Note 10 – Operating Leases and Rental Expense



The Company leases approximately 3,900 square feet of office space located in Miami, Florida. The Company executed the lease for this office space effective October 31, 2016, for a three-year term commencing on November 1, 2016 and ending on October 31, 2019. The lease was amended in June 2017 to provide for additional space. Effective with the June 2017 amendment, base rent payments are $36.00 per square foot and are subject to a 4% annual escalation on November 1 of each subsequent year. The lease also requires payment of related expenses, including real estate taxes, common area maintenance and insurance. The Company has two renewal options to extend the term for a period of three years each. 



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.  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 made 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 increase 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.



The Company leases approximately 6,400 square feet of office space located in London, England under a lease that requires quarterly payments of approximately $24,000 through June 2020.  Based on the terms of the lease agreement, the Company made a security deposit of approximately $57,000.



The Company leases 45,800 square feet of manufacturing and warehouse space in Selangor D.E., Malaysia under a lease that requires monthly payments of approximately $15,500 through August 2019. The Company has an option to extend the term of the lease for a period of three-years. Based on the terms of the lease agreement, the Company made a security deposit of approximately $46,000. 



The Company also leases equipment under a number of lease agreements which expire at various dates through May 2023. The aggregate amount of expense associated with these equipment leases is approximately $2,000 per month.



Details of operating lease expense, including real estate taxes, common area maintenance charges and insurance charges, net of sublease income, for the years ended September 30, 2018 and 2017 are as follows:





Future minimum payments under leases consist of the following as of September 30, 2018:







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.