Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.3
Leases
9 Months Ended
Sep. 30, 2019
Leases [Abstract]  
Leases

Note 13. Leases:

 

Oklahoma Lease Agreement.

 

On February 27, 2018, Kairos entered into a lease agreement (the “Lease”) with 7725 Reno #1, LLC (the “Landlord”) to lease an approximately 107,600 square foot warehouse located in Oklahoma City, Oklahoma, including improvements thereon.  Under the Lease, Kairos has the right to operate from the premises on a 24 hour/seven day a week basis. The initial term of the Lease was scheduled to terminate on February 15, 2019; however the term of the Lease was extended by agreement of the parties as discussed below.

 

Prior to the first amendment of the Lease discussed below, the base rent for the facility was equal to $55.95/kW per month for a total of 4 Megawatts (MW) of available electrical power, or $223,800 per month. 

 

On March 26, 2018, Kairos entered into a first amendment to the Lease, whereby the Landlord agreed to increase the electrical power available for Kairos’s use from 6MW to 12MW, and, effective as of the date when such additional power became available for use, the base rent under the Lease was increased to approximately $664,760 per month.

 

Effective November 29, 2018, Kairos entered into the second amendment to the Lease which provides the following:

 

  extends the initial term of the Lease through August 19, 2019;

 

  monthly base rent of $235,000 for December 2018, $230,000 for January and $190,000 per month thereafter for the duration of the Lease, including any renewals;

 

  changes the monthly electricity usage charges; and

 

  Kairos shall have the option to renew the Lease for up to two, three-month periods after expiration of the initial term.

 

On May 15, 2019, the Company renewed the Lease for the first renewal term of three months, extending the lease through November 15, 2019.

 

 On August 15, 2019, the Company renewed the Lease for the second renewal term of three months, extending the lease through February 15, 2020.

 

Corporate Lease Agreement

 

On April 9, 2018, the Company entered into a commercial lease covering 1,694 rentable square feet of office space in Fort Lauderdale, Florida, with a third-party. The lease is for an initial term of thirty-nine months, with one five-year option to renew. The lease requires initial monthly rent of approximately $7,000, including base rent and associated operating expenses.

 

Operating Leases

 

At September 30, 2019, the Company had operating lease liabilities of approximately $0.9 million and right of use assets of approximately $0.9 million, which are included in the condensed interim consolidated balance sheet.

 

The following summarizes quantitative information about the Company’s operating leases:

 

Lease cost   Three Months Ended September 30, 2019   Nine Months Ended September 30, 2019
Operating lease cost   $ 592,593     $ 1,793,778  
Variable lease cost     711,113       2,348,448  
Operating lease expense     1,303,706       4,142,226  
Short-term lease rent expense     4,620       13,860  
Total rent expense   $ 1,308,326     $ 4,156,086  
                 
Other information                
Operating cash flows from operating leases   $ 584,395     $ 1,792,625  
Right of use assets exchanged for new operating lease liabilities   $ 558,314     $ 2,664,126  
Weighted-average remaining lease term – operating leases     0.6 years       0.6 years  
Weighted-average discount rate – operating leases     10.00 %     10.00 %

Maturities of the Company’s operating lease liabilities, are as follows (unaudited):

 

For the three months ended December 31, 2019   $ 584,395  
For the year ended December 31, 2020     343,731  
For the year ended December 31, 2021     35,040  
Total   $ 963,166  
Less present value discount     (24,618 )
Operating lease liabilities   $ 938,548  

 

Rent expense, recorded on a straight-line basis, was approximately $1.3 million and $1.9 million for the three months ended September 30, 2019 and 2018, respectively; and was approximately $4.2 million and $3.7 million for the nine months ended September 30, 2019 and 2018, respectively.