Document_and_Entity_Informatio
Document and Entity Information | 3 Months Ended | |
Mar. 31, 2015 | 12-May-15 | |
Document and Entity Information: | ||
Entity Registrant Name | N-Viro International Corporation | |
Document Type | 10-Q | |
Document Period End Date | 31-Mar-15 | |
Amendment Flag | FALSE | |
Entity Central Index Key | 904896 | |
Current Fiscal Year End Date | -19 | |
Entity Common Stock, Shares Outstanding | 8,594,233 | |
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 | 2015 | |
Document Fiscal Period Focus | Q1 |
CONDENSED_CONSOLIDATED_BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
CURRENT ASSETS | ||
Cash and Cash Equivalents - Unrestricted | $187,339 | $81,854 |
Cash and Cash Equivalents - Restricted | 65,572 | 65,529 |
Accounts Receivable, net | 147,758 | 140,070 |
Other Receivable, net | 6,305 | 51,912 |
Prepaid expenses and other assets | 75,564 | 79,719 |
Deferred costs - stock and warrants issued for services | 407,204 | 597,789 |
Total current assets | 889,742 | 1,016,873 |
Property and equipment, net | 955,323 | 998,852 |
Deposits | 27,319 | 27,319 |
TOTAL ASSETS | 1,872,384 | 2,043,044 |
CURRENT LIABILITIES | ||
Accounts Payable | 674,615 | 716,680 |
Current maturities of long-term debt | 40,456 | 63,186 |
Capital Lease Obligations, Current | 84,829 | 86,652 |
Notes payable, in default - related parties | 238,480 | 244,480 |
Convertible debentures, net of discount, in default | 375,000 | 455,000 |
Pension plan withdrawal liability, current | 376,320 | 68,917 |
Accrued liabilities | 325,145 | 320,207 |
Total current liabilities | 2,114,845 | 1,955,122 |
Long-term debt, less currrent maturities | 0 | 6,182 |
Pension plan withdrawal liability, long-term, in default | 0 | 320,472 |
Capital lease liability - long-term, less current maturities, in default | 301,025 | 319,278 |
TOTAL LIABILITIES | 2,415,870 | 2,601,054 |
STOCKHOLDERS' DEFICIT | ||
Common stock, value | 85,549 | 81,668 |
Receivable from common stock issuance | 20,000 | 0 |
Additional paid in capital | 32,590,681 | 32,103,596 |
Accumulated Deficit | -33,188,625 | -32,565,813 |
Total Stockholders' equity (deficit) before treasury stock | -532,395 | -380,549 |
Treasury stock, at cost | 11,091 | 177,461 |
Total Stockholders' Deficit | -543,486 | -558,010 |
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $1,872,384 | $2,043,044 |
CONDENSED_CONSOLIDATED_BALANCE1
CONDENSED CONSOLIDATED BALANCE SHEETS - Parenthetical (USD $) | Mar. 31, 2015 | Dec. 31, 2014 |
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 | 8,554,911 | 8,166,789 |
Treasury Stock, at cost - Shares | 2,000 | 32,000 |
CONDENSED_CONSOLIDATED_STATEME
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Condensed Consolidated Statements of Operations | ||
REVENUES | $348,919 | $523,588 |
COST OF REVENUES | 352,640 | 502,848 |
GROSS PROFIT (LOSS) | -3,721 | 20,740 |
OPERATING EXPENSES | ||
Selling, General and Administrative | 447,494 | 477,471 |
Gain on disposal of assets | 0 | -67,679 |
Total Operating Expenses | 447,494 | 409,792 |
OPERATING LOSS | -451,215 | -389,052 |
OTHER INCOME (EXPENSE) | ||
Interest income | 43 | 52 |
Interest expense | -35,517 | -51,084 |
Total other income (expense) | -35,474 | -51,032 |
LOSS BEFORE INCOME TAXES | -486,689 | -440,084 |
Federal and state income taxes | 0 | 0 |
NET LOSS | ($486,689) | ($440,084) |
Basic and diluted loss per share | ($0.06) | ($0.06) |
Weighted average common shares outstanding - basic and diluted | 8,225,244 | 6,924,021 |
CONDENSED_CONSOLIDATED_STATEME1
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Condensed Consolidated Statements of Cash Flows | ||
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES | ($245,674) | $38,886 |
Cash Flows From Investing Activities | ||
Purchases of property and equipment | 13,273 | 0 |
Proceeds from sale of Property and Equipment | 45,608 | 77,395 |
Increases in (decreases to) restricted cash | 43 | 52 |
Net cash provided by investing activities | 32,292 | 77,343 |
Cash Flows From Financing Activities | ||
Private placements of stock, net | 373,855 | 0 |
Principal payments on Notes Payable - related party | -6,000 | 0 |
Principal payments on long-term obligations | -48,988 | -31,968 |
Net cash provided by (used in) financing activities | 318,867 | -31,968 |
Net Increase in Cash and Cash Equivalents | 105,485 | 84,261 |
Cash and Cash Equivalents - Beginning | 81,854 | 14,344 |
