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6. Receivable from Former Officer and Director | 9 Months Ended
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Sep. 30, 2012
Receivable From Former Officer And Director |
NOTE 6 - Receivable from Former Officer and Director | Pursuant to an investigation conducted in March 2012 directed by the Company’s Board of Directors, it was determined that Paul Feller, the Company’s former Chairman and CEO, received $640,000 in December 2010 in connection with a sale of the Company’s common stock he arranged with an outside investor. This sale was fulfilled with issuance of 2,540,000 shares of common stock issued directly by the Company. Accordingly, the Company recorded a gross receivable of $640,000 from Mr. Feller in connection with this transaction. Mr. Feller resigned from the Company on June 28, 2012. As of December 31, 2011, this receivable of $640,000 was presented net of $398,790 of accrued salary, $115,000 of commissions that Mr. Feller represented in writing were paid in this transaction, $30,540 of business expenses submitted by Mr. Feller that met Company and IRS guidelines and $133,770 of business expenses that Mr. Feller represented in writing he would provide, for a net receivable of zero. As of September 30, 2012, this receivable of $640,000 was increased by $4,622 of personal expenses for Mr. Feller paid with Company funds, including $4,355 of registration fees paid by the Company for the vintage automobile that remains in Mr. Feller’s possession. This receivable of $682,722 is presented net of $30,540 of approved business expenses and $113,667 in deferred salary:
|  | September 30, |  |  | December 31, |
|  | 2012 |  |  | 2011 |
Gross receivable |  |  |  |  |  |  |  |
Sale of Company common stock, proceeds retained by Mr. Feller |  | $ | 640,000 |  |  | $ | 640,000 |
Vintage automobile retained by Mr. Feller |  |  | 38,100 |  |  |  | 38,100 |
Other |  |  | 4,622 |  |  |  | – |
Total |  |  | 682,722 |  |  |  | 678,100 |
Offsets to receivable |  |  |  |  |  |  |  |
Alleged commission on stock sales per Mr. Feller's written representation |  |  | – |  |  |  | (115,000 | )
Deferred salary |  |  | (113,667 | ) |  |  | (398,790 | )
Expense reports submitted and approved |  |  | (30,540 | ) |  |  | (30,540 | )
Expense reports to be submitted per Mr. Feller's written representation |  |  | – |  |  |  | (133,770 | )
Expense reports actually submitted |  |  | – |  |  |  | – |
Net receivable |  | $ | 538,515 |  |  | $ | – |
Additional evidence obtained in October 2012 confirmed that the $115,000 in commissions for the stock sales were not valid commissions and this amount was removed as an offset to the gross receivable for September 30, 2012. Pursuant to a Separation and Release Agreement dated June 28, 2012 and signed by Mr. Feller on August 9, 2012 (“Separation Agreement”), Mr. Feller agreed to waive his rights to any deferred salary prior to October 1, 2011. Accordingly, the amount of deferred salary eligible for offset to the gross receivable was reduced from $398,790 at December 31, 2011 to $113,667 at September 30, 2012, which consists of $125,000 in deferred salary between October 1, 2011 and June 28, 2012, less $11,333 paid in salary during that period. In addition, Mr. Feller did not submit expense reports to support the $133,770 of expenses in the time provided for in the Separation Agreement, so that amount was removed as an offset to his receivable as of September 30, 2012.

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