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Leases

3 Months Ended

Sep. 30, 2019

As discussed in Note 2, Significant Accounting Policies, the Company adopted ASC Topic 842 effective July 1, 2019. Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; Irvington, New York; Riga, Latvia; Shanghai, China; and Zhenjiang, China, and finance leases related to certain equipment located in Orlando, Florida. The operating leases for facilities are non-cancelable operating leases, expiring through 2022. We include options to renew (or terminate) in our lease term, and as part of our right-of-use ("ROU") assets and lease liabilities, when it is reasonably certain that we will exercise that option. We currently have obligations under five finance lease agreements, entered into during fiscal years 2016 to 2019, with terms ranging from three to five years. The leases are for computer and manufacturing equipment.

Our operating lease ROU assets and the related lease liabilities are initially measured at the present value of future lease payments over the lease term. Two of our operating leases include renewal options, which were not included in the measurement of the operating lease ROU assets and related lease liabilities. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Currently none of our leases include variable lease payments that are dependent on an index or rate. We are responsible for payment of certain real estate taxes, insurance and other expenses on certain of our leases. These amounts are generally considered to be variable and are not included in the measurement of the ROU asset and lease liability. We generally account for non-lease components, such as maintenance, separately from lease components. Our lease agreements do not contain any material residual value guarantees or material restricted covenants. Leases with a term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term.

We received tenant improvement allowances for each of our two Orlando Facility leases. These allowances were used to construct improvements and are included in leasehold improvements and operating lease liabilities. The balances are being amortized over the corresponding lease terms.

The components of lease expense were as follows:

	Three Months Ended September 30, 2019
Operating lease cost	$	164,871
Finance lease cost:
Depreciation of lease assets	$	86,063
Interest on lease liabilities	$	22,532
Total finance lease cost	$	108,595
Total lease cost	$	273,466

Supplemental balance sheet information related to leases was as follows:

	Classification	As of September 30, 2019
Assets:
Operating lease assets	Operating lease assets	$	1,607,458
Finance lease assets	Property and equipment, net(1)		999,297
Total lease assets		$	2,606,755

Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	730,106
Short-term leases	Accrued liabilities(2)		375,347
Finance leases	Finance lease liabilities, current		384,325

Noncurrent:
Operating leases	Operating lease liabilities, less current portion		1,443,023
Finance leases	Finance lease liabilities, less current portion		556,765
Total lease liabilities		$	3,489,566

(1)	Finance lease assets are recorded net of accumulated depreciation of approximately $986,000 as of September 30, 2019.

(2)

Represents accrual related to the lease of the Irvington Facility, which we ceased use of as of June 30, 2019. All remaining lease payments were accrued as of that date, through the lease expiration in September 2020. See Note 14, Restructuring, to these unaudited Condensed Consolidated Financial Statements for additional information.

Lease term and discount rate information related to leases was as follows:

Lease Term and Discount Rate	As of September 30, 2019
Weighted Average Remaining Lease Term (in years)
Operating leases		2.9
Finance leases		2.9

Weighted Average Discount Rate
Operating leases		4.9	%
Finance leases		8.0	%

Supplemental cash flow information:

Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	189,715
Operating cash used for finance leases	$	22,545
Financing cash used for finance leases	$	103,618

Future maturities of lease liabilities, excluding amounts accrued for the Irvington Facility lease, were as follows as of September 30, 2019:

Fiscal year ending June 30,	Finance Leases			Operating Leases
June 30, 2020 (nine months remaining)	$	356,228		$	603,002
June 30, 2021		407,954			825,431
June 30, 2022		231,783			767,296
June 30, 2023		59,647			156,587
Total future minimum payments	$	1,055,612		$	2,352,316
Less imputed interest		(114,522	)		(179,187	)
Present value of lease liabilities	$	941,090		$	2,173,129