Document_and_Entity_Informatio
Document and Entity Information | 9 Months Ended | |
Sep. 30, 2014 | Nov. 13, 2014 | |
Document and Entity Information: | ' | ' |
Entity Registrant Name | 'N-Viro International Corporation | ' |
Document Type | '10-Q | ' |
Document Period End Date | 30-Sep-14 | ' |
Amendment Flag | 'false | ' |
Entity Central Index Key | '0000904896 | ' |
Current Fiscal Year End Date | '--12-31 | ' |
Entity Common Stock, Shares Outstanding | ' | 7,705,639 |
Entity Filer Category | 'Smaller Reporting Company | ' |
Entity Current Reporting Status | 'Yes | ' |
Entity Voluntary Filers | 'No | ' |
Entity Well-known Seasoned Issuer | 'No | ' |
Document Fiscal Year Focus | '2014 | ' |
Document Fiscal Period Focus | 'Q3 | ' |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
CURRENT ASSETS | ' | ' |
Cash and Cash Equivalents - Unrestricted | $30,149 | $14,344 |
Cash and Cash Equivalents - Restricted | 150,144 | 66,592 |
Accounts Receivable, net | 110,252 | 300,910 |
Related party | 25,000 | 10,000 |
Prepaid expenses and other assets | 93,855 | 57,571 |
Deferred costs - stock and warrants issued for services | 578,142 | 258,613 |
Total current assets | 987,542 | 708,030 |
Property and equipment, net | 1,048,898 | 873,542 |
Intangible and other assets, net | 33,696 | 193,545 |
TOTAL ASSETS | 2,070,136 | 1,775,117 |
CURRENT LIABILITIES | ' | ' |
Accounts Payable | 712,776 | 850,702 |
Line of Credit, in default | 106,267 | 218,000 |
Current maturities of long-term debt | 87,141 | 92,249 |
Current maturity of capital lease liability | 78,736 | 0 |
Notes payable, $200,000 in default (2014) - related parties | 250,000 | 228,000 |
Convertible debentures | 455,000 | 455,000 |
Pension plan withdrawal liability - current | 60,408 | 404,672 |
Accrued liabilities | 285,324 | 130,608 |
Total current liabilities | 2,035,652 | 2,379,231 |
Long-term debt, less currrent maturities | 12,256 | 32,818 |
Pension plan withdrawal liability, long-term | 346,147 | 0 |
Capital lease liability - long-term, less currrent maturities | 336,865 | 0 |
TOTAL LIABILITIES | 2,730,920 | 2,412,049 |
Commitments and Contingencies | 0 | 0 |
STOCKHOLDERS' DEFICIT | ' | ' |
Preferred stock, value | 0 | 0 |
Common stock, value | 78,239 | 70,475 |
Additional paid in capital | 31,638,060 | 29,864,113 |
Accumulated Deficit | -31,692,193 | -29,886,630 |
Total Stockholders' equity (deficit) before treasury stock | 24,106 | 47,958 |
Treasury stock, at cost | 684,890 | 684,890 |
Total Stockholders' Deficit | -660,784 | -636,932 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $2,070,136 | $1,775,117 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS - Parenthetical (USD $) | Sep. 30, 2014 | Dec. 31, 2013 |
Condensed 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 | 7,823,929 | 7,047,521 |
Treasury Stock, at cost - Shares | 123,500 | 123,500 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Condensed Consolidated Statements of Operations | ' | ' | ' | ' |
REVENUES | $322,031 | $837,889 | $1,015,711 | $2,559,226 |
COST OF REVENUES | 397,529 | 662,506 | 1,224,198 | 2,356,387 |
GROSS PROFIT (LOSS) | -75,498 | 175,383 | -208,487 | 202,839 |
OPERATING EXPENSES | ' | ' | ' | ' |
Selling, General and Administrative | 309,908 | 446,728 | 1,053,244 | 1,545,767 |
Impairment of intangible assets | 42,653 | 0 | 42,653 | 0 |
Gain on disposal of assets | 31,020 | -30,000 | -89,314 | -30,000 |
Total Operating Expenses | 383,581 | 416,728 | 1,006,583 | 1,515,767 |
OPERATING LOSS | -459,079 | -241,345 | -1,215,070 | -1,312,928 |
OTHER INCOME (EXPENSE) | ' | ' | ' | ' |
Gain on extinguishment of liabilities | 0 | 2,846 | 15,478 | 63,600 |
Interest income | 44 | 158 | 147 | 817 |
Amortization of discount on convertible debentures | 0 | 0 | 0 | -8,184 |
Interest expense | -28,022 | -19,620 | -103,229 | -70,859 |
Total other income (expense) | -27,978 | -16,616 | -87,604 | -14,626 |
LOSS BEFORE INCOME TAXES | -487,057 | -257,961 | -1,302,674 | -1,327,554 |
Federal and state income taxes | 0 | 0 | 0 | 0 |
NET LOSS | ($487,057) | ($257,961) | ($1,302,674) | ($1,327,554) |
Basic and diluted loss per share | ($0.07) | ($0.04) | ($0.18) | ($0.19) |
Weighted average common shares outstanding - basic and diluted | 7,433,588 | 6,920,731 | 7,153,269 | 6,812,169 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Condensed Consolidated Statements of Cash Flows | ' | ' |
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ($435,322) | $50,513 |
Cash Flows From Investing Activities | ' | ' |
Purchases of property and equipment | 31,050 | 4,628 |
Proceeds from sale of Property and Equipment | 157,452 | 0 |
Increases in (decreases to) restricted cash | 83,551 | -142,641 |
Collections on note receivable | -894 | -395 |
Net cash provided by investing activities | 43,745 | 138,408 |
Cash Flows From Financing Activities | ' | ' |
Net repayments on line of credit | -111,733 | -195,400 |
Borrowngs under long-term debt | 101,175 | 41,835 |
Private placements of stock | 367,430 | 0 |
Borrowings from related party | 50,000 | 0 |
Principal payments on long-term obligations | -121,442 | -167,393 |
Proceeds from stock warrants exercised | 121,952 | 123,878 |
Net cash provided by (used in) financing activities | 407,382 | -197,080 |
Net Increase (Decrease) in Cash and Cash Equivalents | 15,805 | -8,159 |
Cash and Cash Equivalents - Beginning | 14,344 | 52,625 |
Cash and Cash Equivalents - Ending | 30,149 | 44,466 |
Supplemental disclosure of cash flows information: | ' | ' |
Cash paid during the nine months ended for interest | 69,725 | 77,932 |
Non-cash investing and financing activities: | ' | ' |
During the nine months ended September 30, 2014, the Company issued common stock with a fair value of $460,700 as part of a consulting contract. | 460,700 | 0 |
During the nine months ended September 30, 2014, the Company entered into a capitalized lease with a net present value of $420,346 | 420,346 | 0 |
During the nine months ended September 30, 2014, the Company issued common stock with a fair value of $55,000 as conversions of debt to equity. | 55,000 | 0 |
