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 $45,600. Total rent expense including common area maintenance charges sales percentage rent and deferred rent expense was $21,380,844 in fiscal 2021 and $19,676,958 in fiscal 2020.

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 associates are terminated without cause. The total amount of exposure to the Company under these agreements was $4,009,943 at January 31, 2021 if all executives with employment agreements were terminated without cause and the full amount of severance was payable.

RELATED PARTIES

Our equity sponsor Mistral Capital Management, LLC (“Mistral”) performs management services for the Company under a contractual agreement. Certain of our directors are members and principals of Mistral. Management fees incurred were approximately $400,000 in both fiscal 2021 and 2020 and are included in selling, general and administrative expenses. There was $0 payable to Mistral as of January 31, 2021 and $2,000 payable to Mistral as of February 2, 2020. The amount payable to Mistral as of February 2, 2020 is included in accrued liabilities in the accompanying consolidated balance sheet. In addition, the Company reimbursed Mistral for expenses incurred in the amount of $1,959 and $44,140 for out-of-pocket expenses for fiscal 2021 and 2020, respectively. The Company’s contractual agreement with Mistral ended on January 31, 2021.

Our equity sponsor Satori Capital, LLC (“Satori”) performs management services for the Company under a contractual agreement. Management fees totaled approximately $100,000 in both fiscal 2021 and 2020 and are included in selling, general and administrative expenses. Amounts payable to Satori as of January 31, 2021 were $8,333 consisting of management fees which were included in accounts payable in the accompanying consolidated balance sheet as of January 31, 2021. Amounts payable to Satori as of February 2, 2020 were $95,000 consisting of $25,000 in management fees and $70,000 of reimbursable expenses which were included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets. In addition, the Company reimbursed Satori for expenses incurred in the amount of $51,614 and $70,000 for out-of-pocket expenses for fiscal 2021 and 2020, respectively. The Company’s contractual agreement with Satori ended on January 31, 2021.

The Company engaged Blueport Commerce (“Blueport”), a company owned in part by investment vehicles affiliated with Mistral, as an ecommerce platform in February 2018. One of our directors is also a director of Blueport. There were $2,143,392 and $1,833,154 of fees incurred with Blueport that were related to sales transacted through the Blueport platform during fiscal 2021 and 2020, respectively. There was an additional $663,572 of fees incurred with Blueport during fiscal 2021 related to Lovesac’s early termination of our contract in order to launch a new enhanced ecommerce platform. There no amounts payable as of January 31, 2021. Amount payable to Blueport as of February 2, 2020 was $150,508 and is included in accounts payable in the accompanying consolidated balance sheets.