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INVESTMENT IN PARAGON WASTE SOLUTIONS LLC
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3 Months Ended |
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Mar. 31, 2014
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| Investment In Paragon Waste Solutions Llc | |
| INVESTMENT IN PARAGON WASTE SOLUTIONS LLC |
NOTE 7– INVESTMENT IN PARAGON WASTE SOLUTIONS LLC
At March 31, 2014 and December 31, 2013 the Company owned 54% of the membership units of PWS, Black Stone Management Services, LLC ("Black Stone"), the original inventor of the technology, owned 26%, an outside third party 10% and two related parties, each owned 5%.
In August, 2011, we acquired certain waste destruction technology intellectual property (the "IP") from Black Stone in exchange for 1,000,000 shares of our common stock valued at $100,000. In March 2012, the Company entered into an Irrevocable License & Royalty Agreement with PWS that granted to PWS an irrevocable world-wide license to the IP in exchange for a 5% royalty on all revenues from PWS and its affiliates. PWS generated no revenue for the three months ended March 31, 2014 and for the year ended December 31, 2013, therefore no royalties were due.
Since its inception through March 31, 2014, we have provided approximately $2.1 million in funding to PWS for working capital, the further development and construction of a prototype, and the construction of commercial waste destruction units for placement with licensees. None of the minority interest holders have made capital contributions or other funding to PWS. The intent of the operating agreement is that we will provide the funding as a loan to be repaid out of future earnings of PWS and prior to any capital distributions to members.
In September 2013, PWS entered into an Exclusive Use License and Joint Operations Agreement ("License Agreement") with Sterall Inc. ("Sterall"). The License Agreement grants to Sterall the use of the PWS Technology and requires payments of licensing fees, unit placement fees and distribution of net operating profits as more fully described in Footnote 7 in our 2013 Annual Report on Form 10-K filed on March 27, 2014. In the quarter ended March 31, 2014, Sterall ordered a second CoronaLux™ unit and that unit was still under construction at March 31, 2014.
In addition, on March 4, 2014, PWS entered into a Licensing and Equipment Lease Agreement with eCycling International of South Carolina, LLC ("eCycling"). The License Agreement grants to eCycling the use of the PWS Technology for an initial term of five years and requires a payment of $176,875 as an initial licensing fee and distribution of 50% of net operating profits, as defined in the agreement, in lieu of continuing royalty payments for the use of the licensed technology.
Payment received by Sterall and eCycling for licensing fees and unit fees have been recorded as deferred revenue in the accompanying condensed consolidated balance sheets at March 31, 2014 until the PWS units are placed in service. |