Revenue and License Agreements

12 Months Ended

Sep. 30, 2013

Revenue and License Agreements [Abstract]

REVENUE AND LICENSE AGREEMENTS

NOTE 6         REVENUE AND LICENSE AGREEMENTS

The Company entered into a License Agreement effective March 31, 2012 (as amended by Amendment No. 1 effective April 1, 2012 and Amendment No. 2 effective May 12, 2013) with Future Fuel Limited, a British Virgin Islands limited liability company (“Licensee”), which is affiliated with Mr. Guangwei Guo, a member of our Board of Directors and a shareholder who has purchased a substantial number of shares of our Common Stock.

The Agreement grants the Licensee an exclusive right to use our Coal to Gas technology in the People’s Republic of China and the Republic of Mongolia (the “Licensed Territory”).  We did not grant the Licensee any rights outside the Licensed Territory.

The Licensee agreed to pay a license fee of Five Hundred Thousand ($500,000) Dollars (USD), within three months, but the Licensee received a credit for Four Hundred Thousand ($400,000) Dollars the Licensee previously invested in field tests, which resulted in a net upfront payment to us of One Hundred Thousand ($100,000) Dollars which was paid to us in June 2012.

In addition, the Licensee agreed to pay an annual fee of a minimum of Thirty Thousand ($30,000) Dollars (USD) per Gas Generating Unit (or GGU) for each year the GGU is capable of producing gas.  Each Gas Generating Unit is approximately 40,000 square meters of coal, lignite or other carbonaceous gas producing material of specified thickness in a field where our technology is used.  A field could have multiple Gas Generating Units.

One half (50%) of the first payment is due within (20) days after the first production or injection well is drilled on a Gas Generating Unit and one half (50%) is due upon the presence of biogenic methane gas from that Gas Generating Unit.  We received a $60,000 payment for four GGU’s in June 2012 and $60,000 for an additional four GGU’s in December 2012.

On May 12, 2013 we amended our March 31, 2012 License Agreement.  Under the terms of that license agreement, the Licensee agreed to pay us for at least fifty Gas Generating Units for the year ended March 31, 2013, whether or not the Licensee achieved that number of Gas Generating Units.  Under the terms of the license agreement before this amendment, the Licensee was obligated to pay us an additional $1,380,000 for the year ended March 31, 2013.  This amendment delayed the Licensee’s obligation to pay us a $1,500,000 minimum until the end of the first year that our technology produces commercial volumes of gas.  If we and our Licensee do not agree that our technology has produced commercial volumes of gas by December 31, 2013, either we or our Licensee can terminate the License Agreement.  Commercial volumes of gas means 2 million cubic meters of gas per year for a Gas Generating Unit (a GGU equals approximately 40,000 square meters of gas producing material of a specified thickness). We currently plan to exercise our right to terminate the license agreement with Future Fuel, unless after the first of the year, we and Future Fuel are able to negotiate a new agreement that would include a new payment schedule in which we will have a clearer path to revenue with respect to our China operations.