During the nine months ended September 30, 2014, the Company recorded an account receivable of $25,000 for the sale of a fixed asset. | 25,000 | 0 |
During the nine months ended September 30, 2013, the Company issued common stock with a fair value of $561,500 as part of three consulting contracts. | 0 | 561,500 |
During the nine months ended September 30, 2013, the Company issued common stock with a fair value of $25,000 as part of a conversion of debt to equity. | $0 | $25,000 |
Note_1_Organization_and_Basis_
Note 1. Organization and Basis of Presentation | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 1. Organization and Basis of Presentation | ' |
Note 1. Organization and Basis of Presentation | |
The accompanying consolidated financial statements of N-Viro International Corporation (the “Company”) are unaudited but, in management's opinion, reflect all adjustments (including normal recurring accruals) necessary to present fairly such information for the period and at the dates indicated. The results of operations for the nine months ended September 30, 2014 may not be indicative of the results of operations for the year ending December 31, 2014. Since the accompanying consolidated financial statements have been prepared in accordance with Article 8 of Regulation S-X, they do not contain all information and footnotes normally contained in annual consolidated financial statements; accordingly, they should be read in conjunction with the consolidated financial statements and notes thereto appearing in the Company's Form 10-K for the period ending December 31, 2013. | |
The financial statements are consolidated as of September 30, 2014, December 31, 2013 and September 30, 2013 for the Company. All intercompany transactions were eliminated. | |
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. | |
Actual results could differ from those estimates. There have been no changes in the selection and application of significant accounting policies and estimates disclosed in “Item 8 – Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2013. | |
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 $1,048,000 at September 30, 2014, has incurred recurring losses and negative cash flow from operations for the year ended December 31, 2013, and incurred negative cash flow from operating activities for the first nine months of 2014. Moreover, while the Company expects to arrange for replacement financing with other lending institutions, there is no borrowing availability under the line of credit at September 30, 2014. 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, and in the first quarter of 2013 further modified all outstanding warrants and realized $124,000 in exercises. In the third quarter of 2014 the Company temporarily offered a discount on the exercise price of all outstanding warrants and realized $122,000 in exercises. Beginning in March 2014, the Company’s operations in Volusia County, Florida, which at the time represented substantially all revenue, were voluntarily delayed while the Company employed additional personnel and moved assets to the Company’s new site in Bradley, Florida. The Company considers its relationship with the landlord in Volusia County to be satisfactory overall as they work to finalize the termination of operations on their site. While operations resumed in Bradley in June 2014, this reduction in revenue, of which the Company expects to be temporary, materially reduced available cash to fund current or prior expenses incurred. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. | |
Note_2_Intangible_Assets
Note 2. Intangible Assets | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 2. Intangible Assets | ' |
Note 2. Intangible Assets | |
At September 30, 2014 , the Company recorded an impairment charge of approximately $43,000 to recognize the decline in revenue generation value of patents and other intangible assets as of the end of the quarter. Most of these assets were nearing the end of their useful lives and reflected the cost of developing patents that are either expired or have limited commercial value. | |
Note_3_Longterm_Debt_and_Line_
Note 3. Long-term Debt and Line of Credit | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 3. Long-term Debt and Line of Credit | ' |
Note 3. Long-Term Debt and Line of Credit | |
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% at September 30, 2014) 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 was repaid. As of the date of this filing, the Company is in default of the forbearance agreement, having made a total of approximately $112,000 out of the $184,000 in scheduled payments. As of November 13, 2014, the principal owed the Bank was approximately $106,000. | |
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 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 $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. In September 2014 the Company agreed to pay Central States a total of $415,000 plus interest on a financed settlement over 19 months, with payments of $6,000 per month for the first twelve months and $10,000 per month for the following six months, with a balloon payment of approximately $312,000 due on or before February 1, 2016. As of the date of this filing, the Company is in compliance with the new settlement agreement. | |
In 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. Timothy 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 was due July 30, 2014. The Company expects to extend the Note in the near future and pay it in full during 2014 or early 2015, although there can be no assurance the Company will have adequate cash flow to allow for this payment. | |
From the beginning of 2006 through the third quarter of 2014, the Company has borrowed a total of $1,677,100 from ten lenders to purchase processing and automotive equipment. As of September 30, 2014, a total of two term notes are outstanding, ranging from 6.2% to 7.1% interest for terms ranging four to five years, monthly payments totaling approximately $5,100 and all secured by equipment. The total amount owed on all equipment-secured notes as of September 30, 2014 was approximately $47,000 and all notes are expected to be paid in full on the applicable maturity date, the last of which is in March 2016. | |
