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Operating Lease

12 Months Ended

Dec. 31, 2019

NOTE 11. 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 office and warehouse operating lease as of December 31, 2019 was four months.

The Company entered into an operating lease with a third party in October 2019 for copiers used for office and warehouse purposes. The terms of the lease include 48 monthly payments of $1,598 with a maturity date of October 2023. The Company has the option to Purchase the equipment at maturity for its estimated fair market value at that point in time. The remaining lease term for the Company’s copier operating lease as of December 31, 2019 was 46 months.

Lease expense related to the office space and copier operating leases were recorded on a straight-line basis over their respective lease terms. Total lease expense under the two operating leases was approximately $400,920 for the year ended December 31, 2019.

The discount rate implicit within the Company’s operating leases 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 commencement date, the operating lease liabilities reflect a weighted average discount rate of 8%.

The cash outflows from operating leases for the year ended December 31, 2019 was $400,920. The weighted average remaining lease term and the weighted average discount rate for operating leases at December 31, 2019 were 5.6 months and 8%, respectively.

The following sets forth the operating lease right of use assets and liabilities as of December 31, 2019:

Assets:
Operating lease right of use assets	$	122,459

Liabilities:
Operating lease obligations-current portion	$	159,160
Operating lease obligations-less current portion	$	44,460
Total operating lease obligations	$	203,620

The components of lease expense were as follows for the year ending December 31, 2019:

Selling, general and administrative expenses

400,920

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

Year ending December 31:
2020	$	173,307
2021		19,176
2022		19,176
2023		15,980
Total undiscounted minimum future lease payments		227,639
Imputed interest		(24,019	)
Total operating lease liability	$	203,620