
Note 2. Balance Sheet Data: Property, Plant and Equipment (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Tables/Schedules | ' | ||
Property, Plant and Equipment | ' | ||
2013 | 2012 | ||
Buildings and leasehold improvements | $ 119,445 | $ 119,445 | |
Equipment | 2,118,863 | 2,060,605 | |
Equipment - idle | 722,559 | 847,621 | |
Furniture, fixtures and computers | 59,896 | 59,896 | |
3,020,763 | 3,087,567 | ||
Less accumulated depreciation | 2,147,221 | 2,093,596 | |
Totals | $ 873,542 | $ 993,971 |
Note_2_Balance_Sheet_Data_Defe
Note 2. Balance Sheet Data: Deferred Costs Disclosure (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Tables/Schedules | ' | ||
Deferred Costs Disclosure | ' | ||
2013 | 2012 | ||
Deferred costs - Rakgear, Inc., less accumulated amortization (2013 - $365,925; 2012 - $73,000) | $ 121,975 | $ 0 | |
Deferred costs - SAMI, less accumulated amortization (2013 - $749,611; 2012 - $401,664) | 261,889 | 609,836 | |
Deferred costs - Equiti-trend Advisors, less accumulated amortization (2013 - $75,000; 2012 - $60,484) | 0 | 14,516 | |
Totals | $ 383,864 | $ 624,352 |
Note_2_Balance_Sheet_Data_Inta
Note 2. Balance Sheet Data: Intangible and Other Assets, Net (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Tables/Schedules | ' | ||
Intangible and Other Assets, Net | ' | ||
2013 | 2012 | ||
Patents and related intangibles, less accumulated amortization (2013 - $126,346; 2012 - $115,127) | $ 42,143 | $ 53,362 | |
Customer list, less accumulated amortization (2013 - $61,803; 2012 - $58,584) | 8,453 | 11,672 | |
Other | 17,698 | 13,935 | |
Totals | $ 68,294 | $ 78,969 |
Note_2_Balance_Sheet_Data_Sche
Note 2. Balance Sheet Data: Schedule of Accrued Liabilities (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Tables/Schedules | ' | ||
Schedule of Accrued Liabilities | ' | ||
2013 | 2012 | ||
Accrued payroll and employee benefits | $ 35,112 | $ 31,818 | |
Sales tax payable | 0 | 82 | |
Deferred compensation payable | 84,658 | 38,440 | |
Interest payable | 10,838 | 11,003 | |
Totals | $ 130,608 | $ 81,343 |
Note_3_Pledged_Assets_Line_of_2
Note 3. Pledged Assets, Line of Credit and Long-term Debt: Schedule of Debt (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Tables/Schedules | ' | ||
Schedule of Debt | ' | ||
2013 | 2012 | ||
Notes payable - banks | $ 31,632 | $ 130,044 | |
Notes payable - equipment vendors | 93,435 | 125,872 | |
Pension plan withdrawal liability | 404,672 | 411,294 | |
Notes payable - related party and stockholders, net of discount | 228,000 | 225,000 | |
Convertible debentures, net of discount of $-0- in 2013 and $8,184 in 2012 | 455,000 | 446,816 | |
Total Long Term debt | 1,212,739 | 1,339,026 | |
Less current maturities | -1,179,921 | -862,721 | |
Totals | $ 32,818 | $ 476,305 |
Note_4_Related_Party_Transacti1
Note 4. Related Party Transactions: Schedule of Related Party Transactions (Tables) | 12 Months Ended | ||||||
Dec. 31, 2013 | |||||||
Tables/Schedules | ' | ||||||
Schedule of Related Party Transactions | ' | ||||||
Payee | Year | Gross Payroll | Gross Proceeds sale of equipment | Total | Account payable bal. at December 31 | Account receivable bal. at December 31 | |
Terri Kasmoch | 2012 | $ 43,333 | $ - | $ 43,333 | $ 3,900 | - | |
Gardenscape | 2013 | - | 30,000 | 30,000 | - | $ 10,000 |
Note_5_Equity_Transactions_Sch
Note 5. Equity Transactions: Schedule of Share-based Compensation, Stock Options, Activity (Tables) | 12 Months Ended | |||||
Dec. 31, 2013 | ||||||
Tables/Schedules | ' | |||||
Schedule of Share-based Compensation, Stock Options, Activity | ' | |||||
2013 | 2012 | |||||
Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||
Outstanding, beginning of year | 2,905,981 | 2.42 | 2,924,985 | 2.44 | ||
Granted | 395,000 | 1.27 | 45,000 | 1.01 | ||
Exercised | 0 | 0.00 | 704 | 1.42 | ||
Forfeited/expired during the year | 1,090,000 | 2.66 | 63,300 | 2.5 | ||
Outstanding, end of year | 2,210,981 | 2.1 | 2,905,981 | 2.42 | ||
Eligible for exercise at end of year | 2,185,981 | 2.11 | 2,519,981 | 2.32 | ||
Weighted average fair value per option for options granted during the year | 1.27 | 1.01 | ||||
Options expected to vest over the life of the Plan | 2,210,981 | 2,905,981 |
Note_5_Equity_Transactions_Fai
Note 5. Equity Transactions: Fair Value, Option, Quantitative Disclosures (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Tables/Schedules | ' | ||