During the first nine months of 2014, the Company borrowed a total of $101,200 from two lenders to finance its general/equipment and Florida workers compensation insurance policies. Two term unsecured notes are outstanding, with interest ranging from 7% to 9.9% for terms ranging seven to ten months and monthly payments totaling approximately $12,200. The total amount owed on these notes as of September 30, 2014 was approximately $43,000 and all notes are expected to be paid in full on the applicable maturity date, the last of which is in February 2015. The Company also financed its directors and officers insurance in late 2013, financing $25,600 over 10 months at 8.8% interest, and also unsecured. That note was paid off in August 2014. | |
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. | |
As of 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 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. |
Note_4_Commitments_and_Conting
Note 4. Commitments and Contingencies | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 4. Commitments and Contingencies | ' |
Note 4. Commitments and Contingencies | |
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. 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 the Form 10-K filed by the Company on June 2, 2014. | |
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 the Form 10-K filed by the Company on June 2, 2014. As a result of these actions, and after additional negotiations, on July 14, 2014 the Company and the stockholder entered into a Confidential Settlement Agreement and General Release with the following terms: Without admitting liability in connection with any of the claims asserted but in order to avoid the expenses and uncertainty of potential litigation the Company agreed: (i) the Company will adopt certain procedures to monitor future issuances of options to management; (ii) the Company will make an installment payment of $20,000 ratably over ten months to counsel for the stockholder who asserted the claim, but none of these funds will be paid to the stockholder; (iii) the Company will issue warrants to counsel for the stockholder exercisable at a predetermined price. In exchange for the foregoing the parties exchanged general releases and this matter is resolved completely. Based on the terms of the settlement, the Company accrued an estimated expense of $86,500, recorded as a trade account payable, at December 31, 2013 and, due to an increase in the underlying valuation of the warrants, an additional accrual of $93,900 for the three months ended March 31, 2014, for a total expense of $180,400 to recognize the cost of the final settlement. All but $20,000 of this expense is for the non-cash component. The Company has failed to make certain of the settlement payments due under the settlement. | |
Also in May 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 $40,764 each year. The total rental expense included in the statements of operations for each of the nine months and three months ended September 30, 2014 and 2013 is approximately $30,600 and $10,200, respectively. The Company also leases various office equipment on a month-to-month basis. | |
In October 2010, the Company began to lease property in Emlenton, Pennsylvania under a lease with Allegheny-Clarion Valley Development Corporation, 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 nine months and three months ended September 30, 2014 and 2013 is $9,000 and $3,000, respectively. | |
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 nine months and three months ended September 30, 2014 and 2013 is $22,500 and $7,500, respectively. | |
The Company maintained 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 the nine months ended September 30, 2014 is $15,000 and $36,000 in 2013, and for the three months ended September 30, 2014 is $750 and $12,000 in 2013. Effective April 2014, the Company is operating on a month to month lease with Volusia County, until such time all of the Company’s assets and finished product have been moved off the site as approved by the County. | |
In June 2014, Mulberry Processing, LLC, a wholly owned subsidiary of the Company, entered into a contract to lease certain real property and buildings in Bradley, Florida from Bowling Green Holdings, LLC (“BGH”), a company owned by David Kasmoch, the father of Timothy R. Kasmoch, the Company’s President and Chief Executive Officer. The lease term is for five years beginning June 1, 2014 and a monthly payment of $10,000. The total minimum rental commitment for the year ending December 31, 2014 is $70,000, for each of the years ending December 31, 2015 through 2018 is $120,000 and for the year ending December 31 2019 is $50,000. This lease is for the Company’s new operating facility which commenced operations in June 2014, and has been determined to be a capital lease. The assets and liabilities under capital leases are recorded at the lower of the present value of the minimum lease payments or the fair value of the asset. The assets are amortized over the term of the lease. A liability and related asset of $420,346 was recorded at June 1, 2014 concurrent with the start of the lease agreement. | |
In September 2014, the Company entered into an operating lease with Caterpillar Financial for operating equipment at its Bradley, Florida location. The lease term is for three years beginning October 2014 and a monthly payment of approximately $3,200. The total minimum rental commitment for the year ending December 31, 2014 is $9,500, for each of the years ending December 31, 2015 through 2016 is $37,900 and for the year ending December 31 2017 is $28,400. | |
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_5_New_Accounting_Standard
Note 5. New Accounting Standards | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 5. New Accounting Standards | ' |
