CHANGE IN ACCOUNTING PRINCIPLE

During

the

first

quarter of fiscal

2020,

the Company changed its method of recording stock-based compensation expense. Under the new accounting principle, stock-based compensation expense is recorded on a straight-line basis over the vesting period and forfeitures are recognized when they occur. Under the previous method, the Company estimated future forfeitures and the expected number of awards that would vest and subsequently adjusted for forfeitures. The Company believes this method of recording stock-based compensation expense on a straight-line basis over the vesting period is preferable since it is more reflective of the stock options that will actually vest.

The cumulative effect of the changes in the

June 30, 2019

Consolidated Balance Sheet for the change in principle related to stock-based compensation expense using the full retrospective method was as follows:

			Stock-Based
Balance Sheet	As Previously		Compensation			As
June 30, 2019	Reported		Adjustment			Adjusted
Equity:
Paid in capital	$	6,186,393	$	146,742		$	6,333,135
Retained earnings	$	8,848,684	$	(146,742	)	$	8,701,942

The impact of the change in principle on the Consolidated Statement of Operations for the

three

and

six

months ended

December 31, 2018

was as follows:

			Stock-Based
Statement of Operations	As Previously		Compensation			As
Three Months Ended December 31, 2018	Reported		Adjustment			Adjusted
Selling, general and administrative expenses	$	1,528,374	$	30,972		$	1,559,346
Income from operations		134,121		(30,972	)		103,149
Net income	$	134,121	$	(30,972	)	$	103,149

Income per common share
Basic	$	0.02	$	(0.01	)	$	0.01
Diluted	$	0.02	$	(0.01	)	$	0.01

			Stock-Based
Statement of Operations	As Previously		Compensation			As
Six Months Ended December 31, 2018	Reported		Adjustment			Adjusted
Selling, general and administrative expenses	$	3,292,122	$	56,813		$	3,348,935
Income from operations		201,557		(56,813	)		144,744
Net income	$	201,532	$	(56,813	)	$	144,719

Income per common share
Basic	$	0.03	$	(0.01	)	$	0.02
Diluted	$	0.03	$	(0.01	)	$	0.02

The impact of the change in principle on the Consolidated Statement of Cash Flows for the

six

months ended

December 31, 2018

was as follows:

			Stock-Based
Statement of Cash Flows	As Previously		Compensation			As
Six Months Ended December 31, 2018	Reported		Adjustment			Adjusted
Operating activities:
Net income	$	201,532	$	(56,813	)	$	144,719
Stock-based compensation expense	$	194,356	$	56,813		$	251,169