OPERATING LEASE LIABILITY

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

OPERATING LEASE LIABILITY

The Company adopted ASU 2016-02, Leases (Topic 842) on January 1, 2019 using the modified retrospective approach. The adoption of the standard resulted in the recognition of an ROU asset and lease liability of $12,900 for one operating lease as of January 1, 2019, with no impact to retained earnings. Prior year amounts have not been restated. The lease is for 1,890 square feet of improved office, assembly and warehouse space in Las Vegas, Nevada. In January 2019, the Company recorded an additional $17,101 ROU remeasurement asset and liability from an extension of the operating facility lease to December 31, 2020. The Company has elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less.

In March 2019, the Company recorded a $57,587 ROU asset and liability for a two-year facility operating lease for 1,906 square feet of improved office, assembly and warehouse space in Lake Forest, California expiring in February 2021.

Due to lack of borrowing history or ability, the Company used as its incremental borrowing rate a low-grade debt rate published by the Federal Reserve Bank and determined a discount rate of 7.5% for the remeasurement in January 2019 and 6.8% for the March 2019 operating lease. Management determined these are reasonable borrowing rates.

Operating lease expense for capitalized operating leases included in operating activities was $6,651 for the three months ended March 31, 2019. Operating lease obligations recorded on the balance sheet are:

Operating lease liability- short term	$	41,418
Operating lease liability - long term		41,050
Total Operating Lease Liability	$	82,468

Future lease payments included in the measurement of lease liabilities on the balance sheet at March 31, 2019 for future periods are as follows:

Remainder of 2019 (nine months)	$	33,194
2020		50,116
2021		5,146
Total future minimum lease payments		88,456
Less imputed interest		(5,988	)
Total	$	82,468

The weighted average remaining lease term is 1.9 years and the weighted average discount rate is 7.0%.