Annual report pursuant to Section 13 and 15(d)

Leases

v3.19.1
Leases
12 Months Ended
Dec. 31, 2018
Leases [Abstract]  
Leases

15. LEASES

 

OPERATING LEASES

 

On March 20, 2017, in connection with the Company’s Miami Beach, Florida lease, the Company’s landlord filed a complaint for eviction with the Miami-Dade County Court against the Company as a result of the Company’s default under the lease for failing to pay rent, operating expenses and sales taxes of approximately $175,000, which represents the Company’s obligations under the lease through March 31, 2017, which was accrued for as of December 31, 2017. As a result of the action taken by the landlord, the Company accrued an additional $300,000 as of December 31, 2017, which represents the present value of the Company’s rent obligation through the end of the lease. On February 16, 2018, the Company paid $234,000 to satisfy this obligation.

 

On May 22, 2017, the Company entered into a lease for 11,457 square feet of office and warehouse space in Phoenix, Arizona beginning June 1, 2017 and ending July 31, 2019. Monthly lease payments range from approximately $6,300 to $6,600 (with the Company paying approximately $6,300 in total during the first three months of the lease) for a total of approximately $155,000 for the total term of the lease.

 

The Company had a five year sublease for office and warehouse space in Phoenix, Arizona beginning December 1, 2013 and ended November 30, 2018. On February 28, 2017, the Company vacated the Phoenix, Arizona space and has no further obligation in connection with the sublease.

 

On April 20, 2018, the Company entered into a three-year operating lease agreement for 3,425 square feet of office space in Miami Beach, Florida beginning May 1, 2018 and ending May 31, 2021. The tenant and landlord have the option to cancel the contract after the first year with a 90-day written notice. As of December 31, 2018, the lease had a remaining term of approximately 2.3 years. The lease does not contain an option to extend past the existing lease term. Over the duration of the lease, payments will escalate 5% every year.

  

On October 16, 2018, the Company entered into an operating lease agreement with Oracle America, Inc for the purchase of a three year license, related training, custom programming and implementation of NetSuite SuiteSuccess Wholesale/Distribution Emerging Edition Cloud Service. The performance obligations of NetSuite commenced in December 2018. The Company’s payment obligations were deferred for six months from NetSuite’s performance obligation date, however the payment schedule was condensed to a 30 month schedule of equal monthly payments. As of December 31, 2018, the lease had a remaining term of approximately 2.9 years.

 

As of December 31, 2018, the Company had no leases that were classified as a financing lease. As of December 31, 2018, the Company did not have additional operating and financing leases that have not yet commenced. 

 

Total operating lease expenses for the year ended December 31, 2018 was $264,014 and is recorded in other operating expenses on the consolidated statements of operations. Total rent expense for the year ended December 31, 2017 was $143,178 and is recorded in other operating expenses on the consolidated statements of operations.

 

Supplemental cash flows information related to leases was as follows:

 

   

Year Ended

December 31, 2018

 
       
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash flows from operating leases   $ 71,516  
         
Right-of-use assets obtained in exchange for lease obligations:        
Operating leases   $ 514,522  
         
Weighted Average Remaining Lease Term        
Operating leases     2.72  
         
Weighted Average Discount Rate        
Operating leases     6.0 %

 

Future minimum payments under non-cancellable leases as of December 31, 2018 were as follows:

 

For the Years Ending December 31,   Amount  
       
2019   $ 197,875  
2020     225,838  
2021     123,640  
Total future minimum lease payments     547,353  
Less: imputed interest     (95,623 )
Total   $ 451,730  

 

See Note 17 - Subsequent Events for additional details.