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 4. Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

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.

- Definition

The entire disclosure for commitments and contingencies.

+ References+ Details