Quarterly report pursuant to Section 13 or 15(d)

Note 6 - Commitments and Contingencies

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Note 6 - Commitments and Contingencies
9 Months Ended
Sep. 30, 2018
Notes  
Note 6 - Commitments and Contingencies

NOTE 6 – COMMITMENTS AND CONTINGENCIES

 

Operating Leases

 

The Company leases approximately 7,579 square feet of office space under a 62 month operating lease which expires during April 2023. The amounts reflected in the table below are for the aggregate future minimum lease payments under the non-cancelable facility operating leases.  Under lease agreements that contain escalating rent provisions, lease expense is recorded on a straight-line basis over the lease term.

 

The Company also leases office space under a 23 month operating lease which expires during August 2019. The amounts reflected in the table below are for the aggregate future minimum lease payments under the non-cancelable facility operating leases.  Under lease agreements that contain escalating rent provisions, lease expense is recorded on a straight-line basis over the lease term.

 

The Company also leases approximately 202 square feet of office space under a 12 month operating lease which originally expired in 2016.  The lease was renewed to May 2019, and is renewable at the Company’s option annually at a flat monthly amount of $400.  The amounts reflected in the table below are for the aggregate future minimum lease payments under the non-cancelable facility operating leases. 

 

Rent expense was $230,211 and $136,134 for the nine months ended September 30, 2018 and 2017, respectively.

 

As of September 30, 2018, future minimum lease payments are as follows:

 

Year Ending December 31,

 

 

 

2018 (three months)

 

 

$

74,364

 

 

2019

 

 

 

259,851

 

 

2020

 

 

 

209,559

 

 

2021

 

 

 

214,107

 

 

2022

 

 

 

218,654

 

 

2023 and thereafter

 

 

 

18,569

 

 

Total minimum lease payments

 

 

$

995,104

 

 

On August 1, 2017, the Company entered into a 36 month lease of computer equipment.  The lease carries a monthly payment of $2,871 with the option to purchase the equipment at its fair market value at the end of the lease.

 

Restricted Stock Commitments

 

The Company has committed to settling a significant portion of its current accounts payable balances through the future issuance of restricted stock units.  While the terms of these agreements have not yet been formalized with employees and outside contractors, they could have a potentially dilutive effect to current shareholders.

 

Contingent Liability

 

On October 15, 2011, the Company entered into an agreement with a consultant by which the consultant’s invoices for the previous four months would be accrued as a liability to be paid out upon (a) the Company’s successful raising of $10,000,000 in capital funding, or (b) the Company reaching total revenues of $10,000,000.  The Company has a balance due under this agreement of $37,500 at September 30, 2018 and December 31, 2017, respectively.

 

Legal Proceedings

 

On December 2, 2016, AltEnergy Cyber, LLC ("Plaintiff") instituted a legal action in Connecticut against the Company and Robert Zahm.  The complaint alleged that (i) the Company improperly extended the maturity date of the Plaintiff’s convertible note in the amount of $1,500,000 and (ii) improperly converted the loan into the Company’s stock. The Complaint alleges that the Company is liable to the Plaintiff for $4,500,000 plus interest.  This litigation is still ongoing.   During the year ended December 31, 2017, Robert Zahm was dismissed from the proceedings for lack of personal jurisdiction.  On March 29, 2018, the AltEnergy Cyber, LLC’s legal action was dismissed through a motion for summary judgement.  As of the date of this filing, the appeal period has expired and it is the Company’s belief that this matter is fully resolved through the dismissal.