NOTE 18 – COMMITMENTS

Building Lease

The Company leases a combined manufacturing, research and development and office facility located in Mundelein, Illinois. The facility is approximately 44,000 square feet. On March 14, 2014, the Company extended the lease until May 2015 and the required monthly rental payments increased to $21,361, inclusive of property taxes. Insurance and maintenance are billed when due. If the Company wishes to remain at this facility beyond the lease expiration date, it will need to negotiate a new lease with the landlord, which cannot be assured.

Effective January 1, 2015, the Company and its landlord executed an amendment to the current lease extending the lease until July 14, 2015. Commencing on May 1, 2015, the parties agreed to a monthly base rent of $10,681 plus property taxes. The Company also agreed to pay $71,125 in rental arrears on April 30, 2015 and another $71,125 in rental arrears on July 1, 2015. Finally, the parties agreed that the Company will deliver to the landlord 20,025 shares of its 12.5% Convertible Preferred Stock. As a result of the preferred stock issued, the Company recorded an expense of $48,060 for the three months ended June 30, 2015 with an offset to preferred stock and additional paid in capital. Also, the Company issued a five year warrant to the landlord to purchase 171,454 shares of common stock at $0.64 per share.

On May 1, 2015, the Company and its landlord executed an amendment to the current lease extending the lease until October 14, 2015. The parties agreed that the Company will deliver to the landlord 8,010 shares of its 12.5% Convertible Preferred Stock. The Company recorded a Preferred stock payable and rent expense of $48,060 for the three months ended June 30, 2015. Also the Company agreed to issue a five year warrant to the landlord to purchase 68,566 shares of common stock at $0.64 per share. Finally, the Company upon execution of this amendment, agreed to make the $71,125 payment of rental arrears that was due on April 30, 2015.

The Company recognizes escalating lease expense on a straight line basis in accordance with current accounting standards.

For the nine months ended September 30, 2015 and 2014, the Company recognized rent expense of $308,756 and $202,599, respectively. The future minimum annual rental payments and sub-lease income for the years ended December 31 under the current lease terms are as follows:

Year Ended	Rentals
2015	$	52,626
2016		-
2017		-
2018		-
2019		-
	$	52,626

The current lease is set to expire on December 15, 2015. The Company is currently negotiating an extension of the current lease and is confident that an agreement will be reached prior to the expiration date.

Equipment Sale and Leaseback

On July 17, 2015, the Company entered into an equipment purchase agreement (the “Purchase Agreement”) with Fordham Capital Partners, LLC (“Fordham”) pursuant to which the Company sold all of its right, title and interest in production equipment utilized by the Company to Fordham for a purchase price of $500,000. Concurrently with entering into the Purchase Agreement, on July 17, 2015, the Company entered into an equipment lease agreement (the “Equipment Lease Agreement”) with Fordham pursuant to which the Company leased the production equipment from Fordham on terms that included the following: a lease term of 24 months, monthly lease payments by the Company of $15,800 and the option (at the election of the Company) to purchase the equipment on or after July 8, 2016 on the following terms: (i) if the purchase date is between 12-18 months $425,000; (ii) if the purchase date is between 19-23 months: $360,000; and (iii) if the purchase date is during the 24th month (but no later than July 8, 2017): $325,000. The Company is accounting for the transaction as a capital lease. The future minimum lease payments under the lease are as follows:

Year Ended	Lease Payments
2015	$	79,000
2016		189,600
2017		110,600
2018		-
2019		-
	$	379,200