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GE ROYALTY OBLIGATIONS | 6 Months Ended
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Jun. 30, 2022
Ge Royalty Obligations |
GE ROYALTY OBLIGATIONS | NOTE 7 GE ROYALTY OBLIGATIONS On June 15, 2011, we entered into a license agreement with GE, pursuant to which we have the right to market certain ceiling light and fan fixtures displaying the GE brand. The license agreement, as amended, imposes certain manufacturing and quality control conditions that we must maintain in order to continue to use the GE brand. The License agreement is nontransferable and cannot be sublicensed. On August 13, 2014, we entered into a second amendment to the license agreement pertaining to our royalty obligations. Under the initial terms of the amendment, we agreed to pay to GE a minimum trademark license fee of $12 million by November 30, 2018 (the “Initial Royalty Obligation”) for the rights assigned in the original contract. The amendment provided that, if we did not pay to GE royalties equal to the Initial Royalty Obligation over the term of the license agreement, we would owe the difference to GE in December 2018. We are expanding our relationship with GE to collaborate on mutual capabilities, and in December 2020, we entered into the current amendment to the license agreement. The amendments following the second amendment expanded our product range, including smart, and added additional global territory rights. The license agreement has been extended for an additional five years and expires on November 30, 2023. Pursuant to the third amendment, entered into September 2018, the approximate remaining $10 million Initial Royalty Obligation that was due on November 30, 2018 was waived, and we agreed to pay GE an aggregate amount of $6 million, consisting of three annual installments of $2 million to be paid to GE in each of December 2018, 2019 and 2020. In December 2020, we entered into the current amendment, which restructured the royalty payment obligations due of approximately $4.4 million, and $0.7 million in interest. We agreed to pay a total of $5.1 million to GE in quarterly installments through December 2023, including $100,000 due December 2020, an aggregate of $500,000 due in four equal installments in 2021, an aggregate of $1.2 million due in four equal installments in 2022 and an aggregate of $3.3 million due in four equal installments in 2023 (the “Minimum Payments”). In the event the Company receives significant funding rounds of at least $50.0 million in funding, it is required to use a portion of such funding to pay certain amounts to GE. The Minimum Payments will be in addition to the royalty payments made to GE during the respective year, as set forth below. Royalty payments are due quarterly, using a December 1 – November 30 contract year and based upon the prior quarter’s sales. Royalty payments will be paid from sales of GE branded product subject to the following repayment schedule: SCHEDULE OF GE ROYALTY OBLIGATIONS
Net Sales in Contract Year |  | Percentage of Contract Year Net Sales owed to GE |
$0 to $50,000,000 |  |  | 7 | %
$50,000,001 to $100,000,000 |  |  | 6 | %
$100,000,000+ |  |  | 5 | %
The Company made principal payments of $600,000 and $250,000. As of June 30, 2022 and December 31, 2021, the outstanding balance of the aggregate Minimum Payment was $3,238,000 and $3,838,000, respectively. Minimum future payment obligations are approximately as follows: SCHEDULE OF GE ROYALTY OBLIGATION MINIMUM FUTURE MINIMUM PAYMENT
Year |  | Minimum Obligation |
2022, remaining period |  | $ | 2,250,000 |
2023 |  |  | 988,000 |
Total principal payments |  | $ | 3,238,000 |

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