Note 5. New Accounting Standards | |
Accounting Standards Updates not effective until after September 30, 2014 are not expected to have a significant effect on the Company’s consolidated financial position or results of operations. | |
Note_6_Segment_Information
Note 6. Segment Information | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 6. Segment Information | ' |
Note 6. Segment Information | |
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_7_Basic_and_Diluted_Incom
Note 7. Basic and Diluted Income (loss) Per Share | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 7. Basic and Diluted Income (loss) Per Share | ' |
Note 7. Basic and diluted income (loss) per share | |
Basic and diluted income (loss) per share is computed using the treasury stock method for outstanding stock options and warrants. For both the nine and three months ended September 30, 2014 and 2013 the Company incurred a net loss. Accordingly, no stock options or warrants have been included in the computation of diluted loss per share as the impact would be anti-dilutive. | |
Note_8_Common_Stock
Note 8. Common Stock | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 8. Common Stock | ' |
Note 8. Common Stock | |
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 consultant 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 recorded a non-cash charge to earnings of approximately $305,000 ratably over a 36-month period starting in December 2010. For the nine months ended September 30, 2014 and 2013, the charge to earnings was approximately $0 and $76,100, respectively. For the three months ended September 30, 2014 and 2013, the charge to earnings was approximately $0 and $25,400, respectively. | |
In August 2011, the Company issued 100,000 shares of common stock and granted 100,000 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 recorded a non-cash charge to earnings of $285,700 through December 2013, the ending date of the agreement. For the nine months ended September 30, 2014 and 2013, the charge to earnings was approximately $0 and $71,400, respectively. For the three months ended September 30, 2014 and 2013, the charge to earnings was approximately $0 and $23,800, respectively. | |
In October 2012, the Company issued 300,000 shares of common stock and granted 150,000 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 recording a non-cash charge to earnings of $421,300 starting in 2013, over a 36 month period. For the nine months ended September 30, 2014 and 2013, the charge to earnings was approximately $102,500 and $125,200, respectively. For both the three months ended September 30, 2014 and 2013, the charge to earnings was approximately $34,200. | |
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. For the nine months ended September 30, 2014 and 2013 the charge to earnings was $0 and $70,000, respectively. For the three months ended September 30, 2014 and 2013 the charge to earnings was $0 and $2,600, 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 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 recorded a non-cash charge to earnings of $487,900 ratably through March 2014, the ending date of the agreement. For the nine months ended September 30, 2014 and 2013 the charge to earnings was approximately $122,000 and $243,000, respectively. For the three months ended September 30, 2014 and 2013 the charge to earnings was approximately $0 and $122,000, respectively. | |
Effective September 15, 2014, the Company executed a Financial Public Relations Agreement with Dynasty Wealth, Inc., for a one year term. For its services, the Company issued Dynasty Wealth 350,000 warrants to purchase the Company's unregistered common stock and at an exercise price of $1.50 per share, and $10,000 per month, to be paid in either cash or shares of the Company’s unregistered common stock at the Company’s discretion. To reflect the entire value of the warrants issued, the Company is recording a non-cash charge to earnings of $460,700 ratably through September 14, 2015, the ending date of the agreement. For both the nine months and three months ended September 30, 2014 the charge to earnings for just the non-cash portion of the agreement was approximately $19,200. | |
In May 2013, the Company issued a total of 3,845 shares of unregistered common stock, valued at a total of $5,000, to five independent directors in lieu of cash owed for a board meeting attended. To reflect the value of the stock issued, the Company recorded a charge to earnings totaling $5,000 in the second quarter of 2013. | |
In April 2014, the Company issued a total of 6,175 shares of unregistered common stock, valued at a total of $5,000, to five independent directors in lieu of cash owed for a board meeting attended. To reflect the value of the stock issued, the Company recorded a charge to earnings totaling $5,000 in the second quarter of 2014. | |
In June 2014, the Company issued a total of 9,212 shares of unregistered common stock, valued at a total of $7,000, to seven independent directors in lieu of cash owed for a board meeting attended. To reflect the value of the stock issued, the Company recorded a charge to earnings totaling $7,000 in the second quarter of 2014. | |
In August 2014, the Company issued a total of 4,760 shares of unregistered common stock, valued at a total of $7,000, to seven independent directors in lieu of cash owed for a board meeting attended. To reflect the value of the stock issued, the Company recorded a charge to earnings totaling $7,000 in the third quarter of 2014. | |
In August 2014 the Company issued Deerpoint Development Company Ltd., the landlord of its administrative office, 16,200 shares of unregistered common stock at a price of $0.71 per share in exchange for three months rent, resulting in net additional expense of approximately $1,300 above the contracted amount, but saving us approximately $10,200 of cash. The stock price was calculated using the Black-Scholes valuation model. More information on this valuation method can be found in Note 9, “Stock Options”. | |
