LICENSING AGREEMENT

9 Months Ended

Sep. 30, 2012

Licensing Agreement

LICENSING AGREEMENT

NOTE 9.  LICENSING AGREEMENT

Until the Acquisition (described in Note 10, below), the Company operated under an operating and licensing agreement with a related party that is majority-owned and controlled by the Company’s Chief Executive Officer and Chairman, Benjamin P. Cowart, that provided for an irrevocable, non-transferable, royalty-free, perpetual right to use TCEP to re-refine certain used oil feedstock and associated operations of this technology on a global basis.  This included the right to utilize the technology in any future production facilities built by the Company. 

The initial valuation of the license was based upon the cost to acquire the use of TCEP and its processes. It was also assessed over time for changes in the valuation. Additional development costs capitalized during the nine months ended September 30, 2012 and 2011 were $209,062 and $232,214, respectively. The Company is amortizing the value of the license agreement over a fifteen year period.  Amortization expense was $95,478 and $108,212 for the nine months ending September 30, 2012 and 2011, respectively.  The unamortized basis of the licensing agreement was reclassified to intangible assets at the acquisition, as discussed in Footnote 10.