Quarterly report pursuant to Section 13 or 15(d)

Commitment and Contingencies

v3.21.2
Commitment and Contingencies
9 Months Ended
Sep. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
Commitment and Contingencies

Note 21: Commitment and Contingencies

 

Effective January 1, 2019, the Company adopted ASC 842, Leases, using the modified retrospective transition method applied at the effective date of the standard. Pursuant to the adoption, management recorded a right-of-use asset of $2,153,747, accumulated amortization of $124,070, a lease liability of $2,071,903, a reversal of previously recorded deferred rent of $37,920 and the increase in accumulated deficit of $4,306 for the operating lease entered into on February 6, 2018, for 6,969 square feet of general office space at 131 South Rodeo Drive, Suite 250, Beverly Hills, CA 90212 pursuant to a 91-month lease that commenced on May 25, 2018. The Company paid rent of $364,130 annually, subject to annual escalations of 3.5%.

  

Effective January 21, 2019, the Company entered into an 83-month sublease for the 6,969 square feet of general office space, that commenced on February 4, 2019. The subtenant paid the Company rent of $422,321 annually, subject to annual escalations of 3.5%. On September 11, 2020, the Company entered into a Surrender Agreement with the landlord which terminated the 131 South Rodeo Dr. lease agreement. As a result, the Company recorded a decrease in the right-of-use asset, accumulated amortization, and the lease liability of $2,142,863, $465,124 and $1,760,302 respectively. The termination of the lease resulted in a loss of $338,586. Simultaneously, as part of the Surrender Agreement the Sublease was terminated.

 

On January 30, 2019, the Company entered into an operating lease for 5,838 square feet of general office space at 190 N. Canon Drive, Suite 400, Beverly Hills, CA 90210 pursuant to a 96-month lease that commenced on August 1, 2019. The Company pays rent of $392,316 annually, subject to annual escalations of 3.5%.

 

On February 1, 2021, as part of the ChizComm Acquisition, the Company assumed an operating lease that was entered into on May 19, 2019 for 6,845 square feet of general office space located at 245 Fairview Mall Drive, Suites 202 and 301, Toronto, Ontario M2J 4T1 pursuant to an 84-month lease which commenced on October 1, 2019. The Company pays rent of $95,830 annually, subject to annual escalations 5% to 7%. Also, as part of the ChizComm Acquisition, the Company assumed an operating lease that was entered into on April 30, 2019 for 3,379 square feet of general office space located at One International Boulevard, 11th Floor, Mahawh, New Jersey pursuant to a 24-month lease which ended on May 1, 2021. The Company paid rent of $74,338 annually.

 

On March 2, 2021, the Company entered into an operating lease for 4,765 square feet of general office space located at 1050 Wall Street West, Suite 665, Lyndhurst NJ, 07071 pursuant to an 89-month lease which commenced on October 1, 2021. The Company will pay $114,360 annually subject to annual escalations of 2.5%.

 

As of September 30, 2021, the weighted-average lease term for operating leases equals to 69 months. Weighted-average discount rate equals to 8.32%.

 

In addition, the Company has contractual commitments for employment agreements of certain employees.

 

Rental expenses incurred for operating leases during the three months ended September 30, 2021 and September 30, 2020 were $124,189 and $141,962, respectively. Rental expenses incurred for operating leases during the nine months ended September 30, 2021 and September 30, 2020 were $367,935 and $557,640, respectively. During the nine months ended September 30, 2021, the Company did not receive sub-lease income. During the nine months ended September 30, 2020, the Company received sub-lease income of $316,762.

 

The following is a schedule of future minimum contractual obligations as of September 30, 2021, under the Company’s operating leases and employment agreements: 

                                                       
                                           
    2021     2022     2023     2024     2025     Thereafter     Total  
Operating Leases   $ 162,898     $ 679,772     $ 665,681     $ 690,463     $ 711,662     $ 1,306,939     $ 4,217,415  
Employment Contracts     856,355       2,932,028       2,236,787       1,105,566       506,583             7,637,319  
Consulting Contracts     75,000       187,500                               262,500  
    $ 1,094,253     $ 3,799,300     $ 2,902,468     $ 1,796,029     $ 1,218,245     $ 1,306,939     $ 12,117,234