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Commitments & Contingencies
12 Months Ended
Feb. 28, 2015
Commitments & Contingencies [Abstract]  
COMMITMENTS & CONTINGENCIES

NOTE 9 - COMMITMENTS & CONTINGENCIES

 

Leases

 

In September, 2014, we entered into lease for a facility of approximately 69,000 square feet. The lease is for a term of seven years, has an option to extend for five years, and carries an initial base rent of $46,871.72. In accordance with the terms of the lease, the Company is responsible for common area charges. Rent expense charged to operations amounted to $747,683 and $681,134 for the years ended February 28, 2015 and February 28, 2014, respectively. The Company moved out of the facility in June 2015 to a much smaller facility in Stanton, California. In the new Stanton California facility, the Company is on a month-to-month lease. During the next 12 months, the Company plans to move to a new, larger facility.

 

Contingencies

 

We are subject to the legal proceedings and claims discussed below as well as certain other legal proceedings and claims that have not been fully resolved and that have arisen in the ordinary course of business. Our management evaluates our exposure to these claims and proceedings individually and in the aggregate and evaluates potential losses on such litigation if the amount of the loss is estimable and the loss is probable. However, the outcome of legal proceedings and claims brought against the Company is subject to significant uncertainty. Although management considers the likelihood of such an outcome to be remote, if one or more of these legal matters were resolved against the Company for amounts in excess of management’s expectations, the Company’s consolidated financial statements for that reporting period could be materially adversely affected. The Company settled certain matters subsequent to year end that did not individually or in the aggregate have a material impact on the Company’s financial condition or operating results.

 

Subsequent to year end, the Company was sued in 2016 by a former employee for a work-related injury. The plaintiff is seeking $45,000. The Company has made the plaintiff a settlement offer which, as of the date of this filing, has not been accepted.

 

Subsequent to year end, the Company was sued by a customer for an alleged failure to partially deliver against an advanced payment of approximately $120,000. The Company has made the plaintiff a settlement offer which, as of the date of this filing, has not been accepted.

 

Subsequent to year end, the Company’s former COO has been awarded approximately $238,000 in accrued salary and related charges by the California labor board. The Company has made the plaintiff a settlement offer which, as of the date of this filing, has not been accepted.

  

Subsequent to year end, the Company and the Company’s Chief Executive Officer, Melvin Gagerman, are among several defendants named in a lawsuit filed by two secured creditors demanding repayment of loans totaling $125,000 plus accrued interest and exemplary damages. In January 2017, the Company entered into an agreement with all secured creditors other than the two plaintiffs which became binding on all of the secured creditors, including the two plaintiffs. That agreement, among other provisions, waives all past events of default. It is the Company’s position that the two plaintiffs are not entitled to any payment or other relief at this time and therefore that they have no valid claim against the Company or Mr. Gagerman. In March 2017, plaintiffs moved for partial summary adjudication against the Company and Mr. Gagerman which was denied by the Court. Thereafter, the Court sustained demurrers by Mr. Gagerman and the Company but granted plaintiffs leave to amend. In response to the plaintiffs’ second amended complaint, both the Company and Mr. Gagerman intend to further demurrer seeking dismissal of this action.

 

In June 2015, the landlord of the Company’s primary facility in Redondo Beach, California initiated litigation against us seeking to terminate the Company’s lease and require the Company to vacate the premises prior to the scheduled lease end. As a result of that litigation, the Company was forced to vacate its primary facility and relocate to its present facility in Stanton, California. To date, no action seeking damages or any other amount has been filed against the Company by the landlord, nor does the Company believe it has any further liability to the landlord.