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10. COMMITMENTS AND CONTINGENCIES
 12 Months Ended
Dec. 31, 2012
Commitments and Contingencies Disclosure [Abstract]  
NOTE 10. COMMITMENTS AND CONTINGENCIES
10. COMMITMENTS AND CONTINGENCIES

 

Leases:

 

Prior to 2010, the Company entered into litigation with a previous landlord related to leased office space that the Company abandoned prior to its lease expiration. (See Legal Matters below). In 2010, a legal judgment was entered awarding the landlord legal possession of premises as well as $94,170, plus interest at 10%, as satisfaction of all claims. The Company has recorded a liability for this obligation, which has yet to be paid, amounting to $122,421 and $113,004 as of December 31, 2012 and December 31, 2011 respectively.

 

In December 2009, the Company entered into a new 4-year lease for new premises. The lease agreement includes a $100,000 note payable feature as discussed in Note 9, for the first year, and then includes rent increases each year thereafter. As of December 31, 2012, this lease, which expires in the upcoming fiscal year, has a remaining obligation of $107,168.

 

Rent expense, net of reimbursement for sublease (see Note 14), was $104,156 and $86,714 for the years ended December 31, 2012 and 2011, respectively.

 

Legal Matters:

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of December 31, 2012, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of our operations except for the following:

 

The Company was a party to a lawsuit with its former landlord whereby the landlord claims that the Company broke its lease with respect to the rental of office space, which housed the Company’s headquarters. The Company vacated premises on December 20, 2009 and the landlord repossessed premises on January 1, 2010. In 2010, a judgment was entered whereby Envision was ordered to pay $94,170 plus 10% interest until paid in satisfaction of all claims. The Company has accrued $122,421 related to this judgment. (See “Leases” above)

 

On December 7, 2010, Envision Solar Construction, Inc. reached a legal settlement with a former vendor related to outstanding payables owed by Envision Solar Construction, Inc. The terms of the settlement stipulated that Envision Solar Construction, Inc. owes the vendor $139,818 plus 10% accrued interest. The Company had accrued payables to this vendor representing the settlement amount and accrued interest of $184,171 at December 31, 2011 that was recorded in accounts payable. In October 2011, this same vendor filed a new lawsuit in an attempt to entwine Envision Solar International, Inc. (the parent company) and effectively force payment from the parent. In April 2012, the Company came to a new settlement related to this continued litigation. The Company made a partial payment to this vendor at this time, and agreed to a future reduction of amounts owed if and when the Company makes a future, predefined payment at any time prior to March 31, 2014. If the Company does not make such payment, the payable balance will remain as recorded and the legal obligation for such payment will revert to Envision Solar International, Inc. (the parent company). As of December 31, 2012, the Company has accrued payables to this vendor of $152,667.

 

Other Commitments:

 

The Company enters into various contracts or agreements in the normal course of business whereby such contracts or agreements may contain commitments. During 2012 and 2011, the Company has agreements to act as a reseller for certain vendors; joint development contracts with third parties; sales agent agreements whereby sales agents would receive a fee equal to a percentage of revenues generated by the agent; business development agreements and strategic alliance agreements where both parties have agreed to cooperate and provide business opportunities to each other and in some instances, provide for a right of first refusal with respect to certain projects of the other parties; agreements with vendors where the vendor may provide marketing, public relations, technical consulting or subcontractor services and financial advisory agreements where the financial advisor would receive a fee and/or commission for advising and raising capital for the Company. All expenses and liabilities relating to such contracts were recorded in accordance with generally accepted accounting principles during the periods. Although such agreements increase the risk of legal actions against the Company for potential non-compliance, other than revenue generating sales contracts, there are no firm commitments in such agreements as of December 31, 2012.

 

Upon the signing of customer contracts, the Company enters into various other agreements with third party vendors who will provide services and/or products to the Company. Such vendor agreements may call for a deposit along with certain other payments based on the delivery of goods or services. Payments made by the Company before the completion of projects are treated as ongoing project expenses and due to the contractual nature of the agreements; the Company may be contingently liable for other payments required under the agreements.

 

In August 2011, 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. The project for which the bond was issued is complete as of December 31, 2011 and there were no claims that would cause such collateral to be called. As of December 31, 2012, this bond has been cancelled.