Commitments and Contingencies

9 Months Ended

Sep. 30, 2018

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Note 8. Commitments and Contingencies

The Company currently leases its machine shop building located at 2169 East Fifth St., Tempe, Arizona 85284. The current lease obligation expires in November, 2018. The Company plans to relocate its machine shop from the Fifth St. location to the same complex that its corporate office is located. On May 18, 2018, the Company executed a lease amendment for its existing corporate office space located at 7970 South Kyrene Road, Tempe, Arizona 85284, to extend its lease obligation from September 2019 to September 2023. Under the terms of the lease amendment, the Company also leased a new machine shop building located at 7910 South Kyrene Road, Tempe, Arizona 85284 to become effective upon completion of leasehold improvements on or after October 1, 2018 with a lease obligation to September 2023.

Future minimum lease payments as of September 30, 2018 under non-cancelable operating leases are as follows:

Building Lease Schedule
2018	$	84,967
2019		345,331
2020		362,703
2021		373,525
2022		384,776
2023		295,091
Total	$	1,846,393

The Company has a deferred rent liability of $34,352 and $75,444 as of September 30, 2018 and December 31, 2017, respectively, relative to the increasing future minimum lease payments. Rent expense, including pro-rata share of common area charges was $120,655 and $117,068 for the three months ended September 30, 2018 and 2017, respectively. Rent expense, including pro-rate share of common are charges was $356,513 and $352,899 for the nine months ended September 30, 2018 and 2017, respectively.

General or Threatened Litigation

From time to time, the Company is notified of threatened litigation or that a claim is being made against it. The Company evaluates contingencies on an on-going basis and has established loss provisions for matters in which losses are probable and the amount of loss can be reasonably estimated.

As of September 30, 2018, the Company has initiated a declaratory judgment action in the Superior Court of the State of Arizona. A former customer has raised allegations of breach of contract and breach of warranty and the Company seeks relief and clarification from the Superior Court regarding the allegations and the Company’s obligations under the contract with the former customer. Management believes that the declaratory judgment action will not have a material adverse effect on our results of operations and the Company will vigorously defend against any allegations raised by the former customer. The Company has established a probable and estimated loss contingency of $40,000 as of September 30, 2018.