4. COMMITMENTS AND CONTINGENCIES

9 Months Ended

May 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Note 4. COMMITMENTS AND CONTINGENCIES

Note 4: COMMITMENTS AND CONTINGENCIES

Lease Amendment

We made an amendment to our current lease which will end on February 2, 2014 with a remaining one extension of 3 years at an annual increase of 4% per year. The amended lease extends to February 2, 2017 with an annual increase of 3% per year and has an option of (2) two-year extensions. The current base rent amount of $24,272.42 per month remains the same; however we have 3 months’ free base rent during the months of June, July and August of 2013. We will record these three months as a discount divided equally through the first term of this amended lease from June 2013 through January 2017. The amended lease is filed with the SEC as an exhibit in this 10-Q.

Sublease with Words+, Inc., a wholly owned subsidiary of Prentke Romich Company (PRC)

After the sale of Words+, we entered into a sublease agreement under which Words+ paid 20 percent of the monthly rent we pay to our landlord, plus 20% of facility-related operating expenses. The term of this sublease is from month to month commencing on January 1, 2012.

On February 4, 2013, we received a 30-day notice from PRC stating their cancellation of the sublease due to the closure of Words+.

Employment Agreement

On July 22, 2012, the Company entered into an employment agreement with its President/Chief Executive Officer that expires in August 2013. The employment agreement provides for an annual base salary of $300,000 per year, and a performance bonus in an amount not to exceed 10% of Employee’s salary, or $30,000 per year, at the end of each fiscal year. The specific amount of the bonus to be awarded will be determined by the Compensation Committee of the Board of Directors, based on the financial performance and achievements of the Company for the previous fiscal year. The agreement also provides Employee stock options, exercisable for five years, to purchase fifty (50) shares of Common Stock for each one thousand dollars ($1,000) of net income before taxes at the end of each fiscal year up to a maximum of 120,000 options over the term of the agreement. The Company may terminate the agreement upon 30 days written notice if termination is without cause. The Company's only obligation would be to pay its President the greater of a) 12 months salary or b) the remainder of the term of the employment agreement from the date of notice of termination.

For fiscal year 2012, the Compensation Committee awarded a $30,000 performance bonus to Walter Woltosz, our President/Chief Executive Officer, which was paid in September 2012.

Litigation

We are not a party to any litigation at this time and we are not aware of any pending litigation of any kind.