Commitments and Contingencies

9 Months Ended

Dec. 31, 2019

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

NOTE 7 - COMMITMENTS AND CONTINGENCIES

LEASES

Operating Leases

We have operating lease agreements for offices and a warehouse facility in Florida, California and Hong Kong expiring in various years through 2024.

We entered into an operating lease agreement, effective October 1, 2017, for the corporate headquarters located in Fort Lauderdale, Florida where we lease approximately 6,500 square feet of office space. The lease expires on March 31, 2024. The base rent payment is approximately $8,800 per month, subject to annual adjustments.

We entered into an operating lease agreement, effective June 1, 2013, for 86,000 square feet of warehouse space in Ontario, California for our logistics operations. The lease expires on August 31, 2020 (original lease term of 87 months). The base rent payment is approximately $43,700

per month for the remaining term of the lease. The lease provides for a renewal option to extend the lease term for 5 years at the fair market value at the time of renewal.

We entered into an operating lease agreement, effective May 1, 2018, for 424 square feet of office space in Macau, Hong Kong. The rent is fixed at approximately $1,600 per month for the duration of the lease which expires on April 30, 2021. The lease provides for a renewal option to extend the lease.

Lease expense for our operating leases is recognized on a straight-line basis over the lease terms.

Finance Leases

On May 25, 2018 and June 4, 2018, we entered into two long-term capital leasing arrangements with Wells Fargo Equipment Finance (“Wells Fargo”) to finance the leasing of two used forklift vehicles in the amount of approximately $44,000. The leases require monthly payments in the amount of $1,279 per month over a total lease term of 36 months which commenced on June 1, 2018. The agreement has an effective interest rate of 4.5% and the Company has the option to purchase the equipment at the end of the lease term for one dollar.

Supplemental balance sheet information related to leases as of December 31, 2019 is as follows:

Assets:
Operating lease - right-of-use assets	$	710,961
Finance leases as a component of property and equipment, net of accumulated depreciation of $10,363		33,163
Liabilities
Current
Current portion of operating leases	$	445,322
Current portion of finance leases		14,816
Noncurrent
Operating lease liabilities, net of current portion	$	349,880
Finance leases, net of current portion		6,340

Supplemental statement of operations information related to leases for the three and nine months ended December 31, 2019 is as follows:

		Three Months Ended			Nine Months Ended
		December 31 2019			December 31 2019
Operating lease expense as a component of general and administrative expenses	$	148,725		$	446,173
Finance lease cost
Depreciation of leased assets as a component of depreciation	$	1,554		$	4,664
Interest on lease liabilities as a component of interest expense	$	217		$	750
Supplemental cash flow information related to leases for the nine months ended December 31, 2019 is as follows:
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flow paid for operating leases				$	487,971
Financing cash flow paid for finance leases				$	10,757
Lease term and Discount Rate
Weighted average remaining lease term (months)		32.6
Operating leases		17.0
Finance leases
Weighted average discount rate
Operating leases		6.25	%
Finance leases		3.68	%

Scheduled maturities of operating and finance lease liabilities outstanding as of December 31, 2019 are as follows:

Year	Operating Leases		Finance Leases
2020, for the remaining 3 months	$	163,179	$	3,837
2021		348,531		15,347
2022		115,812		2,558
2023		117,638		-
2024		121,167		-
Total Minimum Future Payments		866,327		21,741
Less: Imputed Interest		71,125		585
Present Value of Lease Liabilities	$	795,202	$	21,156

Installment Notes

On June 18, 2019, the Company entered into a financing arrangement with Dimension Funding, LLC (“Dimension”) to finance a new Enterprise Resource Planning (“ERP”) System project over a term of 60 months at a cost of approximately $375,000. Dimension has a 100% security interest in the licensed software being financed. We estimate the system to be placed in service on April 1, 2020. Upon approval by Company management, Dimension released progress payments directly to the project consultants as specific project milestones were met.

Total progress payments will be made to the vendor over a period of approximately nine months and the Company will be charged financing costs on the amounts preapproved for the project. Payments advanced by Dimension to the project consultant during the three months ended December 31, 2019 totaled approximately $108,000. Payments advanced by Dimension to the project consultant during the nine months ended December 31, 2019 totaled approximately $284,000. As of December 31, 2019 these advances were converted to installment notes which call for estimated monthly installment payments of approximately $5,785 (including principal and interest) over a 60 month period and bear interest of approximately 8.2%. As of December 31, 2019 the total principal amount outstanding on the installment notes was approximately $276,000 of which approximately $49,000 is classified as a current liability and approximately $227,000 is classified as a long-term liability on the accompanying condensed consolidated balance sheet. Total interest expense on the installment notes was approximately $3,000, and $10,000 for the three and nine months ended December 31, 2019.

LEGAL MATTERS

Management is not aware of any legal proceedings other than matters that arise in the ordinary course of business.