Note 13 - Commitments and Contingencies

12 Months Ended

Dec. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Note 14 - Commitments and Contingencies

Note 14 – Commitments and Contingencies

Leases

In 2010, the Company entered into a lease agreement for 6,400 square feet of office space located in Newburyport, Massachusetts. This lease was effective from August 2010 through July 2013. This agreement provided a free rent period of the first four months of the term.

In August 2013, the Company executed a lease for 8,713 square feet for its former corporate offices located in Portsmouth, New Hampshire. The lease commenced on August 9, 2013 and had a five-year term ending on September 8, 2018. The monthly rental payments for the first year were $10,165 per month and were scheduled to increase on each anniversary at a rate of 3% per annum. The Company was required to pay its proportionate share of the building’s common area maintenance (“CAM”), real estate taxes, utilities serving the premises and the cost of premises janitorial service estimated to be $5,210 on a monthly basis.

On August 11, 2014, the landlord declared the Company in default based on its failure to pay rent and other charges due since July 2014. The Company vacated the premises on August 22, 2014, and moved its office to smaller, less expensive premises in the neighboring area. Past due amounts owed on the lease through the date of surrender of the premises total approximately $51,000. Total payments from surrender through the end of the lease would be approximately $900,000. The Company is attempting to negotiate a settlement of the lease with the landlord based on an offset for the fair market rental value of the premises and a discount to present value, as well as a discount based on the Company’s precarious financial condition. No legal demands have been filed by either party. In addition, the Company has notified its former CEO, who it believes signed the lease without board approval and without proper disclosure, that it will hold him responsible for all losses arising from the lease. The former CEO has denied these charges. In this regard, the Company intends to set off any such losses against the amount accrued in his favor under the Series B debenture held by him (approximately $175,425 as of November 1, 2014) and against his options to purchase 222,100 shares of the Company’s common stock at an exercise price of $0.35 per share. The space was leased to a new tenant controlled by the former CEO effective January 1, 2015. There can be no assurance that settlement of this lease will not have a material adverse effect on the Company.

In September 2013, the Company executed a lease for office space located in Palo Alto, California. The lease commenced on September 1, 2013 with monthly payments of $600 per month and has a twelve-month term ending on August 31, 2014. The Company sublet a portion space of the office in Palo Alto for $300 a month through the end of the rental term ending on August 31, 2014. Upon expiration of the lease term the Company vacated the property.

In September 2014, the Company executed a lease for office space located in Portsmouth New Hampshire. The lease commenced on September 1, 2014, with monthly payments of $3,000 per month on a month-to-month term. The Company vacated the property as of January 31, 2015, and is in the process of relocating its corporate offices to Davie, Florida.

For the years ending December 31, 2014 and 2013, the Company recognized approximately $185,002 and $98,000, respectively, in rent expense.

Legal

In February 2012, Trunity and the Company’s former CEO Terry Anderton were served with a complaint filed by an ex-Trunity, employee, William Horn, in the Nashua, New Hampshire, Superior Court. The plaintiff served as Executive Vice President of Marketing & Business Development from March until August 2011 at an annual salary of $100,000. He asserted whistleblower status and alleged that he was wrongfully terminated because of his allegations that the Company had violated securities, tax and employment laws. The complaint sought unspecified damages under the New Hampshire Whistleblower Act and common law, including reinstatement, back pay and attorney’s fees and costs. In May 2012, the Company responded to the complaint by denying all material allegations and filing a counterclaim against the plaintiff for breach of contract, tortious interference with contractual and business relations, breach of fiduciary duty and violation of the Uniform Trade Secrets Act. Substantial discovery was taken. 

On June 13, 2013, the Court granted the Company Motion to Dismiss Terry Anderton, in his individual capacity, from the case. Therefore, Trunity remained the sole defendant in this matter.

Trial of the case was scheduled for the weeks of June 16 and June 23, 2014.

On April 14, 2014, the parties mediated the case and settlement terms reached. On May 8, 2014, following mediation, Mr. Horn signed a Confidential Settlement Agreement and General Release, which became effective on the eighth day following his signature. The case was settled based on Trunity’s agreement to pay $60,000 to Mr. Horn, less applicable withholding and taxes, as well as confidentiality provisions, non-disparagement, and the parties exchanging mutual releases. The settlement payment was made by the insurance company, which has paid all costs of the litigation above the $50,000 deductible. The parties filed Docket Markings bringing the case to conclusion.