Note 3 – LEASES

We have both lessee and lessor arrangements. Our leases are evaluated at inception or at any subsequent modification. Depending on the terms, leases are classified as either operating or finance leases if we are the lessee, or as operating, sales-type or direct financing leases if we are the lessor, as appropriate under ASC 842. Our lessee arrangement includes a rental agreement where we have the exclusive use of dedicated office space in San Diego, California, and qualifies as an operating lease. Our lessor arrangements include three rental agreements for warehouse and office space in Tulsa, Oklahoma, and each qualifies as an operating lease under ASC 842.

In accordance with ASC 842, we have made an accounting policy election to not apply the new standard to lessee arrangements with a term of one year or less and no purchase option that is reasonably certain of exercise. We will continue to account for these short-term arrangements by recognizing payments and expenses as incurred, without recording a lease liability and right-of-use asset.

We have also made an accounting policy election for both our lessee and lessor arrangements to combine lease and non-lease components. This election is applied to all of our lease arrangements as our non-lease components are not material and do not result in significant timing differences in the recognition of rental expenses or income.

Operating Leases – Lessee

We recognize a lease liability, reported in other liabilities on the condensed balance sheets, for each lease based on the present value of remaining minimum fixed rental payments (which includes payments under any renewal option that we are reasonably certain to exercise), using a discount rate that approximates the rate of interest we would have to pay to borrow on a collateralized basis over a similar term. We also recognize a right-of-use asset, reported in other assets on the condensed balance sheets, for each lease, valued at the lease liability, adjusted for prepaid or accrued rent balances existing at the time of initial recognition. The lease liability and right-of-use asset are reduced over the term of the lease as payments are made and the assets are used.

	2020
	November 30,			February 29,
Operating lease assets:
Right-of-use asset	$	37,000		$	45,200

Operating lease liabilities:
Current lease liability	$	13,700		$	13,500
Long-term lease liability	$	23,300		$	31,700

Remaining lease term (months)		34			43
Discount rate		4.60	%		4.60	%

Minimum fixed rental payments are recognized on a straight-line basis over the life of the lease as costs and expenses on our condensed statements of earnings. Variable and short-term rental payments are recognized as costs and expenses as they are incurred.

	Three Months Ended November 30,				Nine Months Ended November 30,
	2020		2019		2020		2019
Fixed lease cost	$	3,300	$	3,200	$	9,800	$	9,400

Future minimum rental payments under operating leases with initial terms greater than one year as of November 30, 2020, are as follows:

Year ending February 28 (29),
2021	$	3,400
2022		13,700
2023		14,200
2024		8,400
Total future minimum rental payments		39,700
Present value discount		(2,700	)
Total operating lease liability	$	37,000

The following table provides further information about our operating leases reported in our condensed financial statements:

	Three Months Ended November 30,				Nine Months Ended November 30,
	2020		2019		2020		2019
Operating cash flows – operating lease	$	3,300	$	3,200	$	9,800	$	9,400

Operating Leases – Lessor

We recognize fixed rental income on a straight-line basis over the life of the lease as revenue on our condensed statements of earnings. Variable rental payments are recognized as revenue in the period in which the changes in facts and circumstances on which the variable lease payments are based occur.

On April 4, 2020, we executed an amendment to one of our existing leases that abated rental payments for the months of May, June and July 2020. The amendment also extended the term of the lease for three additional months. This amendment represents a lease modification and, as such, we have adjusted our fixed rental income on a straight-line basis over the remaining term starting May 1, 2020.

Future minimum payments receivable under operating leases with terms greater than one year are estimated as follows:

Year ending February 28 (29),
2021	$	383,400
2022		1,542,100
2023		1,573,200
2024		1,577,900
2025		1,547,100
Thereafter		9,615,300
Total	$	16,239,000

The cost of the leased space was approximately $10,846,200 and $10,789,500 as of November 30, 2020 and February 29, 2020, respectively. The accumulated depreciation associated with the leased assets was $2,120,000 and $1,828,900 as of November 30, 2020 and February 29, 2020, respectively. Both the leased assets and accumulated depreciation are included in property, plant and equipment-net on the condensed balance sheets.