Fair Value, Option, Quantitative Disclosures | ' | ||
Year Ended December 31, | |||
2013 | 2012 | ||
Expected dividend yield | 0.00% | 0.00% | |
Weighted average volatility | 267.60% | 247.70% | |
Risk free interest rate | 2.30% | 1.80% | |
Expected term (in years) | 7 | 7 |
Note_8_Income_Tax_Matters_Sche
Note 8. Income Tax Matters: Schedule of Deferred Tax Assets and Liabilities (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Tables/Schedules | ' | ||
Schedule of Deferred Tax Assets and Liabilities | ' | ||
2013 | 2012 | ||
Gross deferred tax liabilities: | |||
Property and equipment and intangible assets | $ 64,600 | $ 48,700 | |
Gross deferred tax assets: | |||
Loss carryforwards | 5,542,300 | 4,795,300 | |
Pension plan withdrawal exp in excess of payments | 137,600 | 0 | |
Section 754 basis step up | 64,300 | 85,700 | |
Allowance for doubtful accounts | 34,400 | 30,600 | |
Deferred compensation | 28,800 | 0 | |
Litigation settlement - non-cash portion | 22,600 | 0 | |
Other | 500 | 500 | |
Less valuation allowance | -5,765,900 | -4,863,400 | |
Totals | $ 0 | $ 0 |
Note_8_Income_Tax_Matters_Sche1
Note 8. Income Tax Matters: Schedule of Components of Income Tax Expense (Benefit) (Tables) | 12 Months Ended | ||
Dec. 31, 2013 | |||
Tables/Schedules | ' | ||
Schedule of Components of Income Tax Expense (Benefit) | ' | ||
2013 | 2012 | ||
Computed "expected" tax credit | $ (560,000) | $ (557,200) | |
State taxes, net of federal tax benefit | 0 | 0 | |
(Decrease) increase in income taxes resulting from: | |||
Change in valuation allowance | 1,135,300 | 164,000 | |
Nondeductible (return of) stock options and warrants | -582,700 | 174,800 | |
Net operating loss carryforward expiration | 0 | 232,800 | |
Other | 7,400 | -14,400 | |
Totals | $ 0 | $ 0 |
Recovered_Sheet7
Note 1. Operations and Summary of Significant Accounting Policies: Liquidity Disclosure, Policy (Details) (USD $) | 12 Months Ended |
Dec. 31, 2013 | |
Details | ' |
Proceeds from stock warrant transactions | $123,908 |
Recovered_Sheet8
Note 1. Operations and Summary of Significant Accounting Policies: Property, Plant and Equipment, Policy (Details) (USD $) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Details | ' | ' |
Depreciation | $178,688 | $269,215 |
Recovered_Sheet9
Note 1. Operations and Summary of Significant Accounting Policies: Intangible Assets, Finite-Lived, Policy (Details) (USD $) | 0 Months Ended | 12 Months Ended |
Dec. 31, 2013 | Dec. 31, 2013 | |
Details | ' | ' |
Finite-Lived Intangible Assets, Weighted-Average Useful Life | 14.1 | ' |
Amortization of Intangible Assets | ' | $14,438 |
Future Amortization Expense, Year One | ' | 11,000 |
Future Amortization Expense, Year Two | ' | 11,000 |
Future Amortization Expense, Year Three | ' | 9,000 |
Future Amortization Expense, Year Four | ' | 7,000 |
Future Amortization Expense, Year Five | ' | $4,000 |
Recovered_Sheet10
Note 1. Operations and Summary of Significant Accounting Policies: Earnings Per Share, Policy (Details) | 12 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Details | ' | ' |
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount | 2,555,981 | 2,905,981 |
Note_2_Balance_Sheet_Data_Prop1
Note 2. Balance Sheet Data: Property, Plant and Equipment (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Details | ' | ' |
Buildings and Improvements, Gross | $119,445 | $119,445 |
Machinery and Equipment, Gross | 2,118,863 | 2,060,605 |
Property, Plant and Equipment, Other, Gross | 722,559 | 847,621 |
Furniture and Fixtures, Gross | 59,896 | 59,896 |
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment | 2,147,221 | 2,093,596 |
Property, Plant and Equipment, Net, Total | $873,542 | $993,971 |
Note_2_Balance_Sheet_Data_Inta1
Note 2. Balance Sheet Data: Intangible and Other Assets, Net (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Details | ' | ' |
Finite-Lived Patents, Gross | $42,143 | $53,362 |
Finite-Lived Customer Lists, Gross | 8,453 | 11,672 |
Other Finite-Lived Intangible Assets, Gross | 17,698 | 13,935 |
Intangible Assets, Net (Excluding Goodwill), Total | $68,294 | $78,969 |
Note_2_Balance_Sheet_Data_Sche1
Note 2. Balance Sheet Data: Schedule of Accrued Liabilities (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Details | ' | ' |
