OPERATING & FINANCING LEASES

12 Months Ended

Jun. 30, 2023

Operating Financing Leases

OPERATING & FINANCING LEASES

NOTE 6 – OPERATING & FINANCING LEASES

In July 2019, the Company adopted ASU 2016-02, Leases (Topic 842). This standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based upon the principle of whether or not the lease is effectively a financed purchase by the lessee. We have elected the optional transition method to apply the standard as of the effective date and therefore, we will not apply the standard to the comparative periods presented in the consolidated financial statements. We have also elected the transition package of these practical expedients permitted within the standard which eliminates the requirements to reassess prior conclusions about lease identification, lease classification and indirect costs.

The Company accounts for its various operating leases in accordance with Accounting Standards Codification (‘ASC’) 842 – Lease, as updated by ASU 2016-02. At the inception of a lease, the Company recognizes right-of-use lease assets and related lease liabilities measured at present value of future lease payments on its balance sheet. Lease expense is recognized on a straight-line basis over the term of the lease. Our most common initial term varies in length from 2 to 10 years. Including renewal options negotiated with the landlord, we have a total span of 2 to 16 years at the facilities we lease. The Company reviewed its contracts with vendors and customers, determining that its right-to-use lease assets consisted of only office space operating leases. In determining the right-to-use lease assets and liabilities, the Company did recognize lease extension options which the Company feels would be reasonably exercised. Our incremental borrowing rate (“IBR”) used to discount the stream of operating lease payments is closely related to the interest rates available to the Company. A reconciliation of operating and financing lease payments undiscounted cash flows to lease liabilities recognized as of June 30, 2023 is as follows:

Reconciliation of operating and financing lease payments  Year Ending June 30,	Operating Lease Payments			Financing Lease Payments
2024	$	5,592,971		$	244,343
2025		5,600,823			244,343
2026		5,174,942			244,343
2027		4,190,414			162,897
2028		3,600,133			—
Thereafter		22,306,056			—
Present value discount		(10,454,450	)		(57,848	)
Total lease liability	$	36,010,889		$	838,078

Weighted Average Remaining Lease Term
Operating leases - years	10.8
Finance lease - years	3.6
Weighted Average Discount Rate
Operating leases	5.0	%
Finance lease	3.6	%

The components of lease expense were as follows:

Components of Lease Expense
	For Year Ended June 30,
	2023		2022
Operating lease cost	$	5,887,390	$	5,668,199
Finance lease cost:
Depreciation of leased equipment	$	198,881	$	198,881
Interest on lease liabilities		35,833		41,603
Total finance lease cost	$	234,714	$	240,484

Supplemental cash flow information related to leases as follows: 

Supplemental cash flow information related to leases
	For Year Ended June 30,
Cash paid for amounts included in the measurement of lease liabilities:	2023		2022
Operating cash flows from operating leases	$	5,577,578	$	5,133,369
Financing cash flows from financing leases	$	244,344	$	244,344
Right-of-use and equipment assets obtained in exchange for lease obligations:
Operating leases	$	2,902,584	$	7,900,074