Note 5 - Commitment and Contingencies - Related Party

3 Months Ended

Sep. 30, 2014

Notes

Note 5 - Commitment and Contingencies - Related Party

NOTE 5 – COMMITMENT AND CONTINGENCIES – RELATED PARTY

Operating Lease Obligations

The Company leases a warehouse in El Monte, California, which is owned by a single member limited liability company owned by the Company’s President and majority shareholder, which it plans to sublease in 2014.  The lease commenced December 2, 2013, terminates May 31, 2020, and requires monthly lease payments of $30,000 beginning June 1, 2014.  The monthly lease payment increases to $40,000 on June 1, 2015, $50,000 on June 1, 2016, $60,000 on June 1, 2017, and $70,000 on June 1, 2019.  The lease includes a period of free rent from December 2, 2013 to May 31, 2014.  The Company recognizes rent expense on a straight-line basis over the entire lease period in accordance with the current accounting guidaance.  Accordingly, for the three months ended September 30, 2014, the Company recorded $147,692 of rent expense and a deferred rent liability as of September 30, 2014 of $372,308 related to the rent escalations and the free rent.  The lease is an operating lease.