COMMITMENTS AND CONTINGENCIES
|9 Months Ended|
Sep. 30, 2021
|COMMITMENTS AND CONTINGENCIES|
|COMMITMENTS AND CONTINGENCIES||
7. COMMITMENTS AND CONTINGENCIES
Real Property Leases
Florham Park, New Jersey
On June 4, 2018, the Company entered in an Agreement of Lease for 3,893 square feet for its corporate headquarters in Borough of Florham Park, New Jersey (the “HQ Lease”). The HQ Lease commencement date was October 2018 and terminates in February 2024. The Company has an option to extend the term of the HQ Lease for one additional period.
Under the terms of the HQ Lease, the Company paid a security deposit of $75,000 and the aggregate rent due over the term of the HQ Lease is approximately $828,000, which will be reduced to approximately $783,000 after certain rent abatements. The Company is required to pay its proportionate share of certain operating expenses and real estate taxes applicable to the leased premises. After certain rent abatements the rent is approximately $12,500 per month for the first year and then escalates thereafter by 2% per year for the duration of the term.
The Company presently rents office space in Madison and is rented for approximately $3,000 per month under an agreement that expires on August 31, 2022.
Operating Lease Liability
In June 2018, the Company entered into the HQ Lease. The HQ Lease commenced upon completion of certain improvements by the landlord in October 2018 and terminates in February 2024 with an option to extend the term of the lease for one additionalperiod. As of December 31, 2018, the Company recorded a deferred lease liability of approximately $176,000 for the improvements funded by the landlord on the consolidated balance sheet. The Company amortizes the deferred liability as a reduction to rent expense in the consolidated statement of operations over the term of the lease.
Under the HQ Lease, the Company will pay monthly fixed rent based on approximate rate per rentable square foot which ranges between approximately $12,400 to $13,600 over the lease period. In addition, the Company received certain rent abatements and lease incentives subject to the limitations in the HQ Lease. The HQ Lease’s net ROU asset and lease liability are approximately $225,000 and ($333,000), respectively, as of September 30, 2021 and rental expense for the nine months ended September 30, 2021 is approximately $85,000.
The Company has determined the interest rate implicit in the lease considering factors such as Company’s credit rating, borrowing terms offered by the U.S. Small Business Administration, amount of lease payments, quality of collateral and alignment of the borrowing term and lease term. The Company considers 10% per annum as reasonable to use as the incremental borrowing rate for purposes of the calculation of lease liabilities.
Maturity Analysis of Short-Term and Operating Leases
The following table approximates the dollar maturity of the Company’s undiscounted payments for its short-term leases and operating lease liabilities as of September 30, 2021:
The Company may be involved in legal matters and disputes in the ordinary course of business. We do not anticipate that the outcome of such matters and disputes will materially affect the Company’s financial statements.
The entire disclosure for commitments and contingencies.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef