NOTE 14 – LEASED PROPERTY

The Company adopted ASC 842 on May 1, 2019 using the modified retrospective transition method; and therefore, the comparative information has not been adjusted for the three and nine months ended January 31, 2020 or as of April 30, 2019. Upon transition to the new standard, the Company elected the package of practical expedients, which permitted the Company not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs.

On February 15, 2019, a lease agreement became effective for tenant occupancy of the 23,924 square foot building owned by Torotel. Monthly installment payments of $11,500 began to be paid to us on March 1, 2019. The lease is for a sixty-two month term with monthly payments escalating periodically from $11,500 to $15,500. The tenant has the right to elect to purchase the building. The election to purchase must be made within the lease term or Torotel is not prohibited from placing the building up for public sale.

Future minimum lease payments on the operating lease as of January 31, 2020 are as follows:


	Operating Lease
Fiscal Years Ending April 30,	Payments
2020	$	37,500
2021		154,000
2022		166,000
2023		178,000
2024		124,000
Total	$	659,500

Torotel’s leased property (where Torotel is the lessor) by asset category was as follows:


	January 31, 2020		April 30, 2019
Land	$	265,000	$	265,000
Buildings and improvements		1,000,000		1,000,000
		1,265,000		1,265,000
Less accumulated depreciation		(702,000)		(659,000)
Net leased property	$	563,000	$	606,000

Depreciation resulting from the leased property amounted to $5,000 and $15,000 during the three and nine months ending January 31, 2020, respectively.