INTELLINETICS, INC. Commitments Disclosure

8. Commitments and Contingencies

 

From time to time we are involved in legal proceedings, claims and litigation related to employee claims, contractual disputes and taxes in the ordinary course of business. Although we cannot predict the outcome of such matters, currently we have no reason to believe the disposition of any current matter could reasonably be expected to have a material adverse impact on our financial position, results of operations or the ability to carry on any of our business activities.

 

Employment Agreements

 

We have entered into employment agreements with three of our key executives, including one of our founders. Under their respective employment agreements, the executives are bound by typical confidentiality, non-solicitation and non-competition provisions. Two of the executives have severance arrangements. See also Note 12, “Subsequent Events.”

 

Leases

 

For each of the below listed leases, management has determined it will utilize the base rental period and have not considered any renewal periods.

 Schedule of Operating Lease

Location		Square Feet				Monthly Rent				Lease Expiry
Columbus, OH			6,000			$	5,400			December 31, 2028
Madison Heights, MI			36,000			$	45,828			August 31, 2026
Sterling Heights, MI			37,000			$	22,932			April 30, 2028
Traverse City, MI			5,200			$	5,400			January 31, 2031
Temporary space
Madison Heights, MI			3,200			$	1,605			month to month
Vehicles and equipment
various			n/a			$	10,153			April 30, 2029

 

We signed a five-year extension in 2025 for our Traverse City, MI location, resulting in increased right of use assets and operating lease liabilities, reflected in the consolidated balance sheets and the supplemental disclosure of non-cash financing activities in the consolidated statements of cash flows.

 

The following table sets forth the future minimum lease payments under our leases:

 Schedule of Future Rental Payment for Operating Lease

For the Years Ending December 31		Finance Lease				Operating Leases
2026		$	81,849			$	797,561
2027			69,624				437,269
2028			49,508				233,059
2029			7,532				68,650
2030			-				69,000
Thereafter			-				5,750
Less imputed interest			(24,488	)			(140,064	)
		$	184,025			$	1,471,225

 

 

The following table summarizes the components of lease expense:

 Summary of Components of Lease Expense

For the Year Ending December 31,		2025				2024
Finance lease expense:
Amortization of ROU assets		$	72,743			$	71,326
Interest on lease liabilities			20,694				26,198
Operating lease expense			939,405				945,001
Short-term lease expense			19,254				19,254

 

The following tables set forth additional information pertaining to our leases:

 Schedule of Additional Information Pertaining to Leases

For the Year Ending December 31,		2025				2024
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash flows from finance leases (interest)		$	20,694			$	26,198
Financing cash flows from finance leases (principal)			69,260				61,874
Operating cash flows from operating leases			863,268				787,537
Weighted average remaining lease term – finance leases			2.7 years				3.6 years
Weighted average remaining lease term – operating leases			2.6 years				2.6 years
Weighted average discount rate – finance leases			9.70	%			9.72	%
Weighted average discount rate – operating leases			6.58	%			6.89	%