NOTE 10. SUBSEQUENT EVENTS

6 Months Ended

Jun. 30, 2011

10.	SUBSEQUENT EVENTS

As it relates to a legal settlement entered into by the Company (see Note 6 and Note 7), the Company, in July 2011, issued 94,595 shares of its common stock valued at $33,108 (based on the contemporaneous cash sales prices) as payment of such settlement amounts. The Company will record a gain on the settlement of debt of $1,892 related to this transaction. Further, in August of 2011, the Company will issue 120,690 shares valued at $42,241as its final payment related to this settlement. The Company will record a loss on the settlement of debt of $7,241 with this issuance.

On August 10, 2011, the Board of Directors appointed Desmond Wheatley (currently the Company’s President and Chief Operating Officer) as its new President, Chief Executive Officer and corporate Secretary and approved and entered into an employment agreement with him, effective on August 10, 2011. This agreement calls for an annual salary of $200,000, consistent with his current rate of compensation. Further, Mr. Wheatley is granted 4,320,000 stock options with an exercise price of $0.27 per share and a ten (10) year term. One third of these options vest immediately, while one third will vest on the November 1, 2011 and one third will vest on November 1, 2012. Consistent with ASC 718 “Compensation – Stock Compensation”, and valued using the Black-Sholes valuation methodology, the Company will record a charge of $341,589 in August 2011 related to this option grant and the remaining value of $662,558 will be charged to operations over the remaining vesting period. The term of the employment agreement ends on January 1, 2016. Robert Noble resigned as the Company’s Chief Executive Officer and corporate Secretary, effective August 11, 2011, to vacate those positions for Mr. Wheatley.

On August 10, 2011, the Board of Directors appointed Chris Caulson as its new Chief Financial Officer and approved and entered into an employment agreement with him, effective on August 10, 2011. This agreement calls for an annual salary of $165,000. Further, Mr. Caulson is granted 2,700,000 stock options with an exercise price of $0.27 per share and a ten (10) year term. One third of these options will vest immediately, while one third will vest on the November 1, 2011 and one third will vest on November 1, 2012. Consistent with ASC 718 “Compensation – Stock Compensation”, and valued using the Black-Sholes valuation methodology, the Company will record a charge of $213,493 in August 2011 related to this option grant and the remaining value of $414,099 will be charged to operations over the remaining vesting period. The term of the employment agreement ends on January 1, 2016.

On August 10, 2011, the Board of Directors entered into an employment agreement with Robert Noble pursuant to which his appointment as Executive Chairman is confirmed. The employment agreement calls for annual compensation, including auto allowance, of $258,000 which is consistent with his current compensation. Further, in accordance with an earlier understanding involving stock compensation whereas Mr. Noble had agreed to terminate earlier awarded options for newly issued options, Mr. Noble is granted 9,162,856 stock options with an exercise price of $0.33 per share and a ten (10) year term. All of these options vest immediately upon the Company’s achievement of cumulative gross revenues of $30,000,000 prior to December 31, 2014. Upon the grant of the options, all outstanding options held by Robert Noble that were granted under the Company’s predecessor’s 2007 Unit Option Plan and 2008 Equity Incentive Plan will immediately be cancelled and terminated. Consistent with ASC 718 “Compensation – Stock Compensation”, the Company does not expect there to be an additional current or future charge related to this option transaction. The term of this employment agreement ends on January 1, 2016.

On August 10, 2011, the Company’s Board of Directors approved and caused the Company to adopt the Envision Solar International, Inc. 2011 Stock Incentive Plan (the “Plan”), which authorizes the issuance of up to 30,000,000 shares of the Company’s common stock pursuant to the exercise of stock options or other awards granted under the Plan. A copy of the Plan is attached to this Quarterly Report on Form 10-Q as Exhibit 4.1.

On August 10, 2011, the Board of Directors approved compensation for non executive board members amounting to 200,000 stock options per year of service, effective and commencing on August 10, 2011. Accordingly, the Company has granted 200,000 stock options to each of Jay S. Potter and John M. Evey, effective August 10, 2011 for the current year of service. The stock options have an exercise price of $0.27 per share and a term of ten (10) years. Of these options, 122,222 will vest immediately for each individual, with the remainder vesting on a prorated basis over the remaining year of service. Consistent with ASC 718 “Compensation – Stock Compensation”, and valued using the Black-Sholes valuation methodology, the Company will record a charge of $57,986 in August 2011 related to these option grants and the remaining value of $36,900 will be charged to operations on a prorated basis over the remaining vesting period. The terms and conditions of options for future grants will be approved by the Company’s board on the date of grant.

In August 2011, the Board of Directors approved and the Company agreed to issue 1,000,000 shares of common stock with a per share value of $0.35 (based on contemporaneous cash sales prices) or $350,000 for marketing and investor relations services. This expense will be recognized over the remainder of fiscal year 2011 consistent with the term of the agreement.

In August 2011, the Board of Directors approved and the Company agreed to issue 600,000 warrants, each with a five year term and exercise price of $0.25 for investor relations and financial advisory services to a company controlled by Jay Potter, our Director. These warrants, valued at $119,360 using the Black-Scholes valuation methodology, will be expensed over the six month term of the agreement.

In August 2011, the Board of Directors and the Company signed an agreement which it pledged newly issued shares of common stock to be valued at market prices as collateral for any claims made against a performance bond issued on behalf of the Company.