Commitments and Contingencies

3 Months Ended

Mar. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

6. Commitments and Contingencies

Leases

The Company leases a plant in Kentucky under an operating lease which expires May 31, 2013. Monthly base rental payments approximate $3,300. Rent expense for the three month periods ended March 31, 2013 and 2012, was $10,234 and $18,447, respectively.

Employment and Consulting Agreements

During 2013 the Company entered into a three month consulting agreement, effective February 1, 2013 with an unrelated third party. Under the terms of the agreement, the consultant receives $15,000 per month, and an option to purchase 250,000 shares of common stock at $0.20 per share, which vests in three months, on May 1, 2013, and expires 2023. In addition, the consultant received options to purchase 375,000 shares of common stock at $0.40 and 375,000 options at $0.80, contingent on the Company’s revenue exceeding $5,000,000 and $10,000,000, as defined.

The Company has entered into various other agreements with officers, directors, employees and consultants that expire in one to five years. As of March 31, 2013, the agreements provide collectively for the issuance of stock options, at exercise prices of $0.40 and $0.80, underlying 5,375,000 shares of common stock issuable upon the Company’s revenue exceeding $5,000,000 and $10,000,000, as defined. The Company’s President annual base salary of $120,000 was amended to $145,000 effective October 12, 2012. Annual compensation agreements for other officers, directors, employees and consultants range from $5,000 per month to amounts to be determined by the Board of Directors. In addition, the agreements provide for bonus compensation to these individuals aggregating 11.5 percent of the Company’s pretax income.

Legal Matters

In the normal course of business operations the Company may become involved in various legal matters. At March 31, 2013, the Company’s management does not believe that there are any potential legal matters that could have an adverse effect on the Company’s financial position.

In November 2009, the Company entered into a settlement agreement to resolve all aspects of litigation relating to a patent suit. As part of that settlement agreement, the Company received $440,000 as reimbursement for litigation costs. The Company also was awarded $200,000 in eight installments of $25,000 every six months beginning on January 15, 2011, in return for an exclusive patent license. The term of the license agreement is consistent with the term of the $25,000 semiannual payments. The $25,000 installments are being recorded as revenue only upon receipt of the funds. As of March 31, 2013, $75,000 remained to be paid to the Company under this agreement.