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Leases
12 Months Ended
Aug. 31, 2021
Leases  
Leases

Note 12 – Leases

 

Operating 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 discounts lease payments based on an estimate of its incremental borrowing rate.

 

The Company leases its corporate office space and certain facilities under long-term operating leases expiring through fiscal year 2028.

 

The table below presents the lease related assets and liabilities recorded on the Company’s consolidated balance sheets as of August 31, 2021 and 2020:

 

      2021   2020 
   Classification on Balance Sheet        
Assets             
 Operating lease assets  Operating lease right of use assets  $2,543,396   $2,810,556 
Total lease assets     $2,543,396   $2,810,556 
              
Liabilities             
Current liabilities             
 Operating lease liability  Current operating lease liability  $530,797   $563,793 
Noncurrent liabilities             
 Operating lease liability  Long-term operating lease liability   2,057,805    2,266,887 
Total lease liability     $2,588,602   $2,830,680 

 

 

Lease obligations at August 31, 2021 consisted of the following:

 

Years Ending August 31,    
2022  $717,772 
2023   649,974 
2024   444,301 
2025   366,620 
2026   351,434 
Thereafter   728,841 
Total payments   3,258,942 
Amount representing interest   (670,340)
Lease obligation, net   2,588,602 
Less lease obligation, current portion   (530,797)
Lease obligation, long-term portion  $2,057,805 

 

During the year ended August 31, 2021, the Company entered into new lease obligation of $296,317.

 

The lease expense for the years ended August 31, 2021 and 2020 was $858,847 and $788,272, respectively. The cash paid under operating leases during the years ended August 31, 2021 and 2020 was $834,502 and $772,798, respectively.

 

At August 31, 2021, the weighted average remaining lease terms were 5.98 years and the weighted average discount rate was 8%.

 

Finance leases

 

The Company leases certain equipment under lease contracts that are accounted for as finance leases. If the contracts meet the criteria for a finance lease, the related equipment underlying the lease contract is capitalized and amortized over its estimated useful life. If the cost of the equipment is not available, the Company calculates the cost by taking the present value of the lease payments using an implicit borrowing rate of 5%.

 

The net book value of equipment under finance leases included in property and equipment on the accompanying balance sheet at August 31, 2021 is as follows:

 

      
Cost  $209,457 
Accumulated amortization   (136,491)
Net book value  $72,966 
      

 

Future minimum finance lease payments are as follows:

 

Years Ending August 31,    
2022  $25,153 
2023   9,719 
2024   5,669 
 Total payments   40,541 
 Amount representing interest   (1,140)
 Lease obligation, net   39,401 
 Less lease obligation, current portion   (23,184)
 Lease obligation, long-term portion  $16,217