NOTE 8 - COMMITMENTS AND CONTINGENCIES

 

OBLIGATIONS UNDER OPERATING LEASES

 

The Company leases approximately 1,700 square feet for its principal offices in Boca Raton, Florida at a monthly rental of approximately $3,200. The lease, which provides for annual increases of base rent of 4%, expires on November 30, 2018.

 

The Company subleased a portion of its principal offices to a third party on a month to month basis until November 30, 2014 at which time the sub-lessee negotiated its own lease. For the years ended September 30, 2014 the Company's rent was reduced by approximately $30,000 as a result of the sublease agreement.

 

Future lease commitments are as follows for the years ended September 30:

 

Rental expense incurred during the years ended September 30, 2015 and 2014 was $43,673 and $51,549, respectively.

 

MAJOR CUSTOMERS

 

Approximately 38% and 44% of the Company's revenues for the years ended September 30, 2015 and 2014 was derived from 3 customers, respectively.

 

MAJOR SUPPLIERS AND SOLE MANUFACTURING SOURCE

 

During 2014, the Company developed a proprietary interoperable communications solution. The Company relies on no major supplier for its products and services. The Company has contracted with a single local manufacturing facility to provide completed circuit boards used in the assembly of its IP gateway devices. Interruption to the manufacturing source presents additional risk to the Company. The Company believes that other commercial facilities exist at competitive rates to match the resources and capabilities of its existing manufacturing source.

Approximately, 20% of the revenues generated during the year ended September 30, 2015 were generated from our licensing agreement with Collabria. If this agreement is terminated it could have significant on impact on revenues.

 

EMPLOYMENT AGREEMENT

 

In March 2015, the Company entered into a new employment agreement with its CEO. Under the agreement, the CEO receives a base salary of $8,000 per month. The agreement term is one year and renews automatically at the end of each year unless notice of termination is given by the Company or the CEO. In the event of termination by the Company, the CEO would receive six months of base salary as severance.