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10. COMMITMENTS AND CONTINGENCIES
 9 Months Ended
Sep. 30, 2014
Notes to Financial Statements  
NOTE 10. COMMITMENTS AND CONTINGENCIES

Lease Commitments

 

The Company leased 1,611 square feet of office/warehouse space in San Diego, CA for research and development purposes.  The lease payments amounted to approximately $2,000 per month.  This lease expired and the Company has continued to rent the space on a month-to-month basis.  The Company vacated the office/warehouse in July of 2014 and has moved the lab to its new facility in Frederick, Maryland.

 

        In September 2014, the Company entered into a lease agreement for approximately 6,000 square feet in Frederick MD comprised of space for offices, warehousing, laboratory, training and mock hospital facilities. As part of the lease agreement, the Company is to receive a rent holiday in the first 5 months of the lease. The lease also provides for an escalation clause where the Company will be subject to an annual rent increase of 3%, year over year. The lease expires on January 31, 2018. The Company accounts for the lease using the straight line method and recorded $3,809 in rent expense for the quarter ended September 30, 2014. Approximate minimum annual rents under lease are as follows:

 

Year Ending December 31,   Amount  
       
 2015   $ 42,000  
 2016     52,000  
 2017     53,000  
 2018     4,000  
    $ 151,000  

 

Purchase Commitments

 

In April 2014, the Company entered into purchase commitments with a new manufacturer for the procurement of inventory amounting to $465,000.  For the nine months ended September 30, 2014, the Company has purchase $278,000 in inventory as part of the agreement with manufacturer.