Note 4 - Commitments and Contingencies

9 Months Ended

Sep. 30, 2014

Notes

Note 4 - Commitments and Contingencies

NOTE 4 - COMMITMENTS AND CONTINGENCIES

Judgments Payable

On April 10, 2014 we received notice from one of the holders of our Convertible Debentures regarding a judgment they obtained on March 6, 2014 in the amount of $132,876, including principal of $117,650, accrued interest of $14,619 and costs of $607 as of that date. The judgment bore interest at a 9% rate until paid in full and is secured by the assets of the Company. On May 12, 2014 the judgment was paid in full.

On June 11, 2014, four holders of our Convertible Debentures totaling $705,900 in principal plus accrued interest of $218,215 as of September 30, 2014 filed a motion seeking summary judgment with the Supreme Court of the State of New York.  The case was heard on July 31, 2014 and the court granted their request and on August 20, 2014 issued a judgment in their favor for the full amount of principal and interest, plus certain expenses.  We are working with their attorney to attempt to find a settlement agreeable to both parties, but no agreement has been reached. The judgment holders have the right to levy the judgment on our bank accounts, and other assets at any time. The principal and accrued interest have been reclassified on the balance sheet from Convertible Debentures and accrued interest to Judgment payable on the accompanying balance sheet at September 30, 2014.

Lease Agreement

On January 28, 2014 we entered into a lease agreement for approximately 4,600 square feet of office and light industrial space located in Berkeley, California in the United States.  We utilize the facility for our research and development activities and as our corporate headquarters.

The lease term is for two years effective from February 1, 2014 and terminates on January 31, 2016. Our remaining lease obligations are $15,000, $60,000 and $5,000 for the years ended December 31, 2014, 2015 and 2016, respectively.  The Company is also responsible for certain insurance, utilities, maintenance and other costs as described in the lease.

Liabilities of Sendio

In September 2007, we formed Sendio, s.r.o. (“Sendio”) in the Czech Republic as a wholly-owned subsidiary for the purpose of operating a research and development and pilot manufacturing facility. On February 13, 2012, Sendio filed a petition of insolvency with the Regional Court in Olomouc, Czech Republic.  In March, 2012 the court determined that Sendio was insolvent, and control of the legal entity passed to a court appointed trustee. The trustee will oversee the orderly sale of the assets and use any proceeds to satisfy the liabilities of Sendio.  These liabilities have been recorded as a current liability on our balance sheet as of September 30, 2014 and December 31, 2013 under the caption “Liabilities of Sendio.”