Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 3. Commitments and Contingencies

Legal Matters

From time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of business.  Other than as set forth below, no legal proceedings, government actions, administrative actions, investigations or claims are currently pending against us or involve us which, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business or financial condition.

On September 8, 2011, an action entitled Cooper Electric Supply Co. v. Southside Electric, Inc. was filed in the Superior Court of New Jersey. GEM succeeded to the business of Southside Electric, Inc. (“Southside”) pursuant to a share exchange between Southside and GEM in May of 2010.  We were served in October 2011.  The plaintiff asserts damages in the amount of approximately $23,700 for non-payment for goods supplied by the plaintiff to Southside.  Our management believes the resolution of this matter will not materially affect our financial position, results of operations or liquidity.  Approximately $9,000 was paid toward the resolution of the structured payoff in August 2013 and September 2013.

Other Commitments, Agreements and Extinguishment of Liabilities

Pursuant to the contract between the Company and Riverbay Corporation regarding the maintenance of the energy conservation measures (EMC) associated with installed light bulbs and electrical system, the Company is responsible for the repairing or replacing of the bulbs over the life of the 10 year contact that began August 2011. The bulb supplier has warranted the bulbs for 100,000 hours. Accordingly, the Company has computed that the best estimate of the potential liability for maintenance to be approximately $90,000, which was accrued as of September 30, 2013. 

In August 2013, an agreement was entered into among the Company and Watz Enterprises, L.L.C., Mark Deleonardis and their affiliates (collectively, the “Watz Affiliates”) pursuant to which the Watz Affiliates agreed to (i) settle and waive any and all outstanding claims and liabilities against the Company, including any outstanding Company payables to the Watz Affiliates, and (ii) return 1,000,000 shares of the Company’s common stock, in consideration for the Company paying the Watz Affiliates a sum of $42,000 in the fourth quarter of 2013. As of November 19, 2013, approximately $23,000 has been paid to the Watz Affiliates. Pursuant to the agreement outstanding claims and liabilities in the amount of $396,000 on the Company’s books have been written off and recorded as a gain on settlement of debt in the amount of $352,600.

In August 2013, an agreement was entered into between the Company and John Morra and his affiliates (collectively, the “Morra Affiliates”) pursuant to which the Morra Affiliates agreed to settle and waive any and all outstanding claims and liabilities against the Company, including any outstanding Company payables to the Morra Affiliates in return for the Company paying the Morra Affiliates a sum of $1 and granting Morra piggy back registration rights for the balance of its shares acquired by the Morra Affiliates in connection with the merger of the Company and GEM in August 2010 (the “Merger”). The Company paid the Morra Affiliates a sum of $1 during the third quarter of 2013 and pursuant to the agreement all such outstanding claims and liabilities in the amount of $268,504 on the Company’s books have been written off and recorded as a gain on settlement of debt.

In August 2013, an agreement (the “FPF Agreement”) was entered into among the Company and Jay Ennis, Financial Partners Funding, LLC (“FPF”) and their affiliates (collectively, the “Ennis Affiliates”) pursuant to which the Ennis Affiliates agreed to (i) settle and waive any and all outstanding claims and liabilities against the Company, including any outstanding Company payables to the Ennis Affiliates,in consideration for the Company paying Mr. Ennis a sum of $1, and (ii) terminate the Commitment Letter and the Option (each as defined below) and any other agreement among the Company and the Ennis Affiliates in consideration for the Company issuing to FPF 1,000,000 shares of the Company’s common stock with piggy back registration rights. The Company paid Mr. Ennis the sum of $1 during the third quarter of 2013 and pursuant to the agreement all such outstanding claims and liabilities in the amount of $770,000 on the Company’s books have been written off and recorded as a gain on settlement of debt.