Cash and Cash Equivalents - Ending | 187,339 | 98,605 |
Supplemental disclosure of cash flows information: | ||
Cash paid during the three months ended for interest | 42,496 | 30,690 |
Non-cash investing and financing activities: | ||
During the three months ended March 31, 2015, the Company issued common stock with a fair value of $81,244 as part of a conversion of debentures. | 81,244 | 0 |
During the three months ended March 31, 2015, the Company issued common stock with a fair value of $20,000 in exchange for a note receivable. | $0 | $20,000 |
Note_1_Organization_and_Basis_
Note 1. Organization and Basis of Presentation | 3 Months Ended |
Mar. 31, 2015 | |
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 three months ended March 31, 2015 may not be indicative of the results of operations for the year ending December 31, 2015. 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, 2014. | |
The financial statements are consolidated as of March 31, 2015, December 31, 2014 and March 31, 2014 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, 2014. | |
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 $1,225,000 at March 31, 2015 and has incurred recurring losses and negative cash flows from operations. Moreover, while the Company hopes to arrange for substitute financing arrangements for the line of credit that was closed during 2014, there can be no assurance that additional financing will be available. 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 2013 and 2014, the Company modified all outstanding warrants to enhance their exercisability and realized approximately $124,000 and $122,000 in exercises in 2013 and 2014, respectively. 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. While operations resumed in Bradley in June 2014, this reduction in revenue materially reduced available cash to fund 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_Longterm_Debt
Note 2. Long-term Debt | 3 Months Ended |
Mar. 31, 2015 | |
Notes | |
Note 2. Long-term Debt | Note 2. Long-Term Debt |
In August 2011, the Company borrowed $200,000 with a Promissory Note payable to David and Edna Kasmoch (related parties), 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 the January, April and July due dates during 2014 and 2015, and as of March 31, 2015 the Note was due October 30, 2014, and the Company is in default. The Company expects to extend the Note in the near future and pay it in full in 2015, although there can be no assurance the Company will have adequate cash flow to allow for any additional payments or that the maturity date will be extended. | |
In December 2013, the Company borrowed a total of $28,000, net of debt discount of $27,000, from two existing stockholders (related parties) 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. In December 2013, the Company received a Notice of Default from Central States, and 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 principal and interest payments of $6,000 per month for the first twelve months and principal and interest payments of $10,000 per month for the following six months, with a balloon payment of approximately $312,000 due on or before February 1, 2016. Interest is charged at the Prime rate plus 2% (effective rate of 5.25% at March 31, 2015). Concurrently a separate security agreement was agreed on, effectively securing all of the Company’s assets and future rights to assets. As of the date of this filing, the Company is in compliance with the new settlement agreement. | |
From the beginning of 2006 through the first quarter of 2015, the Company borrowed a total of $1,677,100 from ten lenders to purchase processing and automotive equipment. As of March 31, 2015, one term note is outstanding at 7.1% interest for a term of five years, with monthly payments of approximately $2,100 and secured by equipment. The amount owed on the equipment-secured note as of March 31, 2015 was approximately $24,100 and the note is expected to be paid in full on the maturity date in March 2016. | |
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 became due. In the first quarter 2015, one of the Company’s debenture holders converted a total of $81,244 in debt including accrued interest to 40,622 restricted shares of the Company’s common stock. 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. This reduced the amount of Debentures that remain outstanding and in default at March 31, 2015 to $375,000. | |
