Note 6 – Commitments, Contingencies And Related Parties

Operating Lease Commitments

The Company leases its office, warehouse facilities and retail showrooms under operating lease agreements which expire at various dates through November 2027. Monthly payments related to these leases range from $2,500 to $24,600. Total rent expense including common area maintenance charges and sales percentage rent was $16,245,590 in fiscal 2019 and $11,722,255 in fiscal 2018.

Expected future annual minimum rental payments under these leases follow:

The above disclosure includes lease extensions for various retail showrooms the Company entered into after year end.

Severance Contingency

The Company has various employment agreements with its senior level executives. A number of these agreements have severance provisions, ranging from 12 to 18 months of salary, in the event those employees are terminated without cause. The total amount of exposure to the Company under these agreements was $2,905,640 at February 3, 2019 if all executives with employment agreements were terminated without cause and the full amount of severance was payable.

Related Parties

Mistral Capital Management, LLC (Mistral), a stockholder of the Company, performs management services for the Company under a contractual agreement. Management fees totaled approximately $400,000 in both fiscal 2019 and in fiscal 2018 and are included in selling, general and administrative expenses. Transaction fees related to the IPO were $500,000 in fiscal 2019 and are included in selling, general and administrative expenses. No transaction fees were incurred during fiscal 2018. Amounts payable to Mistral as of February 3, 2019 and February 4, 2018 were $0 and $121,103, respectively and are included in accounts payable in the accompanying balance sheets.

Satori Capital, LLC (Satori), a stockholder of the Company since April 2017, performs management services for the Company under a contractual agreement. Management fees totaled approximately $100,000 in both fiscal 2019 and fiscal 2018 and are included in selling, general and administrative expenses. Transaction fees related to the IPO were $125,000 in fiscal 2019 and there were no structuring fees in the prior year’s financial statements. A one-time stock bonus of 50,000 shares of common stock at $14.83 per share, or $741,500, is included in equity-based compensation on the accompanying consolidated statement of changes in stockholders’ equity and issued on June 22, 2018. The bonus was issued to Satori in three installments; two equal installments of 5,000 shares of common stock in August 2018 and September 2018 and the remainder of the shares were issued in October 2018. All fees and the stock bonus are included in selling, general and administrative expenses in the accompanying condensed statements of operations. There were no amounts payable to Satori as of February 3, 2019 and February 4, 2018.

In fiscal 2017, the Company engaged Blueport Commerce (“Blueport”), a company owned in part by investment vehicles affiliated with Mistral and an affiliate of Schottenstein Stores Corporation, an indirect investor in Sac Acquisition LLC. to evaluate a transition plan to convert to the Blueport Commerce platform. Certain of our directors are members and principals of Mistral or employees of Schottenstein Stores Corporation. The Company launched the Blueport platform in February 2018. There were $1,153,844 of fees incurred with Blueport on the conversion of and sales transacted through the Commerce platform during fiscal 2019. Transition plan fees of $0 and $15,235 were incurred with Blueport during fiscal 2019 and fiscal 2018, respectively. Amounts payable to Blueport as of February 3, 2019 and February 4, 2018 were $93,210 and $15,235, respectively, and are included in accounts payable and accrued expenses in the accompanying condensed consolidated balance sheets.