Note 10 – Commitments and contingencies:

The Company leases its executive offices and warehouse facilities in Fort Lauderdale, Florida from an entity controlled by its Chairman, President and Chief Executive Officer. The lease, as extended, expires on December 31, 2023. The lease requires an annual minimum base rent of $94,800 and provides for a maximum annual 2% increase in subsequent years, although the entity has not raised the minimum rent since the Company entered into a previous lease agreement in 1998. Additionally, the leasing entity is entitled to reimbursement of all taxes, assessments, and any other expenses that arise from ownership. Each of the parties to the lease has agreed to review the terms of the lease every three years at the request of the other party. Rent expense under the lease was approximately $98,000 and $97,000 for the years ended December 31, 2015 and 2014, respectively.

The following is a schedule of minimum future rentals on the Company’s non-cancelable operating leases.

12 month period ending December 31,
2016	$	96,064
2017		97,985
2018		99,945
2019		101,944
2020		103,983
Thereafter		324,593
Total	$	824,514

On August 13, 2014, Star-Brite Distributing, Inc. (“Star-Brite”), a wholly-owned subsidiary of the Company, filed a complaint for injunctive relief and damages against Gold Eagle Co. (“Gold Eagle”) in the United States District Court for the Southern District of Florida. The complaint alleges that Gold Eagle, in violation of Section 43(a) of the Lanham Act, the Florida Deceptive and Unfair Trade Practices Act, and the Florida False Advertising Statute, made false and/or misleading statements in a comparative marketing campaign against Star Tron® Enzyme Fuel Treatment, an enzyme based fuel additive for the marine market used to treat ethanol gasoline, commonly referred to as E10 fuel. The complaint also constitutes a claim for common law unfair competition.

Specifically, the complaint alleges, among other things, that Gold Eagle commenced a marketing campaign for its STA-BIL® Marine ethanol fuel treatment and stabilizer (“STA-BIL Marine”) that included a product information tag attached to the neck of the STA-BIL Marine product bottle; that the product information tag contained a comparison advertisement purportedly establishing that, based on a fuel stability test and a corrosion control test, STA-BIL Marine outperformed Star Tron; and that the tests used were not appropriate for fuel additives treating E10 fuel.

The complaint seeks a preliminary and permanent injunction enjoining Gold Eagle from further publishing the alleged false and/or misleading statements and requiring Gold Eagle to issue corrective advertising sufficient to dispel the lingering harmful effects of specified product information tags; the entry of a judgment against Gold Eagle for actual damages and enhanced damages up to three times actual damages; disgorgement of profits to Star-Brite that Gold Eagle made as a result of the alleged unlawful actions; and costs and attorney’s fees.

Gold Eagle filed an answer to complaint and counterclaim, generally denying the allegations in Star-Brite’s complaint and asserting, among other things, that original equipment manufacturers recognize the fuel stability test it used as reliable for testing E10 fuel treatment additives and that the corrosion protection test it used is applicable to most boat engine fuel systems. Gold Eagle also asserted affirmative defenses to Star-Brite’s claims. Gold Eagle’s counterclaim alleges, among other things, that in various advertising and marketing materials for Star Tron, which Star-Brite markets for use in various types of engines, Star-Brite makes false and misleading claims that are causing harm to Gold Eagle, which markets competitive products under the STA-BIL brand, thereby violating the same statutory provisions as Gold Eagle is alleged to have violated in Star-Brite’s complaint, and also constituting common law unfair competition. Among other things, the counterclaim references several tests conducted by a laboratory hired by Gold Eagle and alleges that, given the results of these tests, Star-Brite’s claims that Star Tron improves the performance of E10 fuel, provides cleaning and restorative benefits, and provides benefits with respect to ethanol fuel problems are false and misleading.

Gold Eagle seeks, among other things, a permanent injunction enjoining Star-Brite from further using, displaying and distributing marketing materials that include the alleged false and misleading claims and requiring Star-Brite to issue corrective statements sufficient to dispel any residual harmful effects of the alleged false and misleading statements; and that the Court issue a judgment against Star-Brite for actual damages to be enhanced up to three times; disgorgement of profits to Gold Eagle that Star-Brite made as a result of its alleged unlawful actions; and attorney’s fees, costs and interest.

Star-Brite filed an answer to the counterclaim, generally denying the allegations, and asserting affirmative defenses, including that Star-Brite’s subject advertising is based on reliable tests, data and results, and that the counterclaim is barred by, among other things, the applicable statutes of limitations and the doctrine of laches.

In September 2015, Gold Eagle filed a motion for summary judgment. Star-Brite filed two motions for summary judgment with respect to Gold Eagle’s counterclaims, one of which was based on Star-Brite’s defenses regarding the statutes of limitations and doctrine of laches and the other based on Star-Brite’s other defenses to the counterclaims. Star-Brite’s motion based on the statutes of limitations and doctrine of laches was denied by the Court in January 2016. The remaining motions were denied as moot following the jury verdict on the matter, described below.

A jury trial was conducted during February 2016. On March 1, 2016, the jury unanimously found that (i) Gold Eagle’s advertising was not literally false; (ii) Gold Eagle did not commit false advertising under the Florida False Advertising Statute; (iii) Star-Brite’s advertising was not literally false and (iv) Star-Brite did not commit false advertising under the Florida False Advertising Statute. As a result of the jury’s verdict, the Court determined that (i) Star-Brite would recover nothing from Gold Eagle, and Star-Brite’s action was dismissed on the merits and (ii) Gold Eagle would recover nothing from Star-Brite, and Gold eagle’s counterclaim was dismissed on the merits.

Each party has until April 1, 2016 to file an appeal.

The Company believes that, based on information available, the outcome of this legal matter will not ultimately have a material adverse effect on the financial position or results of operation of the Company. However, in the event of unexpected further developments, it is possible that the ultimate resolution of this matter, or other matters that may arise, if unfavorable, may be materially adverse to the Company’s business, financial condition, results of operations or liquidity.