The Company continues to accrue interest on the principal amount at the rate set forth in the Debentures until the principal amount is paid in full. The Company 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_3_Capital_Lease
Note 3. Capital Lease | 3 Months Ended |
Mar. 31, 2015 | |
Notes | |
Note 3. Capital Lease | Note 3. Capital Lease |
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 related party, 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 with a monthly payment of $10,000. At March 31, 2015 and December 31, 2014 the Company was in default of its payments. This lease is for the Company’s operating facility which commenced operations in June 2014, and has been determined to be a capital lease. | |
The economic substance of the lease is the Company is financing the acquisition of the asset through the lease, and accordingly, it is recorded in the Company’s assets and liabilities. Assets and liabilities under capital leases initially are recorded at the lower of present value of the minimum lease payments or the fair value of the assets. The assets are depreciated over the shorter of the lease term or their estimated useful lives. | |
A liability and related asset of $420,346 was recorded in June 2014 concurrent with the start of the lease agreement. | |
Depreciation on assets under capital leases charged to expense for the three months ended March 31, 2015 and 2014 was $21,007 and $0, respectively, recorded as cost of sales. Interest charged related to capital lease liabilities for the three months ended March 31, 2015 and 2014 was $14,275 and $0, respectively, recorded as interest expense. |
Note_4_Commitments_and_Conting
Note 4. Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2015 | |
Notes | |
Note 4. Commitments and Contingencies | Note 4. 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 March 2015, Mr. Kasmoch’s Employment Agreement automatically renewed for a one-year term. | |
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 March 2015, Mr. Bohmer’s Employment Agreement automatically renewed for a one-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. | |
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. In March 2015, Mr. McHugh’s Employment Agreement automatically renewed for a one-year term. | |
In May 2013, the Company’s Board of Directors approved an amendment to the stock option grant section of the employment agreements for all of the Company’s executive officers. | |
Additional information about all of the employment agreements for the Company’s executive officers is available in “Item 11 Executive Compensation” in the Form 10-K filed on April 15, 2015. | |
In February 2013, the Company received a letter from counsel on behalf of one of our 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 on April 15, 2015. | |
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 quarter 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. Certain of the settlement payments due under the settlement are in default, and as of March 31, 2015 the Company owed approximately $10,000 in cash installment payments. | |
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 2015 through 2016 is $40,764 each year. The total rental expense included in the statements of operations for each of the three months ended March 31, 2015 and 2014 is approximately $10,200. 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 three months ended March 31, 2015 and 2014 is $3,000. | |
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 2011, and operated under a month-to-month lease until the Company closed the office in September 2014 The total rental expense included in the statements of operations for the three months ended March 31, 2015 and 2014 is $0 and $7,500, respectively. | |
The Company maintained an office in Daytona Beach under a lease with the County of Volusia, Florida, from March 2009 through March 2014. Effective and subsequent to April 2014, the Company briefly operated on a month to month lease with Volusia County, to allow the removal of certain owned assets and finished product from the site as approved by the County. The total rental expense included in the statements of operations for the three months ended March 31, 2015 and 2014 is $0 and $12,000, respectively. | |
