COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

NOTE 12- COMMITMENTS AND CONTINGENCIES

Operating Leases

At December 31, 2011, the Company had reduced its operations and does not maintain a corporate headquarters. During 2011, Company was leasing a facility in Portland Oregon for its office and research and development lab space under an operating lease that expired September 30, 2011.  In December 2010, the existing operating lease was amended to reduce the rent payments for February 2011 to September 2011 from $3,950 per month to $2,000 per month, accruing deferred rent that will be due immediately in the case of default on the lease, or to be negotiated in the lease renewal for a minimum of three years.  

The Company terminated its lease and has settled the $3,900 remaining portion and deferred rent obligation of $15,600 for a net payment of $3,900. The Company has no further obligation under this lease agreement, and currently is planning to transfer operations to a new facility pending obtaining financing to recommence operations and has surrendered its security deposit of $6,093.

Rent expense is recognized on a straight-line basis over the initial lease term. Leasehold improvements have been included in fixed assets.  Rent expense is recognized on a straight-line basis over the initial lease term. Leasehold improvements have been included in fixed assets. Rent expense relating to our operating leases was $20,832 and $94,730 for the years ended December 31, 2011 and 2010, respectively.  

During 2010, the Company had a subtenant leasing research and development lab space.  Sublease income relating to our operating leases was $ $4,125 for the year ending December 31, 2010, and is recorded in other income.

Executive Employment Agreements

We entered into employment contracts with key executives that provide for the continuation of salary to the executives if terminated for reasons other than cause or in connection with a change in control of the Company, as defined in those agreements. At various times from July 2010 to December, 2010, all of these agreements were terminated.  In December 2010, the Company entered into payoff agreements with certain key executives, which have been paid in full. At December 31, 2011, there were no agreements with management.

Legal Contingencies

We may occasionally become subject to legal proceedings and claims that arise in the ordinary course of our business.  It is impossible for us to predict with any certainty the outcome of any disputes that may arise, and we cannot predict whether any liability arising from claims and litigation will be material in relation to our financial position or results of operations.