8. COMMITMENTS AND CONTINGENCIES Lease Commitments In March 2004, the Company entered into a seven-year lease, beginning in August 2004, for approximately 16,500 square feet of mixed-use space from an unaffiliated third party at a base cost with escalations throughout the lease term plus additional common-area expenses based on the Company s proportionate share of the lessor s operating costs. The lease provided for two rent holidays, during which no rent was payable, and a moving allowance. In January 2011, the Company amended the lease effective January 1, 2011 to extend the term through January 2017 in exchange for a reduced rental rate and 50% rent abatement in the first 12 months of the extended term. The amended lease includes 3% annual rent escalations and a one-time option to terminate the lease effective as of July 31, 2014. The Company exercised this right to terminate the lease by giving notice to the lessor prior to October 31, 2013. The expected cost to terminate the lease effective July 31, 2014 is approximately $112,000, which the Company paid at the time notice was given to terminate the lease. See Note 13,  Subsequent Events  for further discussion. The Company recognizes rent expense on a straight-line basis, giving consideration to the rent holidays, the moving allowance paid to the Company, and the rent abatement. As of September 30, 2013, the Company s future minimum payments under this operating lease were as follows: 2013 $ 34,827 2014 143,486 2015 147,791 2016 152,224 2017 13,066 Total $ 491,394 Rent expense for the three months ended September 30, 2013 and 2012 was approximately $55,000 and $48,000, respectively. Rent expense for the nine months ended September 30, 2013 and 2012 was approximately $188,000 and $148,000, respectively. Purchase Commitments On June 6, 1997, the Company entered into an amended and restated exclusive supply agreement with Cree, Inc. ( Cree ). The exclusive supply agreement had an initial term of ten years that was extended in January 2005 to July 2015. In conne