Related Party Transactions

9 Months Ended

May 31, 2019

Note 5. Related Party Transactions

The Company leases its Chicago area sales office and distribution center located in Glendale Heights, Illinois under an operating lease agreement (the “Lease”) from a grantor trust (the “Trust”) that is beneficially owned by the Company’s majority shareholder, who is also the Company’s Chairman and CEO. The Lease is a ten year lease with an initial monthly rental rate of $22,600, which is subject to annual rent increases of approximately 2.5% as set forth in the Lease. During the three months ended May 31, 2019 and 2018, the Company incurred approximately $68,000 of expense related to this lease for both periods.

Within the next seven months, the Company plans to relocate its corporate headquarters and Anaheim distribution center to an 80,000 square foot facility in Anaheim, California that is owned by the Trust. The Company plans to enter into a new lease with the Trust in the near future concerning such facility. Tenant improvements to the new facility is scheduled to start on September 1, 2019 with a completion date of late December 2019 and a move in period during January 2020. Whereas the existing property has been listed for sale, the Company does not intend to transfer the existing property to a buyer until it processes uncompleted customer orders at the existing facility and it completes the construction of tenant improvements at the new facility.