Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

6. Commitments and Contingencies

Leases

At September 30, 2018, the Company leased or rented 20 different facilities including its corporate headquarters, a warehouse and 18 active retail locations. Future lease obligation for these facilities are as follows:

Year	Amount
2018 (remaining three months)	$	86,256
2019		257,990
2020		159,292
2021		148,804
2022		120,045
Thereafter		24,808
Total	$	797,195

Rent expense for the three months ended September 30, 2018 and 2017 was $125,885 and $150,167, respectively. Rent expense for the nine months ended September 30, 2018 and 2017 was $378,807 and $475,674, respectively.

Concentrations

As of September 30, 2018, the Company has only twelve qualified vendors that supply its wigs and hair extension products. The Company sources its hair care products from one vendor. There are numerous suppliers of styling tools as this is a commodity product.

During the three months ended September 30, 2018, the Company purchased hair products from four different vendors, however, two vendors accounted for approximately 94.5% of all hair products purchased. During the nine months ended September 30, 2018, the Company purchased hair products from six different vendors, however, two vendors accounted for approximately 92.4% of all hair products purchased. During the three months ended September 30, 2017, the Company purchased hair products from four different vendors, however, two vendors accounted for approximately 96.6% of all hair products purchased. During the nine months ended September 30, 2017, the Company purchased hair products from six different vendors, however, two vendors accounted for approximately 92.1% of all hair products purchased.

Legal Proceedings

From time to time, the Company may become involved in various lawsuits and legal proceedings, which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm the Company’s business.

On or about September 5, 2015, the Company received a summons naming it in a civil action against Her Imports, LLC, Her Imports New York, LLC, Her Holding, Inc. and EZJR, Inc. (now Her Imports) from a former independent contractor of Her Imports, LLC. The complaint claims unpaid wages and overtime wages in violation of New York Labor Law, among other things. No specific damages are mentioned in the complaint. The Company subsequently answered the complaint and denied any wrongdoing as EZJR had no relationship with the contractor, whatsoever. At this point in the litigation it is impracticable to foresee the outcome, however, the Company believes it has meritorious defense and is vigorously defending this litigation. On February 16, 2018, a magistrate judge ruled that EZJR, Her Holding and Her Imports, LLC acted as a joint employer. The judge also found that genuine issues of material fact exist as to “whether plaintiff qualifies as an ‘employee’ under the law or was an ‘independent contractor’.” While the Company disagrees with the ruling that it was a joint employer, it has decided to proceed to trial on the basis that the plaintiff was an independent contractor, while reserving the right to appeal the decision.

On or about On March 13, 2018, the Company received a summons in a civil action alleging that it had violated the Telephone Consumer Protection Act of 1991 (TCPA). In the complaint, an individual who provided his phone number to the Company to obtain certain discounts on the Company’s products, claims that the Company sent several text messages to his cell phone without prior written consent. The suit was filed by on behalf of the plaintiff and others similarly situated. On or about June 5, 2018 the Company received a second summons in a civil action also alleging that it had violated the TCPA. In the complaint, an individual who provided her phone number to the Company to obtain certain discounts on the Company’s products, claims that the Company sent several text messages to her cell phone without prior written consent. The suit was filed by on behalf of the plaintiff and others similarly situated. In both instances our review of the circumstance surrounding the claim are that the actions are not justified and as such we made the decision to intend to vigorously defend the Company against these actions. In the case of the first action we have filed a response denying the allegations. In the case of the second action we have file a motion to dismiss or consolidate this action with the first based on what is known “the-first-to-file rule.” To date there has been no ruling on this motion.

On January 12, 2017, the Company entered into a Business Purchase Agreement with EnzymeBioSystems, Inc. (“EnzymeBio”), a Nevada corporation, whereby the Company entered into an agreement to purchase 100% ownership of EnzymeBio’s wholly owned subsidiary, Share Acquisition Corp. (“SAC”), a Nevada corporation in exchange for approximately 9,167 shares of the Company’s common stock and $25,000 cash. On February 28, 2017, EnzymeBio agreed to spin-off SAC as a dividend. Pursuant to the Business Purchase Agreement and Nevada Revised Stature 92A.180 (Merger of a subsidiary into parent or parent into subsidiary), SAC was to be acquired and merged into the Company. Restricted common shares of the Company were to be exchanged on a pro-rata one-for-one ownership basis. After the exchange took place, SAC would be collapsed into the Company and subsequently dissolved with the Nevada Secretary of State. The Company agreed to acquire SAC for the sole purpose to increase its shareholder base. The Company paid the $25,000, however, the share exchange did not take place and the agreement was not consummated. The Company was subsequently informed by its legal counsel that this transaction cannot be concluded under applicable securities laws. The Company informed EnzymeBio of this and requested that the $25,000 payment be returned. As a result, the $25,000 payment was recorded under Other Asset on the balance sheet. EnzymeBio refused to return the $25,000 and, as a result, on March 13, 2018 the Company filed a legal complaint against those parties which included a demand for the $25,000 as well as legal fees and specific damages the Company incurred as a result of their actions. In June 2018, the defendants responded to the complaint denying the allegation and also filed a counterclaim against the Company and its Chief Executive Officer. Subsequently, the defendants stipulated and all charges against the Company and its Chief Executive Officer were dismissed. On and effective October 30, 2018 all parties involved in the lawsuit agreed to a settlement and mutual release. Under the settlement agreement, the Company agreed to dismiss that lawsuit. In return, certain shareholders of the Company agreed to return to the Company 72,324 shares of the Company’s common stock upon the filing by the Company of a Form 15 with the U.S. Securities and Exchange Commission. The returned common stock will be immediately retired. Additionally, the shareholders agreed to place 120,000 shares of common in an attorney trust account and that such shares will be surrendered for retirement to the Company on January 1, 2020 should the Company refrain from trading its stock other and a “pink sheet system or OTC market.”

Her Imports 10-Q