NOTE 6 - COMMITMENTS AND CONTINGENCIES Commitments: Franchise agreement The Company operates its restaurant property under a franchise agreement with the Franchisor under an initial ten-year term, renewable for two additional five-year terms. Pursuant to the franchise agreement, the Company is to pay royalty fees based on a percentage of gross revenues (generally between 3% and 5% of gross sales, as defined), plus additional fees and costs for marketing, training, inventory and other franchisor costs. Two officers of the Company have personally guaranteed royalty payments to the Franchisor. On September 23, 2013, Smokin Concepts Development Corporation and its subsidiaries (the "Company") amended the Franchise Agreement ("FA") with SH Franchising &amp; Licensing LLC (the "Franchisor"). The amendment to the FA resulted in a substantial reduction in the royalty fees for the Company's Denver restaurant to be paid to the Franchisor beginning January 1, 2014. The reduced rate is 2.5% of gross sales, subject to a monthly floor of $5,000. For the three and nine months ended September 30, 2013, the Company incurred franchise royalty expense of $27,700 and $71,200, respectively. Lease agreement In April 2012, the Company entered into a ten-year, non-cancellable lease for the restaurant in Denver, Colorado. This lease provides for two, five-year renewal options. Rent payments are approximately $16,000 per month plus certain common area maintenance charges, as defined, and are subject to escalation provisions. Lease expense was approximately $47,000 and $189,000 for the three and nine months ended September 30, 2013, respectively, and $62,600 and $131,000 for the three and nine months ended September 30, 2012. During the three months ended September 30, 2013, the Company and its general contractor were in a dispute regarding the final payment on the leasehold improvements on the restaurant. The general contractor recorded a lien against the premises. This lien caused the Company to be in default of its lease agreement. In J