Note I – COMMITMENTS
As part of the employment agreement with Dr. Barnhill, which will terminate upon the appointment of a successor Chief Executive Officer, the Company shall pay Dr. Barnhill a cash bonus of $100,000 for each $0.01 per share of earnings. If this milestone is met in future periods, the Company will recognize an expense to bonus compensation. This bonus will only apply if Dr. Barnhill is acting as interim CEO at the end of period in which the Company earns $0.01 per share. The Company believes the probability of this occurring is very low and therefore has not accrued for this expense.
In addition, the employment agreement contains an equity component in which Dr. Barnhill shall receive a grant of 5,000,000 shares of the Company’s common stock over the course of the three year employment agreement provided certain performance milestones are met. In each future period, the Company will calculate the probability of the milestone being met and a contingent liability will be disclosed as such in the financial statements footnotes. At September 30, 2012, no accrual has been made. This equity grant will only apply if Dr. Barnhill is acting as interim CEO at the end of period in which the Company meets the performance milestone. The first opportunity for Dr. Barnhill to earn this equity grant is on the first anniversary of the employment agreement which is May 2013. The Company does not anticipate Dr. Barnhill will be acting as interim CEO at that time and therefore has not accrued for this expense.
From time to time, the Company is subject to various claims primarily arising in the normal course of business. Although the outcome of these matters cannot be determined, the Company does not believe it is probable that any such claims will result in material costs and expenses.