In December 2013, the Company borrowed a total of $55,000 from one of the Company’s board members and an existing stockholder 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. During the second quarter of 2014, both individuals converted their respective Note 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. | |
In April 2014, the Company entered into a share purchase agreement with one of the Company’s board members (“Purchaser”), pursuant to which the Company sold 71,429 shares of its common stock (the “Shares”) to the Purchaser for $50,000, or a purchase price of $0.70 per Share, and 71,429 warrants to purchase common stock. The Shares are restricted and the transaction was exempt from the registration requirements under the Securities Act pursuant to section 4(a)(2) as a transaction by an issuer not involving a public offering. | |
In April 2014, the Company entered into a share purchase agreement with one of the Company’s board members (“Purchaser”), pursuant to which the Company sold 25,000 shares of its common stock (the “Shares”) to the Purchaser for $17,500, or a purchase price of $0.70 per Share, and 25,000 warrants to purchase common stock. The Shares are restricted and the transaction was exempt from the registration requirements under the Securities Act pursuant to section 4(a)(2) as a transaction by an issuer not involving a public offering. | |
In May 2014, the Company entered into a share purchase agreement with one of the Company’s board members (“Purchaser”), pursuant to which the Company sold 37,313 shares of its common stock (the “Shares”) to the Purchaser for $25,000, or a purchase price of $0.67 per Share, and 37,313 warrants to purchase common stock. The Shares are restricted and the transaction was exempt from the registration requirements under the Securities Act pursuant to section 4(a)(2) as a transaction by an issuer not involving a public offering. | |
During June through September 2014, the Company entered into share purchase agreements with a total of seven Purchasers pursuant to which the Company sold 275,500 shares of its common stock (the “Shares”) to the Purchasers for a total of $275,500, or a purchase price of $1.00 per Share. The Shares are restricted and have limited “piggy-back” registration rights in connection with certain registration statement filings of the Company under the Securities Act of 1933 as amended (the “Securities Act”). All of the transactions were exempt from the registration requirements under the Securities Act pursuant to section 4(a)(2) as a transaction by an issuer not involving a public offering. |
Note_9_Stock_Options
Note 9. Stock Options | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 9. Stock Options | ' |
Note 9. Stock Options | |
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 option term and the expected forfeiture rate. 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. | |
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 2013 and 2014 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 nine months ended September 30, 2014 and 2013 this charge was $0 and $176,800, 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. Additional information is available in the Company’s Form 10-K filed June 2, 2014, under Item 11, “Executive Compensation”. | |
In November 2012, the Company granted stock options totaling 20,000 options to four directors. All of the options granted were for a period of ten years, were pursuant to the 2010 Plan, are exercisable at $0.88 and did not vest until May 2013. To reflect the value of the stock options granted, the Company recorded a charge to earnings totaling approximately $17,200 ratably over the subsequent six-month period. For the nine months ended September 30, 2014 and 2013 this charge was $0 and $13,000, respectively. | |
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. | |
In May 2013, the Company also granted stock options totaling 25,000 options to five directors. All of the options granted are for a period of ten years, are pursuant to the 2010 Plan, are exercisable at $1.30 and did not vest until November 2013. To reflect the value of the stock options granted, the Company recorded a charge to earnings totaling approximately $33,200 ratably over the subsequent six-month period. For the nine months ended September 30, 2014 and 2013 this charge was $0 and $25,900, respectively. For the three months ended September 30, 2014 and 2013 this charge was $0 and $16,600, respectively. | |
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. | |
In December 2013, the Company granted stock options totaling 25,000 options to five directors. All of the options granted are for a period of ten years, are pursuant to the 2010 Plan, are exercisable at $1.52 and did not vest until June 2014. To reflect the value of the stock options granted, the Company recorded a charge to earnings totaling approximately $36,700 ratably over the subsequent six-month period. For the nine months and three months ended September 30, 2014, the Company recorded an expense of approximately $31,800 and $0, respectively. | |
In April 2014, the Company granted stock options totaling 25,000 options to five directors. All of the options granted are for a period of ten years, are pursuant to the 2010 Plan, are exercisable at $0.81 and do not vest until October 2014. To reflect the value of the stock options granted, the Company is taking a charge to earnings totaling approximately $16,200 ratably over the subsequent six-month period. For the nine months and three months ended September 30, 2014, the Company recorded an expense of approximately $16,200 and $8,100, respectively. | |
In June 2014, the Company granted stock options totaling 35,000 options to seven directors. All of the options granted are for a period of ten years, are pursuant to the 2010 Plan, are exercisable at $0.67 and do not vest until December 2014. To reflect the value of the stock options granted, the Company is taking a charge to earnings totaling approximately $32,200 ratably over the subsequent six-month period. For the nine months and three months ended September 30, 2014, the Company recorded an expense of approximately $21,500 and $16,100, respectively. | |
