NOTE 18– PENDING LITIGATION/ CONTINGENT LIABILITY

On July 7, 2007, the Company was served with a complaint by Joseph Sanfilippo and James Cluck for violation of the Consumer Fraud Act and is seeking damages in excess of $200,000. The trial court has issued a default order against the Company, and has denied the Company's Motion to reconsider. Management believes that the trial court's rulings were erroneous and that it has grounds for appeal, and that the underlying allegations are frivolous and wholly without merit and will vigorously defend the claim. The outcome of this matter is unknown as of the report date. However, the Company has conservatively allocated a reserve of $110,000 to satisfy any liability it may incur as a result of this matter.

In December 2011, the Company was sued in Circuit Court of the 17th Judicial District, Winnebago County, Illinois, by LIBCO Industries, Inc., alleging the Company breached a construction contract and tortuously interfered with a business relationship, and is seeking damages in excess of $185,000. The case has subsequently been transferred to the 19th Judicial Circuit Court, Lake County, Illinois. Management believes that the allegations are frivolous and wholly without merit and will vigorously defend the claim. Related to this matter, Process Piping, LLC, a sub-contractor for LIBCO Industries, filed a mechanics lien on the property leased by the Company, claiming it was owed in excess of $95,000 by LIBCO Industries. As of December 31, 2011, the Company accrued as a settlement loss, the $62,500 paid to Process Piping, LLC on March 6, 2012 in exchange for a release of its lien as well as an assignment of all of its claims against LIBCO Industries. On January 31, 2013, the Circuit Court granted the Company's motion for partial summary judgment on the tortious interference claim. The pleadings on the other claims are still at issue and discovery is underway. Thus, the outcome is unknown as of the date hereof.

During 2012, the Company entered into a settlement agreement with a former employee who filed a Charge of Discrimination with the Equal Employment Opportunity Commission. The Company settled with a payment of $13,968 and the matter was resolved.