Annual report pursuant to Section 13 and 15(d)

9. Commitments and Contingencies

9. Commitments and Contingencies

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

9.	Commitments and Contingencies

We are involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. There is no current or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.

Leases

In April 2017, the Company moved its executive offices to 23902 FM 2978, Tomball, Texas 77375. From May 2016 through May 2017, the Company’s executive offices were located at 5266 Hollister Avenue, Suite 219, Santa Barbara, CA 93111.

Total rent expense under these leases in effect during the years ended December 31, 2018, and 2017 was $18,000 and $20,000, respectively which are included as part of Operating Expenses in the attached consolidated statements of operations. The Tomball Texas office is under a month-to-month lease payable at $1,500 per month. The Tomball facility is leased from JBL Energy Partners, an entity solely owned by Jason Lane, Company CEO.

Contractual Commitments

The Company’s contractual commitments for future periods, including office leases, minimum guaranteed compensation payments and other agreements as described in the following table and associated footnotes:

Year ending December 31,		License Agreements (1)		Compensation Agreements (2)		Total Obligations
	2019		187,500		404,100		591,600
	2020		187,500		–		187,500
	2021		187,500		–		187,500
	2022		187,500		–		187,500
	2023		187,500		–		187,500
	Total	$	937,500	$	404,100	$	1,341,600

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	(1)	Consists of license maintenance fees to Temple University in the amount of $187,500 paid annually through the life of the underlying patents or until otherwise terminated by either party.
	(2)	Consists of base salary and certain contractually-provided benefits, to i) a former executive officer, pursuant to an severance in the amount of $580,000 that will be paid through March 31, 2019 pursuant to a separation agreement effective April 1, 2017 as amended by letter agreements effective August 16, 2018 and March 31, 2019, modifying the payment schedule to a payment of $10,000 per month, continue paying his health insurance premium and extending the term on a month-to-month basis until paid in full or otherwise terminated. As of December 31, 2018, $370,000 was payable under this agreement and was included as part of Accounts payable and accrued expenses in the accompanying consolidated balance sheet.; ii) an executive officer, pursuant to a two-year employment agreement effective April 1, 2017 at a base annual salary of $150,000 per year; and iii) an executive officer, pursuant to a two-year agreement effective April 1, 2017 at a base annual salary of $158,400 per year.