Note 10 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 10–Commitments and Contingencies

Operating Leases

As of December 31, 2014, the Company leases facilities and certain trucks and equipment under lease commitments that expire through January 2021. All of these facility leases are accounted for as operating leases. Future minimum lease commitments for these facilities and other operating leases are as follows:

Year Ended December 31,
2015	$	664,257
2016		362,318
2017		151,000
2018		96,000
2019		96,000
Thereafter		104,000
Total	$	1,473,575

Rent expense under operating leases for the year ended December 31, 2014 and 2013 was $1,113,581 and $994,940, respectively.

Equipment Purchase Commitments

As of December 31, 2014, the Company had approximately $1.9 million in outstanding purchase commitments that are necessary to complete the purchase and fabrication of eight hot oil trucks and one acid truck included in the Company’s 2014 CAPEX program. The Company intends to finance the purchase and fabrication of this equipment through cash flow from operations and through its revolving credit facility.

Litigation

On October 10, 2014, the Company received service of a complaint filed in the United States District Court for the Northern District of Texas, Dallas Division (Civil Action No. 3:14-cv-03631) by Heat-On-The-Fly, LLC (“HOTF”) naming the Enservco Corporation (“Enservco”) and its subsidiary Heat Waves Hot Oil Service, LLC (“Heat Waves”) as defendants. The complaint alleges that Enservco and Heat Waves, in offering and selling frac water heating services, infringed and induced others to infringe two patents owned by HOTF (U.S. Patent Nos. 8,171,993 (“the ‘993 Patent”) and 8,739,875 (“the ‘875 Patent”)). The complaint seeks various remedies including injunctive relief and unspecified damages and relates to only a portion of Heat Waves’ frac water heating services. The case is still in its early stages. Heat Waves has filed a motion to transfer the case to Colorado and Enservco has filed a motion to dismiss the case against it based on a lack of personal jurisdiction. A hearing on these motions is set for April 6, 2015.

Enservco and Heat Waves deny that they are infringing any valid, enforceable claims of the asserted patents and intend to vigorously defend themselves against the lawsuit. Heat Waves has offered on demand water heating services well before these patents were even filed.

The Company previously reported in its Annual Report on Form 10-K for the fiscal year ended December 31, 2013 that it was aware of the HOTF ‘993 Patent relating, in part, to the heating of frac water, but also reported that the Company did not believe at that time, and still does not believe, that Heat Waves’ operations infringed any valid claim of that patent. The Company is aware that HOTF has been involved in litigation dating back to January of 2013 with a group of energy companies that are seeking to, among other things, invalidate the ‘993 Patent. Further, the Company is aware of another claim filed by a third party against HOTF in August 2014 also seeking to, among other things, invalidate the ‘993 Patent.

Although the first 12 claims of the ‘993 Patent survived a prior reexamination, the United States Patent and Trademark Office (“USPTO”) granted a second request on July 1, 2014, to reexamine the ‘993 Patent in its entirety (all 99 claims, including the prior 12 claims that survived the prior, limited reexamination) based on different reasoning. On February 11, 2015, the USPTO issued initial findings in the second reexamination proceeding that rejected all 99 claims of the ‘993 Patent as being unpatentable. HOTF has until April 11, 2015, to file a response with the USPTO, but can request an extension of the deadline if it shows good cause. The timing of HOTF’s response and any decision resulting therefrom is uncertain, is subject to appeal, and may be a year or more in the future. Further, HOTF has at least two additional pending patent applications that are based on the ‘993 Patent and ‘875 Patents that if granted could be asserted against the Company. As the ‘993 Patent and the ‘875 Patent are based on the same subject matter, management believes that a finding of invalidity of the ‘993 Patent could serve as a basis to affect the validity of the ‘875 Patent. If the Patents are found to be invalid, the litigation would become moot.

Until such time as the validity of the Patents is finalized and the case is dismissed, the Company will be expending funds for its defense. To the extent that the Company and Heat Waves are unsuccessful in their defense, they could be liable for damages (which may be significant) and possibly an injunction preventing them from using any infringing technology. Either result could negatively impact the Company’s business and operations.  At this time, the Company is unable to predict the outcome of this case, and accordingly has not recorded an accrual for any potential loss.