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Leases

3 Months Ended

Sep. 30, 2020

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; 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 2025. 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 four finance lease agreements, entered into during fiscal years 2018 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 leases with respect to our facility located in Orlando, Florida (the “Orlando Facility”). 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,
	2020		2019
Operating lease cost	$	166,974	$	164,871
Finance lease cost:
Depreciation of lease assets		65,869		86,063
Interest on lease liabilities		12,824		22,532
Total finance lease cost		78,693		108,595
Total lease cost	$	245,667	$	273,466

Supplemental balance sheet information related to leases was as follows:

	Classification	September 30, 2020		June 30, 2020
Assets:
Operating lease assets	Operating lease assets	$	1,502,488	$	1,220,430
Finance lease assets	Property and equipment, net(1)		619,165		666,519
Total lease assets		$	2,121,653	$	1,886,949

Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	814,307	$	765,422
Short-term leases	Accrued liabilities(2)		-		97,665
Finance leases	Finance lease liabilities, current		284,005		278,040

Noncurrent:
Operating leases	Operating lease liabilities, less current portion		1,075,781		887,766
Finance leases	Finance lease liabilities, less current portion		205,966		279,435
Total lease liabilities		$	2,380,059	$	2,308,328

(1)	Finance lease assets were recorded net of accumulated depreciation of approximately $1.1 million as of September 30, 2020, and $1.0 million as of June 30, 2020.

(2)

Represents accrual related to the lease of a manufacturing and office facility in Irvington, New York, which we ceased use of as of June 30, 2019 as the relocation of the operations formerly housed in this facility was complete. All remaining lease payments were accrued as of that date, through the lease expiration in August 2020.

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

Lease Term and Discount Rate	September 30, 2020
Weighted Average Remaining Lease Term (in years)
Operating leases		2.9
Finance leases		1.9

Weighted Average Discount Rate
Operating leases		4.6	%
Finance leases		7.9	%

Supplemental cash flow information:

	Three Months Ended September 30,
	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	212,132	$	189,715
Operating cash used for finance leases	$	12,824	$	22,545
Financing cash used for finance leases	$	67,501	$	103,618

Future maturities of lease liabilities were as follows as of September 30, 2020:

Fiscal year ending:	Finance Leases			Operating Leases
June 30, 2021 (remaining nine months)	$	240,972		$	653,026
June 30, 2022		231,783			822,780
June 30, 2023		59,647			237,341
June 30, 2024		11,811			117,852
June 30, 2025		—			117,852
Total future minimum payments		544,213			1,948,851
Less imputed interest		(54,242	)		(58,763	)
Present value of lease liabilities	$	489,971		$	1,890,088