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GE Royalty Obligations

3 Months Ended

Mar. 31, 2018

NOTE 10 GE ROYALTY OBLIGATIONS

In 2011, the Company executed a Trademark Licensing Agreement with General Electric, which allows the Company the right to market certain ceiling light and fan fixtures displaying the GE brand. The License Agreement imposes certain manufacturing and quality control conditions that the Company must maintain in order to continue to use the GE brand.

The License Agreement is nontransferable and cannot be sublicensed. Various termination clauses are applicable; however, none were applicable as of March 31, 2018, and December 31, 2017.

In August 2014, the Company entered into a second amendment to the License Agreement pertaining to its royalty obligations. Under the terms of the amendment, the Company agreed to pay a total of $12,000,000 by November 2018 for the rights assigned in the original contract. In case the Company does not pay GE a total of at least $12,000,000 in cumulative royalties over the term of the License Agreement, the difference between $12,000,000 and the amount of royalties paid to GE is owed in December 2018.

Payments are due quarterly based upon the prior quarters’ sales. The Company made payments of $541,858 and $489,108 for the three-months ended March 31, 2018 and 2017, respectively.

The License Agreement obligation will be paid from sales of GE branded product subject to the following repayment schedule:

Net Sales in Contract Year	Percentage of Contract Year Net Sales owed to GE
$0 $50,000,000	7%
$50,000,001 $100,000,000	6%
$100,000,000+	5%

As of March 31, 2018, and December 31, 2017, the outstanding balance was $10,581,728 and $10,760,566, respectively.