For the three months ended March 31, 2015, the Company paid a total of $6,600 recorded as rent in selling, general and administrative expense on behalf of the Chief Executive Officer. No future commitment exists as the residential building lease is not in the name of the Company; however, the Company expects to pay an additional $15,400 through the lease term maturing October 31, 2015. | |
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 each of the years ending December 31, 2015 through 2016 is $37,900 and for the year ending December 31, 2017 is $28,400. The total rental expense included in the statements of operations for the three months ended March 31, 2015 and 2014 is $9,465 and $0, respectively. | |
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 | 3 Months Ended |
Mar. 31, 2015 | |
Notes | |
Note 5. New Accounting Standards | Note 5. New Accounting Standards |
Accounting Standards Updates not effective until after March 31, 2015 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 | 3 Months Ended |
Mar. 31, 2015 | |
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 | 3 Months Ended |
Mar. 31, 2015 | |
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 the three months ended March 31, 2015 and 2014 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 | 3 Months Ended |
Mar. 31, 2015 | |
Notes | |
Note 8. Common Stock | Note 8. Common Stock |
In October 2012, the Company issued 300,000 shares of common stock and granted 150,000 stock warrants to Strategic Asset Management, Inc., or SAMI, to extend the period of services performed in connection with a 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 both the three months ended March 31, 2015 and 2014, the charge to earnings was approximately $34,200. | |
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 three months ended March 31, 2015 and 2014 the charge to earnings was approximately $0 and $122,000, respectively. | |
In September 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 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 the three months ended March 31, 2015 and 2014 the charge to earnings for the entire agreement was approximately $145,200 and $0, respectively, of which the non-cash portion of the agreement was approximately $115,200 and $0, respectively. | |
In November 2014, the Company executed a Public Relations Agreement with Global IR Group, Inc., for a one year term. For its services, the Company issued Global IR 100,000 shares of the Company’s unregistered common stock. To reflect the entire value of the stock issued, the Company is recording a non-cash charge to earnings of $165,000 ratably through November 19, 2015, the ending date of the agreement. For the three months ended March 31, 2015 and 2014 the charge to earnings was approximately $41,300 and $0, respectively. | |
During the first quarter of 2015, the Company entered into share purchase agreements with a total of eleven Purchasers pursuant to which the Company sold 395,000 shares of its common stock (the “Shares”) to the Purchasers for a total of $395,000, of which $20,000 was received in April 2015, or a purchase price of $1.00 per share, to provide operating capital. All but 30,000 shares were 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”). The Company issued 30,000 shares in 2015 it held in its treasury. 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 | 3 Months Ended |
Mar. 31, 2015 | |
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. | |
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 could have been 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 2014 only from the 2010 Plan at the market value of the stock at date of grant, as defined in the plan. | |
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 vested in 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 three months ended March 31, 2015 and 2014, the Company recorded an expense of approximately $-0- and $18,400, 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 vested in February 2015. To reflect the value of the stock options granted, the Company took a charge to earnings totaling approximately $47,900 ratably over the subsequent six-month period. For the three months ended March 31, 2015, the Company recorded an expense of approximately $16,000. | |
In October 2014, the Company granted stock options totaling 12,500 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 $1.21 and do not vest until April 2015. To reflect the value of the stock options granted, the Company is taking a charge to earnings totaling approximately $16,600 ratably over the subsequent six-month period. For the three months ended March 31, 2015, the Company recorded an expense of $8,300. | |
