16.

Commitments

Operating Leases

We adopted ASC Topic

842

(Leases) on

January 1, 2019.

This standard requires us to record certain operating lease liabilities and corresponding right-of-use assets on our balance sheet. Results for periods beginning after

January 1, 2019

are presented under Topic

842,

while prior period amounts are

not

adjusted and continue to be reported in accordance with our historic accounting under Topic

840.

We elected the package of practical expedients available for expired or existing contracts, which allowed us to carryforward our historical assessments of whether contracts are (or contain) leases, as well as lease classification tests and treatment of initial direct costs. We also elected to

not

separate lease components from non-lease components for all fixed payments, and we exclude variable lease payments in the measurement of right-of-use assets and lease obligations.

Upon adoption of ASC

842

we recorded a

$2.2

million increase in other assets, a

$1.1million

increase in current liabilities, and a

$1.2

million increase in non-current liabilities. We did

not

record any cumulative effect adjustments in opening retained earnings, and adoption of ASC

842

had

impact on cash flows from operating, investing, or financing activities.

We determine if an arrangement is a lease at inception. Most of our operating leases do

not

provide an implicit rate of interest so we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. We lease various assets in the course of ordinary business including warehouses and manufacturing facilities, as well as vehicles and equipment used in our operations. Leases with an initial term of

months or less are

not

recorded on the balance sheet as we recognize lease expense for these leases on a straight-line basis over the lease term. The depreciable life of assets and related improvements are limited by the expected lease term, unless there is a reasonably certain expected transfer or title or purchase option. Some lease agreements include renewal options at our sole discretion. Any guaranteed residual value is included in our lease liability.

The table below describes our lease position as of

December 31, 2019:

Assets	As of December 31, 2019
Operating lease right-of-use assets		2,176,000
Accumulated amortization		(1,130,000	)
Net lease assets		1,046,000

Liabilities
Current
Operating		658,000
Noncurrent
Operating		388,000
Total lease liabilities		1,046,000

Weighted average remaining term (years) – operating leases		2

Weighted average discount rate – operating leases		11.25	%

During the year ended

December 31, 2019,

we recorded expenses related to

	Year end ed December 31, 2019
	Operating right-of-use lease asset amortization			1,130,000

	Financing lease asset amortization			-
	Related interest expense			-

	Total expense during twelve months ended December 31, 2019			1,130,000

The operating lease expense, including

two

lease arrangements from a related party, for the year ended

December 31, 2019

was as follows:

Supplemental information related to operating leases was as follows:

	For the year ended December 31, 2019
Rounded, thousands

Cash paid for amounts included in the measurement of lease liabilities	$	1,250
New operating lease assets obtained in exchange for operating lease liabilities	$	0

As of

December 31, 2019,

the operating leases had a weighted average remaining lease term of

years and a weighted average discount rate of

8%.

		For the year ended
Lease Cost	Classification	December 31, 2019
Operating lease cost	Cost of revenue, general and administrative expenses	$	1,250
Total lease cost		$	1,250

The following table summarizes the maturities of our lease liabilities for all operating leases as of

December 31, 2019

(in thousands)	12/31/2019

2020		752
2021		425
2022 and thereafter		60
Total lease payments		1,237
less: Imputed interest		-191
Present value of lease liabilities		1,046

Licenses

The Company has certain merchandising license agreements that require royalty payments based upon the Company’s net sales of the respective products. The agreements call for guaranteed minimum commitments that are determined on a calendar year basis. As the last such agreement expired on

December 31, 2019,

there are

remaining guaranteed commitments.