Note H - Right-of-Use Assets and Lease Liabilities

6 Months Ended

Dec. 31, 2020

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

NOTE H - RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

Operating leases

In

June 2015,

the Company entered into a lease agreement to lease certain office equipment with a lease term of

63

months. The lease contains a renewal option to extend the term for successive

one

year periods. The Company is

not

reasonably certain that it will renew the lease when it expires. Initial rent amount was

$1,079

per month, with increases each year

no

more than

3%.

In applying ASC

842,

the Company uses a lease term of

63

months and an incremental borrowing rate of

5.5%

which was the borrowing rate on the Company's line of credit with a financial institution with all accounts and general intangibles. This lease expired in

September 2020.

As such, the right-of-use asset has been fully amortized and its related lease liability extinguished at

September 30, 2020.

In

February 2018,

the Company entered in a lease agreement to lease warehouse space with a lease term of

39

months. The Company pays

no

rent for the

first

three

months of the lease, pays

$2,936

per month for the next

12

months,

$3,024

per month for the next

8

months,

$3,019

per month for the next

4

months, and

$3,109

for the last

12

months. In applying ASC

842,

the Company uses a lease term of

39

months and an incremental borrowing rate of

5.5%

which was the borrowing rate on the Company's line of credit with a financial institution.

In

August 2020,

the Company entered into a lease agreement to lease certain office equipment with a lease term of

63

months. The lease renews on a month-to-month basis and contains an option to purchase the equipment at fair market value or return the equipment. Historically, the Company has

not

exercised the option to purchase at the end of the initial lease term for similar leases and simply returned the equipment at the end of the initial lease term. Initial rent amount was

$574

per month. In applying ASC

842,

the Company uses a lease term of

63

months and an incremental borrowing rate of

4.25%

which was the borrowing rate on the Company's line of credit with a financial institution.

The following is information related to the Company's right-of-use assets and liabilities for its operating leases:

ROU assets - operating leases obtained in exchange for lease liabilities - operating leases	$	108,516
Amortization of ROU assets since lease inception	$	(64,873	)
ROU assets - operating leases at December 31, 2020	$	43,643
Lease liabilities - operating leases on adoption date and increase in lease liabilities	$	115,456
Payments on lease liabilities		(70,427	)
Lease liabilities - operating leases on December 31, 2020		45,029
Lease liabilities - operating leases due in the 12 months ending December 31, 2020		18,424
Lease liabilities - operating leases due in the 12 months ending December 31, 2021	$	26,605

Variable lease expense was

$8,386

and

$11,666

for the

three

months ended

December 31, 2020

and

2019,

respectively.

Weighted average remaining lease term was

3.66

years and weighted average discount rate was

4.57%

at

December 31, 2020.