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Operating Lease

9 Months Ended

Sep. 30, 2019

NOTE 10. OPERATING LEASE

The Company entered into an operating lease with a third party in September 2012 for office and warehouse space in Lenexa, Kansas. The terms of the lease include monthly payments ranging from $38,026 to $38,533 with a maturity date of April 2020. The Company has the option to renew for an additional three years beyond the original expiration date, which may be exercised at the Company’s sole discretion. The Company evaluated the renewal option at the lease commencement date to determine if it is reasonably certain the exercise the option and concluded that it is not reasonably certain that any options will be exercised. The weighted average remaining lease term for the Company’s operating lease as of September 30, 2019 was .58 years.

Expense related to the office space operating lease was recorded on a straight-line basis over the lease term. Lease expense under the operating lease was approximately $298,292 for the nine months ended September 30, 2019.

The discount rate implicit within the Company’s operating lease was not generally determinable and therefore the Company determined the discount rate based on its incremental borrowing rate on the information available at commencement date. As of September 30, 2019, the operating lease liabilities reflect a weighted average discount rate of 8%.

The following sets forth the operating lease right of use assets and liabilities as of September 30, 2019:

Assets:
Operating lease right of use assets	$	167,443

Liabilities:
Operating lease obligations-current portion	$	248,603
Operating lease obligations-less current portion	$	—
Total operating lease obligations	$	248,603

Following are the minimum lease payments for each year and in total.

Year ending December 31:
2019 (period from October 1, 2019 to December 31, 2019)	$	115,092
2020		154,131
	$	269,223