In August 2014, the Company granted stock options totaling 35,000 options to seven directors. All of the options granted are for a period of ten years, are pursuant to the 2010 Plan, are exercisable at $1.47 and do not vest until February 2015. To reflect the value of the stock options granted, the Company is taking a charge to earnings totaling approximately $47,900 ratably over the subsequent six-month period. For the three months ended September 30, 2014, the Company recorded an expense of approximately $8,000. |
Note_10_Stock_Warrants
Note 10. Stock Warrants | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 10. Stock Warrants | ' |
Note 10. Stock Warrants | |
The Company records compensation expense for stock warrants based on the estimated fair value of the warrants 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 warrant term and the expected forfeiture rate. 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 warrant. | |
In February 2013, the Board of Directors approved a plan to modify all Company warrants by offering any warrant holder who exercises a “replacement warrant”. All other terms and conditions of all outstanding warrants remain unchanged. In February and March 2013, five warrant holders exercised a total of 127,264 warrants at $1.00 and were issued a total of 127,264 shares of restricted common stock and 127,264 replacement warrants. All of the $123,878 in proceeds from the exercises were used in operations. The incremental fair value of $178,200 associated with the exercises and concurrent issuances of replacement warrants was determined using the Black-Scholes model was recorded as a deemed dividend to common stockholders in the Statement of Stockholders’ Equity in the first quarter of 2013. 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. | |
In September 2014, the Board of Directors approved a plan to offer to all Company warrants holders a 25% discount on the exercise price to any warrant holder who exercises warrants, and a second 25% discount on any subsequent warrant exercise, but within a specific “discount period” and only on a temporary basis. Any warrant holder who exercised within the discount period also received a “replacement warrant” on a 1.5 to 1 basis. All other terms and conditions of all outstanding warrants remain unchanged, and the discount offer was temporary. During the discount period, five warrant holders exercised a total of 250,009 warrants at various exercise prices and were issued a total of 250,009 shares of restricted common stock and 375,014 replacement warrants. As a condition of exercise, all of the $121,952 in cash proceeds from the exercises were restricted for future payment to specific creditors as agreed upon with the warrant holders. The balance at September 30 2014 of the restricted cash balance from these warrant exercises was $83,405 and is classified as restricted in the balance sheet. The incremental fair value of $502,890 associated with the exercises and concurrent issuances of replacement warrants was determined using the Black-Scholes model and was recorded as a deemed dividend to common stockholders in the Statement of Stockholders’ Equity in the third quarter of 2014. 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. | |
Note_11_Income_Tax
Note 11. Income Tax | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 11. Income Tax | ' |
Note 11. Income Tax | |
For the nine months ended September 30, 2014 and 2013, we are fully reserving our deferred tax asset value to zero as we have not recognized the future tax benefit of current or prior period losses due to our history of operating losses. Accordingly, our effective tax rate for each period was 0%. | |
Note_12_Subsequent_Events
Note 12. Subsequent Events | 9 Months Ended |
Sep. 30, 2014 | |
Notes | ' |
Note 12. Subsequent Events | ' |
Note 12. Subsequent Events | |
As of the date of this filing, the Company expects to extend the $200,000 Promissory Note payable to a related party of Timothy Kasmoch, the Company’s CEO. Additional details are provided in Note 3, Long-Term Debt and Line of Credit. |
Note_1_Organization_and_Basis_1
Note 1. Organization and Basis of Presentation: Consolidation Policy (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Consolidation Policy | ' |
The financial statements are consolidated as of September 30, 2014, December 31, 2013 and September 30, 2013 for the Company. All intercompany transactions were eliminated. |
Note_1_Organization_and_Basis_2
Note 1. Organization and Basis of Presentation: Basis of Accounting, Policy (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Basis of Accounting, Policy | ' |
In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. |
Note_1_Organization_and_Basis_3
Note 1. Organization and Basis of Presentation: Going Concern Note (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Going Concern Note | ' |
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 $1,048,000 at September 30, 2014, has incurred recurring losses and negative cash flow from operations for the year ended December 31, 2013, and incurred negative cash flow from operating activities for the first nine months of 2014. Moreover, while the Company expects to arrange for replacement financing with other lending institutions, there is no borrowing availability under the line of credit at September 30, 2014. 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, and in the first quarter of 2013 further modified all outstanding warrants and realized $124,000 in exercises. In the third quarter of 2014 the Company temporarily offered a discount on the exercise price of all outstanding warrants and realized $122,000 in exercises. Beginning in March 2014, the Company’s operations in Volusia County, Florida, which at the time represented substantially all revenue, were voluntarily delayed while the Company employed additional personnel and moved assets to the Company’s new site in Bradley, Florida. The Company considers its relationship with the landlord in Volusia County to be satisfactory overall as they work to finalize the termination of operations on their site. While operations resumed in Bradley in June 2014, this reduction in revenue, of which the Company expects to be temporary, materially reduced available cash to fund current or prior expenses incurred. These factors raise substantial doubt as to the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. |
