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License Agreement Note
3 Months Ended
Sep. 30, 2013
Notes  
License Agreement Note

4.  License Agreement

 

On November 15, 2012, Sustainable LLC entered into a renewable 20-year engine technology license agreement (the “Agreement”) with a third party licensor (the “Licensor”) that developed engines capable of converting low grade heat into other forms of energy.  Under the terms of the Agreement, Sustainable LLC obtained certain exclusive license rights in the engines developed by the Licensor which would permit Sustainable LLC to develop, manufacture and integrate such engines into its projects.

 

The exclusive market rights of the Agreement provide that Sustainable LLC make a cash payment of $200,000 and issue common stock in Sustainable representing a small minority ownership position in the Company (see note 1), along with periodic quarterly payments of $25,000 commencing six months after the initial $200,000 payment.  These payments reset to $50,000 per quarter after three payments, and are subject to further resets to up to $100,000 depending on engine sales volume.  Under certain circumstances, engine royalty fees and referral fees can increase the quarterly payment from time to time.  In the event of non-payment, Sustainable retains a non-exclusive license subject to royalty fees.

 

On May 15, 2013, in connection with the Merger (see note 1), the Company, after acquiring 100% ownership interest in Sustainable, issued 2,435,430 shares to the Licensor which represents the small minority position in the Company as required under the terms of the Agreement.  At the time of issuance, these shares were valued at $48,709 representing the fair value of the RAMCO shares.

 

In addition, during the nine months ended September 30, 2013, the Company made payments of $13,000 that were applied against the required initial $200,000 cash payment as stated under the terms of the Agreement.

 

The accompanying September 30, 2013 balance sheet presents the carrying value of the license fee at $245,609, consisting of the $200,000 required payments under the Agreement and $48,709, representing the fair value of shares issues to the Licensor. In addition, the accompanying balance reflects $187,000 due to the Licensor, representing the remaining liability from the initial $200,000 required payment.

 

The Company periodically performs an analysis of its contractual rights and arrangements and establishes asset value based on that analysis.