Note 12 – Operating Leases



Corporate Headquarters



On June 20, 2019, the Company executed a lease for its new corporate headquarters in Miami, Florida. Under the terms of the lease, which was amended on August 13, 2019, the Company is leasing approximately 4,640 square feet of office space for a 30-month term commencing on September 1, 2019 and ending on February 27, 2022. Annual base rent payments are $33.00 per square foot and are subject to a 2.9% annual escalation on September 1 of each subsequent year. Based on the terms of the lease agreement, the Company paid a security deposit of approximately $12,000. The lease included a capital lease for office equipment, furniture, and fixtures. At September 30, 2019, the Company’s capital lease obligation was $42,000, included in accrued expenses and other current liabilities and other liabilities on the accompanying consolidated balance sheet. The Company did not have any capital lease obligations at September 30, 2018.



Under the lease for the Company’s former headquarters in Miami, Florida, the Company leased approximately 3,900 square feet of office space for a three-year term commencing on November 1, 2016 and ending on October 31, 2019. The Company executed the lease for this office space effective October 31, 2016 and amended the lease in June 2017. Effective with the June 2017 amendment, annual base rent payments were $36.00 per square foot and were subject to a 4% annual escalation on November 1 of each subsequent year. The lease also required payment of related expenses, including real estate taxes, common area maintenance and insurance. The Company had two renewal options to extend the term for a period of three years each. The Company did not renew the lease agreement and it terminated on October 31, 2019.



Chicago Lease



The Company leases approximately 6,600 square feet of office space located in Chicago, Illinois. The Company executed the lease for this office in May 2016, for a seven-year period commencing on November 1, 2016 and ending on October 31, 2023. The lease granted the Company a seven-month lease holiday beginning November 1, 2016, a five-month lease abatement beginning June 1, 2017, and provided a tenant improvement allowance. Annual base rent payments were $14.00 per square foot in year one and increase on an annual basis to $17 per square foot in the final year of the lease. The lease also requires payment of related expenses, including real estate taxes, common area maintenance, utilities and insurance expenses from June 1, 2017 to October 31, 2023. Based on the terms of the lease agreement, the Company paid a security deposit of $55,000. Effective September 1, 2017, the Company entered into a sublease for this office space through October 31, 2023. Monthly sublease payments of approximately $15,200 commenced in January 2018 and will end in August 2023. The monthly sublease payment is subject to annual increases in September of each year and will increase to approximately $17,300 per month in the final year of the sublease. The tenant under the sublease provided a security deposit of $30,000 to the Company. The Company continues to be responsible for performance under the lease until it expires on October 31, 2023.



International Leases



The Company leases approximately 6,400 square feet of office space located in London, England. The Company executed this lease in June 2010, for a ten-year term ending in June 2020. The lease requires quarterly payments of approximately $23,000. Based on the terms of the lease agreement, the Company paid a security deposit of approximately $57,000.



The Company leases 45,800 square feet of manufacturing and warehouse space in Selangor D.E., Malaysia. The Company executed the lease for this space in August 2019, for a three-year term commencing September 1, 2019 and ending August 31, 2022. The Company has an option to extend the term of the lease for a period of three years. The lease requires monthly payments of approximately $15,300.  Based on the terms of the lease agreement, the Company maintains a security deposit of approximately $46,000. 



Operating lease expense, including real estate taxes, common area maintenance charges and insurance charges, net of sublease income, was approximately $683,000 and $717,000 for the years ended September 30, 2019 and 2018, respectively.







Future minimum payments under operating leases consist of the following as of September 30, 2019:  









The minimum lease payments presented above do not include real estate taxes, common area maintenance charges or insurance charges payable under the Company’s operating leases for office and manufacturing facility space. These amounts are generally not fixed and can fluctuate from year to year.