Note_2_Intangible_Assets_Impai
Note 2. Intangible Assets: Impairment of Intangible Assets, Policy (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Impairment of Intangible Assets, Policy | ' |
At September 30, 2014 , the Company recorded an impairment charge of approximately $43,000 to recognize the decline in revenue generation value of patents and other intangible assets as of the end of the quarter. Most of these assets were nearing the end of their useful lives and reflected the cost of developing patents that are either expired or have limited commercial value. |
Note_4_Commitments_and_Conting1
Note 4. Commitments and Contingencies: Legal Proceeding Accrual, Policy (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Legal Proceeding Accrual, Policy | ' |
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_5_New_Accounting_Standard1
Note 5. New Accounting Standards: New Accounting Pronouncements Policy. (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
New Accounting Pronouncements Policy. | ' |
Accounting Standards Updates not effective until after September 30, 2014 are not expected to have a significant effect on the Company’s consolidated financial position or results of operations. |
Note_6_Segment_Information_Seg
Note 6. Segment Information: Segment Reporting Policy (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Segment Reporting Policy | ' |
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_7_Basic_and_Diluted_Incom1
Note 7. Basic and Diluted Income (loss) Per Share: Basic and Diluted Earnings Per Share Policy (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Basic and Diluted Earnings Per Share Policy | ' |
Basic and diluted income (loss) per share is computed using the treasury stock method for outstanding stock options and warrants. For both the nine and three months ended September 30, 2014 and 2013 the Company incurred a net loss. Accordingly, no stock options or warrants have been included in the computation of diluted loss per share as the impact would be anti-dilutive. |
Note_9_Stock_Options_Sharebase
Note 9. Stock Options: Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Method Used (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Share-based Compensation Arrangement by Share-based Payment Award, Fair Value Assumptions, Method Used | ' |
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 option term and the expected forfeiture rate. 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. |
Note_9_Stock_Options_Sharebase1
Note 9. Stock Options: Share-based Compensation Arrangement by Share-based Payment Award, Description (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Share-based Compensation Arrangement by Share-based Payment Award, Description | ' |
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 2013 and 2014 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. |
Note_10_Stock_Warrants_Stock_W
Note 10. Stock Warrants: Stock Warrants Expense Policy (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Stock Warrants Expense Policy | ' |
The Company records compensation expense for stock warrants based on the estimated fair value of the warrants 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 warrant term and the expected forfeiture rate. 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 warrant. |
Note_10_Stock_Warrants_Warrant
Note 10. Stock Warrants: Warrants Exercised (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Warrants Exercised | ' |
In February 2013, the Board of Directors approved a plan to modify all Company warrants by offering any warrant holder who exercises a “replacement warrant”. All other terms and conditions of all outstanding warrants remain unchanged. In February and March 2013, five warrant holders exercised a total of 127,264 warrants at $1.00 and were issued a total of 127,264 shares of restricted common stock and 127,264 replacement warrants. All of the $123,878 in proceeds from the exercises were used in operations. The incremental fair value of $178,200 associated with the exercises and concurrent issuances of replacement warrants was determined using the Black-Scholes model was recorded as a deemed dividend to common stockholders in the Statement of Stockholders’ Equity in the first quarter of 2013. 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. | |
In September 2014, the Board of Directors approved a plan to offer to all Company warrants holders a 25% discount on the exercise price to any warrant holder who exercises warrants, and a second 25% discount on any subsequent warrant exercise, but within a specific “discount period” and only on a temporary basis. Any warrant holder who exercised within the discount period also received a “replacement warrant” on a 1.5 to 1 basis. All other terms and conditions of all outstanding warrants remain unchanged, and the discount offer was temporary. During the discount period, five warrant holders exercised a total of 250,009 warrants at various exercise prices and were issued a total of 250,009 shares of restricted common stock and 375,014 replacement warrants. As a condition of exercise, all of the $121,952 in cash proceeds from the exercises were restricted for future payment to specific creditors as agreed upon with the warrant holders. The balance at September 30 2014 of the restricted cash balance from these warrant exercises was $83,405 and is classified as restricted in the balance sheet. The incremental fair value of $502,890 associated with the exercises and concurrent issuances of replacement warrants was determined using the Black-Scholes model and was recorded as a deemed dividend to common stockholders in the Statement of Stockholders’ Equity in the third quarter of 2014. 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. |