Accrued Payroll Taxes, Current | $35,112 | $31,818 |
Sales and Excise Tax Payable, Current | 0 | 82 |
Deferred Compensation Liability, Current | 84,658 | 38,440 |
Interest Payable, Current | 10,838 | 11,003 |
Accrued Liabilities, Current, Total | $130,608 | $81,343 |
Note_3_Pledged_Assets_Line_of_3
Note 3. Pledged Assets, Line of Credit and Long-term Debt: Schedule of Debt (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Details | ' | ' |
Notes Payable to Bank | $31,632 | $130,044 |
Other Notes Payable | 93,435 | 125,872 |
Pension and Other Postretirement and Postemployment Benefit Plans, Liabilities, Current | 404,672 | 411,294 |
Notes payable - related parties, net of discount | 228,000 | 200,000 |
Convertible debentures, net of discount | 455,000 | 446,816 |
Long-term Debt | 1,212,739 | 1,339,026 |
Current maturities of long-term debt | -92,249 | -188,902 |
Notes Payable, Noncurrent, Total | $32,818 | $476,305 |
Note_5_Equity_Transactions_Sch1
Note 5. Equity Transactions: Schedule of Share-based Compensation, Stock Options, Activity (Details) (USD $) | 0 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Details | ' | ' |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures | 395,000 | 45,000 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $1.27 | $1.01 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period | 0 | 704 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price | $0 | $1.42 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Forfeited | 1,090,000 | 63,300 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures and Expirations in Period, Weighted Average Exercise Price | $2.66 | $2.50 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number | 2,210,981 | 2,905,981 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Weighted Average Exercise Price | $2.11 | $2.32 |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested and Expected to Vest, Outstanding, Number | 2,210,981 | 2,905,981 |
Note_5_Equity_Transactions_Fai1
Note 5. Equity Transactions: Fair Value, Option, Quantitative Disclosures (Details) | 0 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Details | ' | ' |
Fair Value Assumptions, Expected Dividend Rate | 0.00% | 0.00% |
Fair Value Assumptions, Weighted Average Volatility Rate | 267.60% | 247.70% |
Fair Value Assumptions, Risk Free Interest Rate | 2.30% | 1.80% |
Fair Value Assumptions, Expected Term | '7 years | '7 years |
Note_8_Income_Tax_Matters_Sche2
Note 8. Income Tax Matters: Schedule of Deferred Tax Assets and Liabilities (Details) (USD $) | Dec. 31, 2013 | Dec. 31, 2012 |
Details | ' | ' |
Deferred Tax Liabilities, Property, Plant and Equipment | $64,600 | $48,700 |
Deferred Tax Assets, Operating Loss Carryforwards | 5,542,300 | 4,795,300 |
Deferred Tax Assets, Tax Deferred Expense, Compensation and Benefits, Pensions | 137,600 | 0 |
Deferred Tax Asset, Parent's Basis in Discontinued Operation | 64,300 | 85,700 |
Deferred Tax Assets, Tax Deferred Expense, Reserves and Accruals, Allowance for Doubtful Accounts | 34,400 | 30,600 |
Deferred Tax Assets, Tax Deferred Expense, Compensation and Benefits, Employee Compensation | 28,800 | 0 |
Deferred Tax Assets, Tax Deferred Expense, Reserves and Accruals, Legal Settlements | 22,600 | 0 |
Deferred Tax Assets, Tax Deferred Expense, Other | 500 | 500 |
Deferred Tax Assets, Valuation Allowance | -5,765,900 | -4,863,400 |
Deferred Tax Assets, Net of Valuation Allowance | $0 | $0 |
Note_8_Income_Tax_Matters_Sche3
Note 8. Income Tax Matters: Schedule of Components of Income Tax Expense (Benefit) (Details) (USD $) | 0 Months Ended | |
Dec. 31, 2013 | Dec. 31, 2012 | |
Details | ' | ' |
Current Federal Tax Expense (Benefit) | ($560,000) | ($557,200) |
Current State and Local Tax Expense (Benefit) | 0 | 0 |
Effective Income Tax Rate Reconciliation, Change in Deferred Tax Assets Valuation Allowance, Amount | 1,135,300 | 164,000 |
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Share-based Compensation Cost, Amount | -582,700 | 174,800 |
Operating Loss Carryforwards, Valuation Allowance | 0 | 232,800 |
Effective Income Tax Rate Reconciliation, Nondeductible Expense, Other, Amount | 7,400 | -14,400 |
Current Income Tax Expense (Benefit) | $0 | $0 |
Note_8_Income_Tax_Matters_Deta
Note 8. Income Tax Matters (Details) (USD $) | Dec. 31, 2013 |
Details | ' |
Operating Loss Carryforwards | $16,300,000 |