Quarterly report pursuant to Section 13 or 15(d)

Leases

v3.19.1
Leases
3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases
Note 11. Leases:

Oklahoma Lease Agreement.

On February 27, 2018, Kairos entered into a lease agreement (the “Lease”) with 7725 Reno #1, LLC (the “Landlord”), pursuant to which Kairos leases an approximately 107,600 square foot warehouse located in Oklahoma City, Oklahoma, including improvements thereon.  Pursuant to the terms of the Lease, the initial term was scheduled to terminate on February 15, 2019, unless terminated earlier pursuant to the terms of the Lease, subject to Kairos’ options to renew the Lease, however the term of the Lease was extended by agreement of the parties as discussed below. Under the Lease, Kairos has the right to operate from the premises on a 24 hour/seven day a week basis. The Lease provides that, at least three months, but no more than six months, prior to its expiration Kairos shall give Landlord written notice of its intent to either exercise its  option to renew the Lease or to allow the Lease to terminate at the end of its term.
 
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.

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.

At March 31, 2019, the Company had operating lease liabilities of approximately $1.0 million and right of use assets of approximately $1.0 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
March 31,
 
Operating lease cost
 
$
600,593
 
Variable lease cost
   
776,053
 
Operating lease expense
   
1,376,646
 
Short-term lease rent expense
   
4,620
 
Total rent expense
 
$
1,381,266
 
         
Other information
       
Operating cash flows from operating leases
 
$
623,976
 
Right of use assets exchanged for new operating lease liabilities
 
$
1,547,499
 
Weighted-average remaining lease term – operating leases
 
0.9 years
 
Weighted-average discount rate – operating leases
   
10.00
%
 
Maturities of the Company’s operating lease liabilities, are as follows (unaudited):

For the nine months ended December 31, 2019
 
$
898,045
 
For the year ended December 31, 2020
   
58,731
 
For the year ended December 31, 2021
   
35,040
 
Total
 
$
991,816
 
Less imputed interest
   
(34,831
)
Operating lease liabilities
 
$
956,985
 
 
Rent expense, which is recorded on a straight-line basis, was approximately $350,000 for the three months ended March 31, 2018.