In November 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 $1.59 and do not vest until May 2015. To reflect the value of the stock options granted, the Company is taking a charge to earnings totaling approximately $43,200 ratably over the subsequent six-month period. For the three months ended March 31, 2015, the Company recorded an expense of $21,600. |
Note_10_Stock_Warrants
Note 10. Stock Warrants | 3 Months Ended |
Mar. 31, 2015 | |
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. | |
No warrants transactions occurred in the first quarter of either 2015 or 2014. |
Note_11_Income_Tax
Note 11. Income Tax | 3 Months Ended |
Mar. 31, 2015 | |
Notes | |
Note 11. Income Tax | Note 11. Income Tax |
For the three months ended March 31, 2015 and 2014, 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 | 3 Months Ended |
Mar. 31, 2015 | |
Notes | |
Note 12. Subsequent Events | Note 12. Subsequent Events |
In April 2015, one of the Company’s debenture holders converted a total of $10,016 in debt including accrued interest to 5,008 restricted shares of the Company’s common stock. 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 2015, the Company entered into share purchase agreements with a total of two Purchasers pursuant to which the Company sold 15,000 shares of its common stock (the “Shares”) to the Purchasers for a total of $15,000, or a purchase price of $1.00 per share, to provide operating capital. All the shares were 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_1_Organization_and_Basis_1
Note 1. Organization and Basis of Presentation: Consolidation Policy (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Policies | |
Consolidation Policy | The financial statements are consolidated as of March 31, 2015, December 31, 2014 and March 31, 2014 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) | 3 Months Ended |
Mar. 31, 2015 | |
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) | 3 Months Ended |
Mar. 31, 2015 | |
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 $1,225,000 at March 31, 2015 and has incurred recurring losses and negative cash flows from operations. Moreover, while the Company hopes to arrange for substitute financing arrangements for the line of credit that was closed during 2014, there can be no assurance that additional financing will be available. 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 2013 and 2014, the Company modified all outstanding warrants to enhance their exercisability and realized approximately $124,000 and $122,000 in exercises in 2013 and 2014, respectively. 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. While operations resumed in Bradley in June 2014, this reduction in revenue materially reduced available cash to fund 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_3_Capital_Lease_Lease_Pol
Note 3. Capital Lease: Lease, Policy (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Policies | |
Lease, Policy | The economic substance of the lease is the Company is financing the acquisition of the asset through the lease, and accordingly, it is recorded in the Company’s assets and liabilities. Assets and liabilities under capital leases initially are recorded at the lower of present value of the minimum lease payments or the fair value of the assets. The assets are depreciated over the shorter of the lease term or their estimated useful lives. |
Note_4_Commitments_and_Conting1
Note 4. Commitments and Contingencies: Legal Costs, Policy (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Policies | |
Legal Costs, 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) | 3 Months Ended |
Mar. 31, 2015 | |
Policies | |
New Accounting Pronouncements Policy | Accounting Standards Updates not effective until after March 31, 2015 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) | 3 Months Ended |
Mar. 31, 2015 | |
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) | 3 Months Ended |
Mar. 31, 2015 | |
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 the three months ended March 31, 2015 and 2014 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) | 3 Months Ended |
Mar. 31, 2015 | |
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) | 3 Months Ended |
Mar. 31, 2015 | |
Policies | |
