Note

- 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

$2.8

million increase in other assets, a

$1.1

million increase in current liabilities, and a

$1.7

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

September 30, 2019:

Assets	As of September 30, 2019
Operating lease right-of-use assets		2,234,000
Accumulated amortization		(938,000	)
Net lease assets		1,296,000

Liabilities
Current
Operating		840,000
Noncurrent
Operating		456,000
Total lease liabilities		1,296,000

Weighted average remaining term (years) – operating leases (in years)	2

Weighted average discount rate – operating leases		11.25	%

During the

three

months ended

September 30, 2019,

we recorded expenses related to

Operating right-of-use lease asset amortization			216,000

Total expense during three months ended September 30, 2019			216,000

During the

nine

months ended

September 30, 2019,

we recorded expenses related to

Operating right-of-use lease asset amortization			938,000

Total expense during nine months ended September 30, 2019			938,000

Operating lease expense were approximately

$216,000

for the

three

months and

$938,000

for the

nine

months ended

September 30, 2019.

Operating lease costs are included within selling, general and administrative expenses on the condensed consolidated statements of operations. The Company does

not

have any finance leases. Cash paid for amounts included in the measurement of operating lease liabilities were approximately

$216,000

for the

three

months and

$938,000

for the

nine

months ended

September 30, 2019.

The following table summarizes the maturities of our lease liabilities for all operating leases as of September 30,2019

(in thousands)	09/30/2019
2019	192
2020	752
2021	425
2022 and thereafter	60
Total lease payments	1,429
less: Imputed interest	(133)
Present value of lease liabilities	1,296