Major Agreements

12 Months Ended

Dec. 31, 2013

Major Agreements [Abstract]

Major Agreements

Note 3. Major Agreements

On November 2, 2010, we entered into a lighting retrofit and maintenance agreement (the “Riverbay Agreement”) to provide energy management lighting installation and services to Riverbay Fund, Inc. (“Riverbay”), the management company of Co-op City, located in Bronx, a borough of New York City.  The Riverbay Agreement entails replacing and retrofitting over 6,000 lighting fixtures and elements and installing 205 new fixtures in eight parking structures within Co-op City.  Project inception was subject to final approval from the New York State Energy Research and Development Authority (“NYSERDA”) under the American Recovery and Reinvestment Act, which was obtained in March 2011.  The Riverbay Agreement became effective on the date of execution and its term shall end ten years from the date of substantial completion of installation by GEM of the fixtures, which substantial completion occurred during the third quarter of 2011.  We received $800,000, based upon meeting certain installation milestones, from a grant received by Riverbay.  Pursuant to the Riverbay Agreement, we are responsible for the repairing or replacing of the bulbs over the life of the 10 year contact. 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 December 31, 2013.

On November 15, 2011, GEM entered into an Assignment, Assumption and Indemnity Agreement (the “Assignment Agreement”) with a certain unaffiliated third party (the “Assignee”), pursuant to which GEM sold to the Assignee for the purchase price of $992,000 the energy conservation measures, together with the accounts receivables, equipment and related assets, under the Riverbay Lighting Agreement, related to the Co-op City project.  The purpose of the Assignment Agreement was for GEM to promptly monetize total projected revenues over the life of the Riverbay Lighting Agreement of approximately $1,900,000 in order to provide GEM with immediate cash liquidity.  GEM will continue to be responsible for all work, obligations, liabilities, claims and expenses required by the Riverbay Lighting Agreement.  Under the Assignment Agreement, as of December 31, 2012, GEM had received approximately $316,200 of the purchase price.  In April 2013 GEM received $456,798, the balance due under the Assignment Agreement (net of applicable fees and expenses).

On May 3, 2011, GEM entered into a Water Management Agreement (the “Riverbay Water Agreement”) with Riverbay to provide Water Management Technology to Riverbay.  The Riverbay Water Agreement entails GEM’s installation of proprietary water valves (the “Units”) in 13 residential structures in the Co-op City (the “Project”).  In consideration for the installation of the Units, during the term of the Riverbay Water Agreement, Riverbay agreed to remit to GEM 50% of the monthly cost savings achieved within the Project. We continue to monitor the status of the new water valve installation that was done to date within the Project.  The original Riverbay Water Agreement was for five years from the date of completion of installation of the Units.  Neither GEM nor Riverbay Corp. may terminate the Riverbay Water Agreement during its term except for “cause” (as defined in the Riverbay Water Agreement).  In July 2013, Riverbay approved Change Order #1 to the Riverbay Water Agreement to extend the agreement by three years. At the end of the additional three-year extension, our water valves used in the Project were to become the property of Riverbay.  In February 2014, Riverbay approved Change Order #2 to the Riverbay Water Agreement, pursuant to which we received a discounted buyout amount of $280,000 in lieu of the remaining amount of $355,000 due to date to us under the Riverbay Water Agreement and that the installed water valves used in the Project became the property of Riverbay.  The buyout amount was in addition to approximately $300,000, which we previously collected from Riverbay as our portion of the water savings through December 31, 2013.

Please also see Note 8. Debt and Warrants Issuance and Note 14. Commitments and Contingencies.