Share-based Compensation Arrangement by Share-based Payment Award, Description | 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 could have been 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. |
Note_10_Stock_Warrants_Stock_W
Note 10. Stock Warrants: Stock Warrant Expense Policy (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Policies | |
Stock Warrant 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_11_Income_Tax_Deferred_Ta
Note 11. Income Tax: Deferred Tax Liability Policy (Policies) | 3 Months Ended |
Mar. 31, 2015 | |
Policies | |
Deferred Tax Liability Policy | For the three months ended March 31, 2015 and 2014, 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_Longterm_Debt_Details
Note 2. Long-term Debt (Details) (USD $) | 3 Months Ended | 0 Months Ended | |||
Mar. 31, 2015 | Mar. 31, 2015 | Dec. 31, 2014 | Feb. 01, 2016 | Sep. 30, 2014 | |
Notes payable, in default - related parties | $238,480 | $238,480 | $244,480 | ||
Debt Instrument, Interest Rate, Stated Percentage | 7.10% | 7.10% | |||
Repayments of Secured Debt | 2,100 | ||||
Secured Debt, Other | 24,100 | 24,100 | |||
Debt Instrument, Convertible, Conversion Price | $2 | $2 | |||
Debt Instrument, Convertible, Effective Interest Rate | 8.00% | ||||
Debt Conversion, Converted Instrument, Amount | 81,244 | ||||
Debt Conversion, Converted Instrument, Shares Issued | 40,622 | ||||
Convertible debentures, net of discount, in default | 375,000 | 375,000 | 455,000 | ||
Central States Southeast and Southwest Areas Pension Fund | |||||
Liabilities Subject to Compromise, Pension and Other Postretirement Obligations | 415,000 | ||||
Debt Instrument, Periodic Payment Terms, Balloon Payment to be Paid | 312,000 | ||||
David and Edna Kasmoch | |||||
Notes payable, in default - related parties | $200,000 | $200,000 | |||
Related Party Debt Transaction, Rate | 12.00% | 12.00% |
Note_3_Capital_Lease_Details
Note 3. Capital Lease (Details) (Bowling Green Holdings, LLC, USD $) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Bowling Green Holdings, LLC | ||
Capital Leases, Income Statement, Amortization Expense | $21,007 | $0 |
Capital Leases, Income Statement, Interest Expense | $14,275 | $0 |
Note_4_Commitments_and_Conting2
Note 4. Commitments and Contingencies (Details) (USD $) | 3 Months Ended | 12 Months Ended | 3 Months Ended | 12 Months Ended | ||
Mar. 31, 2014 | Mar. 31, 2014 | Mar. 31, 2015 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Litigation Settlement, Expense | $93,900 | $180,400 | ||||
Caterpillar Financial | ||||||
Operating Leases, Rent Expense, Minimum Rentals | 28,400 | 37,900 | 37,900 | |||
Operating Leases, Rent Expense | 0 | 9,465 | ||||
Deerpoint Development Co., Ltd. | ||||||
Operating Leases, Rent Expense, Minimum Rentals | 40,764 | 40,764 | 40,764 | |||
Operating Leases, Rent Expense | 10,200 | 10,200 | ||||
Allegheny-Clarion Valley Development Corporation | ||||||
Operating Leases, Rent Expense | 3,000 | 3,000 | ||||
D&B Colon Leasing, LLC | ||||||
Operating Leases, Rent Expense | 7,500 | 0 | ||||
County of Volusia, Florida | ||||||
Operating Leases, Rent Expense | 12,000 | 0 | ||||
Timothy R. Kasmoch | ||||||
Officers' Compensation | 150,000 | 150,000 | ||||
Operating Leases, Rent Expense | 6,600 | |||||
Robert W. Bohmer | ||||||
Officers' Compensation | 57,200 | 57,200 | ||||
James K. McHugh | ||||||
Officers' Compensation | $125,000 | $125,000 |
Note_8_Common_Stock_Details
Note 8. Common Stock (Details) (USD $) | 3 Months Ended | ||
Mar. 31, 2015 | Mar. 31, 2014 | Dec. 31, 2014 | |
Proceeds from Issuance of Common Stock | $395,000 | ||
Receivable from common stock issuance | 20,000 | 0 | |
Stock Issued During Period, Shares, Treasury Stock Reissued | 30,000 | ||
Strategic Asset Management, Inc. | |||
Issuance of Stock and Warrants for Services or Claims | 34,200 | 34,200 | |
Rakgear, Inc. | |||
Issuance of Stock and Warrants for Services or Claims | 0 | 122,000 | |
Dynasty Wealth, Inc. | |||
Issuance of Stock and Warrants for Services or Claims | 115,200 | 0 | |
Share-based Goods and Nonemployee Services Transaction, Expense | 145,200 | 0 | |
Global IR Group, Inc. | |||
Issuance of Stock and Warrants for Services or Claims | $41,300 | $0 |
Note_11_Income_Tax_Deferred_Ta1
Note 11. Income Tax: Deferred Tax Liability Policy (Details) | 3 Months Ended | |
Mar. 31, 2015 | Mar. 31, 2014 | |
Details | ||
Effective Income Tax Rate Reconciliation, Percent | 0.00% | 0.00% |