13. Commitments and contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

NOTE 13 - Commitments and contingencies

Office Space Rental

On May 1, 2009, the Company entered into a lease for approximately 1,800 square feet of office space in Santa Barbara, California for use as its executive offices.  This lease was amended on July 21, 2009 and expires on December 31, 2013 with a three-year renewal term available at an initial rent plus common area charges of $5,767 per month. The Company has vacated this space as of August 31, 2012 and accrued a year of rent payments as of June 30, 2012 to provide for the Company’s estimated liability before a new tenant takes over the lease liability. There was no cash impact from this accrual of rent payments.

On August 1, 2011, we entered into a lease for approximately 7,000 square feet of office space in Los Angeles, California.  The lease continues through November 30, 2014.  Initially, the lease had a fixed monthly rent of $19,326, subject to annual increases of 3%.  The Company was not required to pay a fixed monthly rent for months 2 through 5.  Prior to this, the Company was leasing the same office space on a month-to-month basis. The Company vacated this property in the quarter ended June 30, 2012 and accrued a year of rent payments as of June 30, 2012 to provide for the Company’s estimated liability before a new tenant takes over the lease liability. There was no cash impact from this accrual of rent payments.

On November 1, 2011, we entered into a lease for approximately 3,000 square feet of office space in Santa Barbara, California for use by our operating units.  This lease expires on October 31, 2014 with two additional three-year renewal terms available.  The initial rent plus common area charges are $7,157 per month. The Company vacated this property in the quarter ended June 30, 2012 and accrued a year of rent payments as of June 30, 2012 to provide for the Company’s estimated liability before a new tenant takes over the lease liability. There was no cash impact from this accrual of rent payments.

Rent expense for the nine months ended September 30, 2012 and 2011 was $209,749 and $105,193 respectively. Rent expense for the three months ended September 30, 2012 and 2011 was $12,351 and $58,735 respectively.

Employment and Consulting Contracts

Effective June 28, 2012, an existing director of the Company and Chairman of the Company’s Audit Committee, was elected by the Company’s board of directors as Chairman of the Board, CEO and a director of the Company’s subsidiaries. The Board of Directors of PEI elected him as Chairman of the Board and CEO. Under the terms of an employment agreement dated June 28, 2012, this CEO will receive an annual salary of $250,000 per year and will continue to serve on the Company’s board of directors and as Chairman of the Company’s Audit Committee and shall continue to receive his compensation for such services. The term of this agreement is six months with an automatic six month extension unless the Company provides written notice of non-renewal 30 days prior to the end of the initial six-month term. This executive has been granted options to purchase 2,300,000 shares of the Company’s common stock at $0.35 per share, which was the closing price of the Company’s common stock on the day of option grant. These options vest monthly over a twelve-month period. In the event the Company does not renew the second six month period, the executive resigns or the Company terminates the executive’s employment without cause, all options will immediately vest and the executive will receive all unpaid salary for the full twelve month period.

On June 28, 2012, Paul Feller, the Company’s former Chairman of the Board and CEO, resigned from all positions with the Company and its subsidiaries, including PEI. In connection therewith, pursuant to a Separation and Release Agreement, the Company and this former employee entered into a new Consulting Agreement for a term of two years at an annual salary of $250,000, subject to the Company raising at least $2,000,000 in funding. Under the Consulting Agreement, this former employee agreed to provide services in the area of business development, fund-raising and the evaluation of asset/event acquisitions to be done at the discretion of the Board of Directors. As noted in Footnote 6 “Receivable from Former Officer and Director,” the Company has a receivable from Mr. Feller of $538,500.

On August 1, 2012, the employment contract between the Company and its CFO expired and the Company and this officer are negotiating a replacement contract.

Set forth below is information concerning our known contractual obligations as of September 30, 2012 that are fixed and determinable by years ending December 31:

											After
	Total		2013		2014		2015		2016		2016
Payroll, payroll tax and personnel	$	1,394,880	$	1,394,880	$	–	$	–	$	–	$	–
Employee and consulting contracts		1,670,661		1,545,661		125,000		–		–		–
Notes payable		2,752,999		2,752,999		–		–		–		–
Legal judgments		90,732		90,732		–		–		–		–
Rent obligations		452,041		452,041				–		–		–
	$	6,361,313	$	6,236,313	$	125,000	$	–	$	–	$	–