Note

–

Leases

Effective

October 1, 2019,

the Company adopted ASU

2016

02,

Leases (Topic

842

), utilizing the modified-retrospective transition approach. which is intended to improve financial reporting about leasing transactions. The standard requires the recognition of right-of-use assets and lease liabilities on the consolidated balance sheet and disclosure of key information about leasing arrangements. The Company elected to use the transition option that allows the Company to initially apply the new lease standard at the adoption date and recognize a cumulative-effect adjustment, if any, to the opening balance of retained earnings in the year of adoption. The adoption of ASC

842

did

not

result in any adjustments to retained earnings.

In accordance with ASC

842,

the Company has made accounting policy elections (

) to

not

apply the new standard to lessee arrangements with a term of

twelve

months or less and (

) to combine lease and non-lease components. The non-lease components are

not

material and do

not

result in significant timing differences in the recognition of lease expense. As a result of adopting ASC

842,

the Company recognized net operating lease right-of-use assets of

$4.7

million and operating lease liabilities of

$4.7

million on the effective date. In addition, as a result of adopting ASC

842,

the Company recognized net financing lease assets of

$0.6

million and financing lease liabilities of

$0.6

million on the effective date that were previously accounted for as operating leases.

The Company categorizes leases at their inception as either operating or finance leases. The Company has operating and financing leases in place for various office and warehouse properties, vehicles and certain wireless services equipment. The leases have remaining lease terms of

one

year to

ten

years, some of which include the option to extend the lease terms. Operating leases are included in right-of-use operating lease assets, operating lease liabilities - current, and operating lease liabilities in the consolidated condensed balance sheets. Finance leases are included in net property and equipment, financing lease liabilities – current, and financing lease liabilities in the consolidated condensed balance sheets.

Leased assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. The Company uses a discount rate that approximates the rate of interest for a collateralized loan over a similar term as the discount rate for present value of lease payments when the rate implicit in the contract is

not

readily determinable. Leases that have a term of

twelve

months or less upon commencement date are considered short-term in nature. Accordingly, short-term leases are

not

included in the consolidated condensed balance sheets and are expensed on a straight-line basis over the lease term, which commences on the date the Company has the right to control the property.

The components of lease expense were as follows:

	Three Months ended March 31, 2020		Six Months ended March 31, 2020

Operating lease cost	$	444,642	$	736,764

Finance lease cost:
Amortization of right-of-use assets	$	66,134	$	126,364
Interest on lease liabilities		12,793		24,962
Total finance lease cost	$	78,927	$	151,326

Supplemental cash flow information related to leases are as follows for the

six

months ended:

	March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	736,764
Operating cash flows from finance leases	$	24,962
Financing cash flows from finance leases	$	173,136

Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	1,146,700
Finance leases	$	454,066

Supplemental balance sheet information related to leases are as follows:

	March 31, 2020
Operating l eases
Operating lease right-of-use assets	$	5,178,084

Operating lease obligations - current	$	1,219,301
Operating lease obligations		4,174,774
Total operating lease liabilities	$	5,394,075

Finance leases
Property and equipment, gross	$	1,198,985
Accumulated depreciation		(126,364	)
Property and equipment, net	$	1,072,621

Financing lease obligations - current	$	317,023
Financing lease obligations		708,825
Total finance lease liabilities	$	1,025,848

Weighted Average Remaining Lease Term
Operating leases (years)	4.22
Finance leases (years)	3.92
Weighted Average Discount Rate
Operating leases		5.05	%
Finance leases		5.15	%

Maturities of lease liabilities are as follows for the years ending

September 30:

	Operating Leases		Finance Leases
2020	$	718,464	$	211,198
2021		1,457,535		266,178
2022		1,485,072		233,461
2023		1,386,873		219,396
2024		819,018		181,237
Thereafter		151,895		21,936
Total lease payments		6,018,857		1,133,406
Less imputed interest		624,782		107,558
Total	$	5,394,075	$	1,025,848