Commitments |
9 Months Ended | ||||||||||||||||||||||||||||||
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Sep. 30, 2020 | |||||||||||||||||||||||||||||||
| Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||
| Commitments | NOTE 13 - COMMITMENTS
Lease Commitments
The Company determines if an arrangement is a lease at inception. This determination generally depends on whether the arrangement conveys to the Company the right to control the use of an explicitly or implicitly identified fixed asset for a period of time in exchange for consideration. Control of an underlying asset is conveyed to the Company if the Company obtains the rights to direct the use of and to obtain substantially all of the economic benefits from using the underlying asset. The Company has lease agreements which include lease and non-lease components, which the Company has elected to account for as a single lease component for all classes of underlying assets. Lease expense for variable lease components are recognized when the obligation is probable.
Operating lease right of use (“ROU”) assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Operating lease payments are recognized as lease expense on a straight-line basis over the lease term. The Company primarily leases buildings (real estate) which are classified as operating leases. ASC 842 requires a lessee to discount its unpaid lease payments using the interest rate implicit in the lease or, if that rate cannot be readily determined, its incremental borrowing rate. As an implicit interest rate is not readily determinable in the Company’s leases, the incremental borrowing rate is used based on the information available at commencement date in determining the present value of lease payments.
The lease term for all of the Company’s leases includes the non-cancellable period of the lease plus any additional periods covered by either a Company option to extend (or not to terminate) the lease that the Company is reasonably certain to exercise, or an option to extend (or not to terminate) the lease controlled by the lessor. Options for lease renewals have been excluded from the lease term (and lease liability) for the majority of the Company’s leases as the reasonably certain threshold is not met.
Lease payments included in the measurement of the lease liability are comprised of fixed payments, variable payments that depend on index or rate, and amounts probable to be payable under the exercise of the Company option to purchase the underlying asset if reasonably certain.
Variable lease payments not dependent on a rate or index associated with the Company’s leases are recognized when the event, activity, or circumstance in the lease agreement on which those payments are assessed as probable. Variable lease payments are presented as operating expenses in the Company’s income statement in the same line item as expense arising from fixed lease payments. As of and during the year ended December 31, 2020, management determined that there were no variable lease costs.
Right of Use Asset
In connection with the Bluwire acquisition, the Company recognized a right of use asset of $77,243. The Company used an effective borrowing rate of 13% within the calculation. The lease agreement matures in August 2021. Minimum remaining rental payments in 2020 and 2021 are $22,669 and $59,372, respectively.
Operating Leases
The Company and its subsidiaries have various short-term leases that mature in 2020.
During the second and third quarters up and until the date of this filing the Company has been making post-Covid moves in closing various historically non-profitable Bluwire locations primarily Denver airport, and one location in JFK international airports, or moving this JFK location inside the terminal, redesigning its signature App for a post Covid world, and renegotiating its minimum base rental commitments for all of its retail stores. In all cases there is a rent moratorium until October 1st, 2020. For the Casino store, we did a soft opening on September 11, 2020 and then closed for a two week period in November 2019 to hire and train new staff and management. The store reopened in full on November 29, 2020 in time for Cyber Monday. Management continues to monitor the situation in our prime airport locations or Newark and Dulles airports for reopening. Base monthly rent on the Mohegan Sun store was $6,916, plus a percentage rent equal to 8% of the gross sales that exceeds $86,450 per month until January 2021. The lease expires on April 14, 2021. This lease has been renegotiated and taken over by a different subsidiary of the company that was able to fully stock the store with inventory. and management believes that it will be successful eliminating the minimum base rental feature in all of its retail locations before that date.
On August 13, 2020 the Company’s 12 Fashion Group, a division of 12 Retail Corporation, entered into a new office location under a 2 year lease with an option for a third year beginning on August 17, 2020. This new location is 1600 square feet and caries a base monthly rent of $5651.30 plus a pro-rated expenses for garbage and utilities of $743. Management believes that this additional space is necessary to manage the consolidation of its fashion brands.
Other Commitments
The Company has a significant contract with an independent contractor third party company which plays a critical role to the ongoing operations of the Company. The contract is for an initial period of five years for which can be cancelled upon six months’ notice and payment of all outstanding fees. The minimum monthly payment is $35,000 for which additional amounts are to be reimbursed for expenses, etc. During the three months ended March 31, 2020, the Company paid $60,800 under the contract to which an additional $192,035 was payable as of March 31, 2020. The Company relies upon the third party for obtaining financing, targeting acquisitions, general corporate guidance, financial reporting, etc.
Legal & Contingencies
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