Leases

3 Months Ended

Mar. 31, 2023

Leases [Abstract]

Leases

Note 5. Leases

The Company leases approximately 37,729 rentable square feet of office and warehouse space from an unaffiliated third party for our former corporate office, manufacturing, assembly, warehouse and shipping facility located at 7970 South Kyrene Road, Tempe, Arizona 85284. From 2016 through March 2019, the Company leased approximately 4,529 rentable square feet of office and industrial space from an unaffiliated third party for our machine shop at 2169 East 5th Street, Tempe, Arizona 85284. In April 2019, the Company relocated the machine shop from the 5th Street location to 7910 South Kyrene Road, located within the same business complex as our main office. The Company executed a lease amendment to add an additional 5,131 rentable square feet for the machine shop and extended its existing office lease through April 2024. On June 1, 2022, we entered into a new lease of approximately 9,350 square feet located at 12301 Challenger Parkway, Orlando, Florida, from an unaffiliate third party through May 2027.

On March 1,2023 the company entered into a sublease for its 7970 South Kyrene location for the last 13 months of the lease agreement.

The Company’s lease agreements do not contain any residual value guarantees, restrictive covenants or variable lease payments. The Company has not entered into any financing leases.

In addition to base rent, the Company’s lease generally provides for additional payments for other charges, such as rental tax. The lease includes fixed rent escalations. The Company’s lease does not include an option to renew.

The Company determines if an arrangement is a lease at inception. Operating leases are recorded in operating lease right of use assets, net, operating lease liability – short-term, and operating lease liability – long-term on its balance sheets.

Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 4.5%. Significant judgement is required when determining the Company’s incremental borrowing rate. The Company uses the implicit rate when readily determinable. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Effective June 1, 2022, the Company obtained a right-of-use asset in exchange for a new operating lease liability in the amount of $840,855. Effective January 1, 2019, the Company obtained a right-of-use asset in exchange for a new operating lease liability in the amount of $1,721,380 and derecognized $46,523 deferred rent for an adjusted operating lease right-of-use asset in the net amount of $1,674,857.

Balance Sheet Classification	March 31, 2023			December 31, 2022
Assets
Operating lease right-of-use assets, beginning of period	$	1,212,814		$	784,306
Additional property in Orlando		-			840,843
Amortization for the period ended		(121,774	)		(412,335	)
Total operating lease right-of-use asset	$	1,091,040		$	1,212,814
Liabilities
Current
Operating lease liability, short-term	$	565,949		$	557,683
Non-current
Operating lease liability, long-term		585,165			720,023
Total lease liabilities	$	1,151,114		$	1,277,706

Future minimum lease payments as of March 31, 2023, under non-cancelable operating leases are as follows:

2023	$	464,563
2024		317,938
2025		191,478
2026		196,311
2027		99,381
Total lease payments		1,269,671
Less: imputed interest		(118,557	)
Operating lease liability	$	1,151,114

Rent expenses for the three months ended March 31, 2023, and 2022 were $108,230 and $81,651, respectively.