Commitments and Contingencies

6 Months Ended

Jun. 30, 2023

Commitments and Contingencies.

Commitments and Contingencies

Note 9 — Commitments and Contingencies

Litigation

The Company may from time to time be subject to various legal or administrative claims and proceedings arising in the ordinary course of business. In management’s opinion, the outcome of any such currently pending litigation will not materially affect the Company’s financial condition. Nevertheless, due to uncertainties in the settlement process, it is at least reasonably possible that management’s view of the outcome could change materially in the near term.

Huddled Masses was named as a defendant in a lawsuit on July 10, 2019 related to a delinquent balance to a vendor. On July 28, 2022, the Company entered into a settlement agreement with the vendor and agreed to pay a total of $515,096 with monthly installment payments over 24 months beginning September 1, 2022.  The liability has been recorded and included in accrued liabilities on the consolidated balance sheets as of June 30, 2023 and December 31, 2022 (See Note 5 – Accrued Liabilities).

Operating Leases

In June 2019, the Company entered into a sublease for its corporate office headquarters at 1233 West Loop South, Ste 1170 in Houston, TX. The lease term expired on July 1, 2022 and had a base monthly rent of approximately $3,600 per month.

In March 2022, the Company entered into a new lease to move its corporate headquarters to 1177 West Loop South, Ste 1310 in Houston, TX effective July 1, 2022, and paid a security deposit of approximately $29,000. The lease is for 7,397 square feet of office

space that expires February 28, 2030. The base monthly rent varies annually over the term of the lease. The Company also leases office furniture for its corporate headquarters under a lease agreement effective April 2019 and expiring July 2023.

In March 2021, the Company extended its lease for office space at 716 Congress Ave, Ste 100 in Austin, Texas with an effective date of January 1, 2022. The lease expires on December 31, 2023 and has a base rent of approximately $6,700 per month.

For the three months ended June 30, 2023 and 2022, the Company incurred rent expense of $78,725 and $52,183, respectively, for the combined leases.  For the six months ended June 30, 2023 and 2022, the Company incurred rent expense of $158,486 and $103,561, respectively, for the combined leases.

Supplemental balance sheet information related to operating leases is included in the table below as of June 30, 2023:

	2023
Operating lease right-of-use asset	$	714,129
Operating lease liabilities - current	$	47,668
Operating lease liabilities - long-term		741,771
Total operating lease liability	$	789,439

The weighted-average remaining lease term for the Company’s operating lease is 6.35 years as June 30, 2023, with a weighted-average discount rate of 8%.

Lease liability with enforceable contract terms that have greater than one-year terms are as follows:

2023	$	74,502
2024		110,215
2025		156,077
2026		159,775
2027		163,474
Thereafter		366,830
Total lease payments		1,030,873
Less imputed interest		(241,434)
Total lease liability	$	789,439