Quarterly report pursuant to Section 13 or 15(d)

K. COMMITMENTS AND CONTINGENCIES

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K. COMMITMENTS AND CONTINGENCIES
3 Months Ended
Mar. 31, 2016
Commitments and Contingencies Disclosure [Abstract]  
COMMITMENTS AND CONTINGENCIES

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.

 

The Company presently leases approximately 14,000 square feet of office space in Milwaukee, Wisconsin for its operations facility. The Milwaukee lease expires in March 2020.  

 

In January 2016, the Company entered into a lease agreement for 2,237 square feet of commercial office space in Germantown, Maryland for its engineering employee’s in Maryland. The lease commitment expires in January 2017. 

 

Commitments for minimum rentals under non-cancelable leases at March 31, 2016 are as follows:

 

2016 (remainder of)   $ 191,205  
2017     254,740  
2018     258,381  
2019     265,305  
2020     128,863  
2021     28,014  
Total   $ 1,126,508  

 

Rental expenses charged to operations for the three months ended March 31, 2016 and 2015 was $108,462 and $162,212, respectively. Rental income received for the three months ended March 31, 2016 and 2015 was zero and $34,301, respectively.

 

Litigation

 

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 $229,000 and $230,000 accrued as of March 31, 2016 and December 31, 2015, 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.

 

Prior to 2016, the Company successfully executed and paid in full VDAs in thirty one states totaling approximately $695,000 and is current with the subsequent filing requirements.

 

During the three months ended March 31, 2016, the Company executed two VDA’s totaling approximately $9,500. The Company is currently in negotiations with one state.

 

The following table sets forth the change in the sales tax accrual as of March 31, 2016 and December 31, 2015:

 

    March 31, 2016     December 31, 2015  
Balance, beginning of year   $ 229,768     $ 353,260  
Sales tax collected     117,300       401,031  
Interest and penalties     (3,017 )     (117,700 )
Payments     (115,207 )     (406,823 )
Balance, end of period   $ 228,844     $ 229,768