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Leases

9 Months Ended

Mar. 31, 2021

Our leases primarily consist of operating leases related to our facilities located in Orlando, Florida; 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 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 and 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 March 31,				Nine Months Ended March 31,
	2021		2020		2021		2020
Operating lease cost	$	168,017	$	159,305	$	508,428	$	496,278
Finance lease cost:
Depreciation of lease assets		47,354		86,063		160,577		258,189
Interest on lease liabilities		11,432		18,264		35,688		61,221
Total finance lease cost		58,786		104,327		196,265		319,410
Total lease cost	$	226,803	$	263,632	$	704,693	$	815,688

Supplemental balance sheet information related to leases was as follows:

	Classification	March 31, 2021		June 30, 2020
Assets:
Operating lease assets	Operating lease assets	$	1,208,692	$	1,220,430
Finance lease assets	Property and equipment, net(1)		524,456		666,519
Total lease assets		$	1,733,148	$	1,886,949

Liabilities:
Current:
Operating leases	Operating lease liabilities, current	$	849,169	$	765,422
Short-term leases	Accrued liabilities(2)		-		97,665
Finance leases	Finance lease liabilities, current		242,417		278,040

Noncurrent:
Operating leases	Operating lease liabilities, less current portion		656,535		887,766
Finance leases	Finance lease liabilities, less current portion		108,412		279,435
Total lease liabilities		$	1,856,533	$	2,308,328

(1)	Finance lease assets were recorded net of accumulated depreciation of approximately $1.2 million as of March 31, 2021, 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	March 31, 2021
Weighted Average Remaining Lease Term (in years)
Operating leases		2.6
Finance leases		1.5

Weighted Average Discount Rate
Operating leases		4.5%
Finance leases		7.9%

Supplemental cash flow information:

		Nine Months Ended March 31,
		2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash used for operating leases	$	645,174	$	589,622
Operating cash used for finance leases	$	35,688	$	61,234
Financing cash used for finance leases	$	206,644	$	315,638

Future maturities of lease liabilities were as follows as of March 31, 2021:

Fiscal year ending:	Finance Leases			Operating Leases
June 30, 2021 (remaining three months)	$	80,324		$	223,422
June 30, 2022		231,783			828,017
June 30, 2023		59,647			238,021
June 30, 2024		11,811			118,245
June 30, 2025		—			118,245
Total future minimum payments		383,565			1,525,950
Less imputed interest		(32,736	)		(20,246	)
Present value of lease liabilities	$	350,829		$	1,505,704