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Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12.

Commitments and Contingencies

From time to time we are involved in legal proceedings, claims and litigation related to employee claims, contractual disputes and taxes in the ordinary course of business. Although we cannot predict the outcome of such matters, currently we have no reason to believe the disposition of any current matter could reasonably be expected to have a material adverse impact on our financial position, results of operations or the ability to carry on any of our business activities.

Employment Agreements

We have entered into employment agreements with three of our key executives, including one of our founders. Under their respective employment agreements, the executives are employed on an “at-will” basis and are bound by typical confidentiality, non-solicitation and non-competition provisions. Deferred compensation for one founder remains outstanding as of March 31, 2021.

Operating Leases

On January 1, 2010, we entered into an agreement to lease 6,000 rentable square feet of office space in Columbus, Ohio. The lease commenced on January 1, 2010 and, pursuant to a lease extension dated August 9, 2016, the lease expires on December 31, 2021. We are currently evaluating renewal options.

Our subsidiary, Graphic Sciences, uses 36,000 square feet of leased space in Madison Heights, Michigan as its main facility. Graphic Sciences uses about 20,000 square feet for its records storage services, with the remainder of the space used for production, sales, and administration. The monthly rental payment is $41,508, with increases annually in September up to $45,828 for the final year, with a lease term continuing until August 31, 2026. Graphic Sciences also leases and uses a separate 20,000 square foot building for document storage in Highland Park, Michigan, and a satellite office in Traverse City, Michigan for production. The monthly Highland Park rental payment is $11,250, with a lease term continuing until September 30, 2021. The monthly Traverse City rental payment is $4,500, with a lease term continuing until January 31, 2024. Graphic Sciences also leases and uses four leased vehicles for logistics. The monthly rental payments for these vehicles total $2,618, with lease terms continuing until October 31, 2024.

Graphic Sciences also leases and uses two additional temporary storage spaces in Madison Heights, MI. The first Madison Heights temporary storage space monthly rental payment is $12,500, with a lease term on a month-to-month basis. The second Madison Heights temporary storage space monthly rental payment is $1,605, with a lease term on a month-to-month basis. We have made an accounting policy election to not record a right-of-use asset and lease liability for short-term leases, which are defined as leases with a lease term of 12 months or less. Instead, the lease payments are recognized as rent expense in the general and administrative expenses on the statement of operations.

On February 5, 2021, we signed a lease for 37,000 square foot building, primarily for document storage, in Sterling Heights, Michigan, with monthly rental payments of $20,452 commencing on May 1, 2021, with increases annually in May up to $24,171 for the final year, and a lease term continuing to April 30, 2028.

The following table sets forth the future minimum lease payments under these operating leases:

For the Three Months Ending March 31,		Amount
2022		$	986,320
2023			870,360
2024			862,948
2025			811,864
2026			820,010
Thereafter			824,737
		$	5,176,239

Lease costs charged to operations for the three months ended March 31, 2021 and 2020 amounted to $238,075 and $77,050, respectively. Included in the lease costs for the three months ended March 31, 2021 was short-term lease costs of $39,105. The following table sets forth additional information pertaining to our leases:

For the Three Months Ending March 31, 2021:
Operating cash flows from operating leases		$	170,768
Weighted average remaining lease term – operating leases			5.7 years
Weighted average discount rate – operating leases			7.1	%

As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Warehouse Equipment Financing

On February 18, 2021, we committed to purchase warehouse racking in the amount of $326,864, of which $171,927 was purchased as of March 31, 2021. We are evaluating equipment financing options to finance this equipment purchase.