As discussed in Note 6, the Company has entered in an “Exclusive Patent and Know-How License Agreement Including Transfer of Ownership” that requires minimum license maintenance costs. The Company plans to use the intellectual property consisting of patents granted under the license agreement for foreseeable future.. The license agreement is considered expired on October 14, 2025, the date the patent expires. Future minimum maintenance fee payments are as follows:

The Company has the option to pay $2,500,000 and issue 875,000 shares of common stock for the assignment of the patents, and upon doing so, the requirement to make minimum license maintenance costs ends.

Property Leases

On June 1, 2011, the Company entered into a 36 month lease for warehouse space in Centralia, Washington, commencing August 1, 2011. The lease provides for the option to extend the lease on a month to month basis. Rent is $1,900 monthly throughout the term of the lease.

On October 18, 2011, the Company entered into a 39-month lease for office space in Worthington, Ohio, commencing November 15, 2011. The lease provides for the option to extend the lease under its current terms for three additional years. Rent was abated for the first three months of the lease. Rent is $1,933 per month for months four through fifteen, $1,968 for months 16 through twenty-seven and $2,002 for months twenty-eight through thirty-nine.

The Company also leases office space in Grand Forks, ND, which has a renewable annual term and requires quarterly rental payments of $1,259.

Future minimum lease payments under these non-cancelable leases are approximately as follows:

Rent expense was approximately $12,000 and $17,000 for the quarters ended March 31, 2014 and 2013, respectively.

Fixed Price Contract

The Company’s contract with its first commercial customer contains a fixed price for product for three years. This contract exposes the Company to the potential risks associated with rising material costs during that same period.

Litigation

On March 20, 2014, Michael Yurisic filed a breach of contract complaint against the Company in the United States District Court for the Western District of Pennsylvania. The complaint seeks a remedy of the delivery of 342,340 shares of the Company’s common stock. The Company intends to defend the allegations in Mr. Yurisic’s complaint. In addition, the Company believes that any obligation to Mr. Yurisic is properly the responsibility of Rick MacPherson, the founder of the Company and currently a director.