Note 9 – Leases

The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; however, most of the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate which is based on the interest rate of similar debt outstanding.

The Company leases its current facilities from Gold Team Inc., a company owned by the Company’s CEO, which owns both the Canoga Park, CA and Milford, Ohio locations. The leases expired on April 30, 2023, and the Company exercised its renewal option for an additional 12 months. The new lease is not more than 12 months; therefore, the disclosures under ASC 842 are not required. Future minimum lease payments under this agreement for the twelve months ending December 31, 2022, is $168,000. Effective January 1, 2019, the Company adopted the provision of ASC 842 Leases.

The lease expense for the six months ended June 30, 2023, and 2022 was $84,000 and $84,000, respectively. The cash paid under operating leases during the six months ended June 30, 2023, and 2022 was $0 and $0, respectively. As of June 30, 2023, the weighted average remaining lease terms were 0.1 years and the weighted average discount rate was 8%.