Annual report pursuant to Section 13 and 15(d)

COMMITMENTS AND CONTINGENCIES

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COMMITMENTS AND CONTINGENCIES
12 Months Ended
Dec. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES

During 2017, the Company became aware of a mechanical issue affecting one of the actuators the Company manufactures and sells. The actuator is an ancillary product sold separately from the Company’s burner-management systems (BMS) and chemical-management systems (CMS). The Company does not believe the mechanical issue presents any significant safety concerns for customers. During Q4 the Company identified a solution that resolved the mechanical issue at a minimal cost; however, subsequent to year-end it was determined that the solution was not effective for some customers in very cold climates. Therefore a new solution is necessary to fully address the issue with these actuators. To date, the Company has had to replace less than 2% of the affected actuators sold and the costs were immaterial. Depending on the number of replacements required, the Company estimates that the total replacement costs could be in the range of $150,000 to $675,000.   The Company expects that all costs associated with the repair or replacement of the affected actuators will be incurred during 2018.

In March 2014 the Company entered into a consulting agreement with Terra Industrial with Allen Johnson as agent in order to replace a prior royalty agreement. The agreement is for the term of 10 years with fees of $100,000 CAD paid quarterly. The agreement expires in March of 2024.

The Company leases office space in Texas and Pennsylvania. Rent expense recognized was $48,110 and $40,013 for the year ended December 31, 2017 and the nine-month transition period ended December 31, 2016, respectively. In addition, during the year ended December 31, 2017, the Company entered into operating leases for office equipment. The future minimum lease payments for operating leases as of December 31, 2017, consisted of the following:
Years ending December 31,
Operating
Leases
2018
59,005

2019
39,789

2020
15,371

2021
302

2022

Thereafter

Total
114,467