Odorstar Joint Venture

6 Months Ended

Jun. 30, 2014

5.	ODORSTAR JOINT VENTURE

In 2010, the Company and BBL Distributors, LLC (“BBL”) organized OdorStar. OdorStar owns patents relating to a device for producing chlorine dioxide (the “Patents”), which, among other things, can be used in products designed to safely prevent and eliminate odors relating to mold, mildew and other sources of unpleasant odors. OdorStar’s Operating Agreement contemplates that each of the Company and BBL will make additional capital contributions to OdorStar, to the extent required by OdorStar’s business, unless one of them is unwilling or unable to contribute such additional monies, in which case the other member may contribute the additional monies, which will be considered a loan (as described below, BBL has issued a note to the Company as a result of the Company’s contribution of such additional monies during 2013). In addition, prior to August 6, 2013, OdorStar paid a royalty, funded by the Company and BBL, based upon their respective sales of products encompassing the patented technology, to an unaffiliated company that sold the Patents to BBL (BBL subsequently contributed the Patents to OdorStar). On August 6, 2013, the Company purchased the unaffiliated company’s royalty rights for $160,000. The Company and BBL Distributors, LLC share equally in profits or losses from OdorStar. Because the Company manages OdorStar, it has consolidated OdorStar in its financial statements. The Company’s consolidated balance sheets include approximately $474,000 and $474,000 in assets and $0 and $16,000 in liabilities of OdorStar at June 30, 2014 and December 31, 2013, respectively. The Company’s consolidated statements of operations include OdorStar’s operating losses of approximately $13,000 and $18,000 during the three months ended June 30, 2014 and 2013, respectively, and approximately $26,000 and $59,000 during the six months ended June 30, 2014 and 2013, respectively. During 2013, the Company made additional capital contributions to OdorStar under the provisions of OdorStar’s Operating Agreement described above, and also provided $111,420 in additional funds to OdorStar, in lieu of amounts BBL would have paid as additional capital contributions had BBL been willing and able to do so. BBL issued a note to the Company in the amount of $111,420, which was outstanding on June 30, 2014 and December 31, 2013. Payments of interest only on the note are required until December 2015, at which time all principal on the note is due and payable. In the event principal is not paid when due, the Company has the right to demand an adjustment in the Company's and BBL's capital interests in OdorStar, with the unpaid amounts treated as an additional capital contribution by the Company. The Company has made additional capital contributions to OdorStar in 2014, and has provided to OdorStar additional funds in lieu of amounts BBL would have paid as additional capital contributions had BBL been willing and able to do so. Other assets shown on the balance sheet at June 30, 2014 include a receivable of approximately $61,000 due from BBL with respect to the additional funds provided by the Company.

- Definition

The entire disclosure for noncontrolling interest in consolidated subsidiaries, which could include the name of the subsidiary, the ownership percentage held by the parent, the ownership percentage held by the noncontrolling owners, the amount of the noncontrolling interest, the location of this amount on the balance sheet (when not reported separately), an explanation of the increase or decrease in the amount of the noncontrolling interest, the noncontrolling interest share of the net Income or Loss of the subsidiary, the location of this amount on the income statement (when not reported separately), the nature of the noncontrolling interest such as background information and terms, the amount of the noncontrolling interest represented by preferred stock, a description of the preferred stock, and the dividend requirements of the preferred stock.

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