Note_11_Income_Tax_Deferred_Ta
Note 11. Income Tax: Deferred Tax Liability Policy (Policies) | 9 Months Ended |
Sep. 30, 2014 | |
Policies | ' |
Deferred Tax Liability Policy | ' |
For the nine months ended September 30, 2014 and 2013, we are fully reserving our deferred tax asset value to zero as we have not recognized the future tax benefit of current or prior period losses due to our history of operating losses. Accordingly, our effective tax rate for each period was 0%. |
Note_2_Intangible_Assets_Impai1
Note 2. Intangible Assets: Impairment of Intangible Assets, Policy (Details) (USD $) | 3 Months Ended |
Sep. 30, 2014 | |
Details | ' |
Impairment of Intangible Assets, Finite-lived | $43,000 |
Note_3_Longterm_Debt_and_Line_1
Note 3. Long-term Debt and Line of Credit (Details) (USD $) | 1 Months Ended | 9 Months Ended | 9 Months Ended | 9 Months Ended | ||||
Sep. 30, 2014 | Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Feb. 01, 2016 | Sep. 30, 2014 | Sep. 30, 2014 | Nov. 13, 2014 | |
David and Edna Kasmoch | Central States Southeast and Southwest Areas Pension Fund | Central States Southeast and Southwest Areas Pension Fund | Monroe Bank + Trust | Monroe Bank + Trust | ||||
Line of Credit Facility, Periodic Payment, Principal | ' | ' | ' | ' | ' | ' | $36,784 | ' |
Repayments of Lines of Credit | ' | ' | ' | ' | ' | ' | 112,000 | ' |
Line of Credit as of filing date | ' | ' | ' | ' | ' | ' | ' | 106,000 |
Postretirement Obligation | ' | ' | ' | ' | ' | 415,000 | ' | ' |
Debt Instrument, Other Postretirement Balloon Payment to be Paid | ' | ' | ' | ' | 312,000 | ' | ' | ' |
Related Party Transaction, Due from (to) Related Party | ' | ' | ' | 200,000 | ' | ' | ' | ' |
Related Party Transaction, Rate | ' | ' | ' | 12.00% | ' | ' | ' | ' |
Repayments of Secured Debt - monthly | 5,100 | ' | ' | ' | ' | ' | ' | ' |
Secured Debt | 47,000 | 47,000 | ' | ' | ' | ' | ' | ' |
Repayments of Unsecured Debt | 12,200 | ' | ' | ' | ' | ' | ' | ' |
Unsecured Debt, Current | 43,000 | 43,000 | ' | ' | ' | ' | ' | ' |
Debt Instrument, Convertible, Conversion Price | $2 | $2 | ' | ' | ' | ' | ' | ' |
Debt Instrument, Convertible, Effective Interest Rate | ' | 8.00% | ' | ' | ' | ' | ' | ' |
Convertible debentures | $455,000 | $455,000 | $455,000 | ' | ' | ' | ' | ' |
Note_4_Commitments_and_Conting2
Note 4. Commitments and Contingencies (Details) (USD $) | 9 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||||||||
Sep. 30, 2014 | Dec. 31, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2014 | Dec. 31, 2015 | Dec. 31, 2015 | Dec. 31, 2014 | Jun. 30, 2014 | Jun. 01, 2014 | |
Deerpoint Development Co., Ltd. | Deerpoint Development Co., Ltd. | Deerpoint Development Co., Ltd. | Deerpoint Development Co., Ltd. | Deerpoint Development Co., Ltd. | Allegheny-Clarion Valley Development Corporation | Allegheny-Clarion Valley Development Corporation | Allegheny-Clarion Valley Development Corporation | Allegheny-Clarion Valley Development Corporation | D&B Colon Leasing, LLC | D&B Colon Leasing, LLC | County of Volusia, Florida | County of Volusia, Florida | County of Volusia, Florida | County of Volusia, Florida | County of Volusia, Florida | Caterpillar Financial | Caterpillar Financial | Robert W. Bohmer | Bowling Green Holdings, LLC | Bowling Green Holdings, LLC | Bowling Green Holdings, LLC | Bowling Green Holdings, LLC | |||
Officers' Compensation | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $57,200 | ' | ' | ' | ' |
Loss Contingency Accrual, Provision | 93,900 | 86,500 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' |
Operating Leases, Rent Expense, Minimum Rentals | ' | ' | ' | ' | ' | ' | 40,764 | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | 12,000 | 37,900 | 9,500 | ' | 120,000 | 70,000 | ' | ' |
Operating Leases, Rent Expense | ' | ' | 10,200 | 10,200 | 30,600 | 30,600 | ' | 3,000 | 7,500 | 9,000 | 22,500 | 7,500 | 22,500 | 750 | 12,000 | 15,000 | 36,000 | ' | ' | ' | ' | ' | ' | ' | ' |
Capital Lease Obligations | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | ' | $420,346 | $420,346 |
Note_8_Common_Stock_Details
Note 8. Common Stock (Details) (USD $) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2014 | Sep. 30, 2013 | Sep. 30, 2014 | Sep. 30, 2013 | |
Deerpoint Development Co., Ltd. | ' | ' | ' | ' |
Stock Value Issued During Period in Lieu of Rent | $10,200 | ' | ' | ' |
Strategic Asset Management, Inc. | ' | ' | ' | ' |
Issuance of Stock and Warrants for Services or Claims | 0 | 25,400 | 0 | 76,100 |
Strategic Asset Management, Inc.2 | ' | ' | ' | ' |
Issuance of Stock and Warrants for Services or Claims | 0 | 23,800 | 0 | 71,400 |
Strategic Asset Management, Inc.3 | ' | ' | ' | ' |
Issuance of Stock and Warrants for Services or Claims | 34,200 | 34,200 | 102,500 | 125,200 |
Oregon Resource Innovations | ' | ' | ' | ' |
Issuance of Stock and Warrants for Services or Claims | 0 | 2,600 | 0 | 70,000 |
Rakgear, Inc. | ' | ' | ' | ' |
Issuance of Stock and Warrants for Services or Claims | 0 | 122,000 | 122,000 | 243,000 |
Dynasty Wealth, Inc. | ' | ' | ' | ' |
Issuance of Stock and Warrants for Services or Claims | $19,200 | ' | $19,200 | ' |
Note_9_Stock_Options_Details
Note 9. Stock Options (Details) (Michael Burton-Prateley, USD $) | 9 Months Ended |
Sep. 30, 2013 | |
Michael Burton-Prateley | ' |
Stock Option Expense - Consultant | $31,240 |
Note_10_Stock_Warrants_Warrant1
Note 10. Stock Warrants: Warrants Exercised (Details) (USD $) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Details | ' | ' |
Proceeds from stock warrants exercised | $121,952 | $123,878 |
Note_11_Income_Tax_Deferred_Ta1
Note 11. Income Tax: Deferred Tax Liability Policy (Details) | 9 Months Ended | |
Sep. 30, 2014 | Sep. 30, 2013 | |
Details | ' | ' |
Effective Income Tax Rate, Percent | 0.00% | 0.00% |