Quarterly report pursuant to Section 13 or 15(d)


3 Months Ended
Mar. 31, 2017
Commitments and Contingencies Disclosure [Abstract]  

Office Lease Obligations


In October 2013, the Company entered into a lease agreement for 6,362 square feet of commercial office space in Waukesha, Wisconsin for its corporate headquarters. The Waukesha lease expires in April 2021, but was subsequently amended through April 2026 as described in Note M.


In January 2016, the Company entered into a lease agreement for 2,237 square feet of commercial office space in Germantown, Maryland for its Maryland employee’s. The Germantown lease was set to expire at the end of January 2017. In December 2016, the Company entered into a first amendment to the lease agreement extending the lease through the end of January 2018.


Commitments for minimum rentals under non-cancelable leases as of March 31, 2017 are as follows:


  2017 (remainder of)     $ 89,131  
  2018       82,155  
  2019       80,646  
  2020       82,259  
  2021       34,880  
  Total     $ 369,071  


Rental expenses charged to continuing operations for the three months ended March 31, 2017 and 2016 was $34,020 and $39,571, respectively.




The Company is subject to legal proceedings and claims which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position, results of operations or liquidity.


Sales Tax


During 2012, the Company engaged a sales tax consultant to assist in determining the extent of its potential sales tax exposure. Based upon this analysis, management determined the Company had probable exposure for certain unpaid obligations, including interest and penalty, of approximately $1,100,000 including and prior to the year ended December 31, 2011. The Company has approximately $130,000 and $275,000 accrued as of March 31, 2017 and December 31, 2016, respectively.


The Company continues to manage the liability by establishing voluntary disclosure agreements (VDAs) with the applicable states, which establishes a maximum look-back period and payment arrangements. However, if the aforementioned methods prove unsuccessful and the Company is examined or challenged by taxing authorities, there exists possible exposure of an additional $20,000, not including any applicable interest and penalties.


During the year ended December 31, 2016, the State of Wisconsin performed a sales and use tax audit covering the period from January 1, 2012 through December 31, 2015. The audit resulted in approximately $120,000 in additional use tax and interest. The Company appropriately accrued and expensed this amount in the consolidated balance sheet and the consolidated statement of operations for the year ended December 31, 2016. The balance remaining as of March 31, 2017 is approximately $45,000.


Prior to 2017, the Company successfully executed and paid in full VDAs in thirty six states totaling approximately $765,000 and is current with the subsequent filing requirements.


The following table sets forth the change in the sales tax accrual as of March 31, 2017 and December 31, 2016:


    March 31, 2017     December 31, 2016  
Balance, beginning of year   $ 274,869     $ 229,768  
Sales tax collected     89,896       452,016  
Provisions           151,000  
Interest and penalties           (3,017 )
Payments     (234,880 )     (554,898 )
Balance, end of period   $ 129,885     $ 274,869