11. COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2011

Commitments and Contingencies Disclosure [Text Block]

11. COMMITMENTS AND CONTINGENCIES

Leases:

In 2007, the Company entered into a lease agreement for its previous corporate offices. This lease agreement was amended in 2008.  During 2009, the Company entered into litigation with the landlord due to the Company’s default on rental payments and in December 2009, the Company abandoned the premises.  (See Legal Matters below)  The Company vacated these premises and had recognized the approximately $268,000 present value of the remaining lease obligations as a liability on its consolidated balance sheet. 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 total obligation, which has yet to be paid, was reduced to amounts owed of $103,587, including interest, as of December 31, 2010.  As of December 31, 2011, the Company has a recorded liability of $113,004 related to this obligation.

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 10, for the first year, and then includes rent increases each year thereafter.

Future minimum lease payments as of December 31, 2011 for lease agreements with non-cancelable terms in excess of one year are as follows:

2012	$	102,846
2013		107,168
Total	$	210,014

Rent expense, net of reimbursement for sublease (see Note 15), was $86,714 and ($31,197) (including reduction of 2009 abandonment accrual of $173,830) for the years ended December 31, 2011 and 2010, 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, 2011, 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 $113,004 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 stipulate that the Envision Solar Construction, Inc. owes the vendor $139,818 plus 10% accrued interest.  The Company has accrued payables to this vendor representing the settlement amount and accrued interest of $184,171 at December 31, 2011 and is 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. The Company believes it has valid defenses against this claim and intends to vigorously defend itself in the matter.

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 2011 and 2010, the Company has agreements to act as a reseller for certain vendors; joint development contracts with third parties; referral agreements where the Company would pay a referral fee to the referrer for business generated; 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, there are no firm commitments in such agreements as of December 31, 2011.

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 bond is expected to be in place through the first quarter of 2012.  The project for which the bond was issued is complete as of December 31, 2011 and there are not expected to be any claims that would cause such collateral to be called.