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Leases | 3 Months Ended
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Sep. 30, 2023
Leases |
Leases | 11. Leases 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 and Riga, Latvia. The operating leases for facilities are non-cancelable operating leases, with terms at various times through 2034. We typically 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 such options. We currently have obligations under seven finance lease agreements, entered into during fiscal years 2019, 2023 and 2024, 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. We previously had two leases on the premises comprising our primary facility in Orlando, Florida (the “Orlando Facility”). The first lease on the premises comprising our Orlando Facility was amended in April 2021, and again in September 2021, to expand the space from approximately 26,000 square feet to approximately 58,500 square feet. The lease term was extended from April 30, 2022, to that certain date that is one hundred twenty-seven (127) months after the date the landlord completes certain work to be done at the leased premises. The landlord’s work was completed in August 2023, and accordingly the lease expires on March 31, 2034. In April 2023, we entered into a sublease for 11,156 square feet of this space, as we do not have a current need for the full 58,500 square feet of space. The sublease is for an initial term of five years, ending in April 2029. The second lease on the premises comprising our Orlando Facility was assigned to a third-party and it was agreed that we would vacate the premises, subject to the assigned lease, on November 30, 2022. In December 2022, we entered into an agreement with the assignee of such lease that extended our right to occupy the subject premises until February 28, 2023, in consideration of payments of rent through February 28, 2023, and other amounts to the assignee. In February 2023, the space was vacated and we have no further obligations related to this lease. Effective in January 2022, the terms of our leases in Zhenjiang, China and Riga, Latvia were extended to December 31, 2024 and 2030, respectively. 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 assets and the related lease liabilities. 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 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. In August 2023, we completed the construction of additional tenant improvements within the premises subject to our continuing lease for our Orlando Facility, of which the landlord has agreed to provide $2.4 million in tenant improvement allowances. We are funding the balance of the tenant improvement costs, which we estimate will be approximately $3.8 million, pending final construction invoices. The components of lease expense were as follows:
|  | Three Months Ended September 30, |
|  | 2023 |  |  | 2022 |
Operating lease cost |  | $ | 205,023 |  |  | $ | 231,501 |
Finance lease cost: |  |  |  |  |  |  |  |
Depreciation of lease assets |  |  | 19,915 |  |  |  | 34,111 |
Interest on lease liabilities |  |  | 7,536 |  |  |  | 2,683 |
Total finance lease cost |  |  | 27,451 |  |  |  | 36,794 |
Total lease cost |  | $ | 232,474 |  |  | $ | 268,295 |
Supplemental balance sheet information related to the leases was as follows:
|  | Classification |  | September 30, 2023 |  |  | June 30, 2023 |
Assets: |  |  |  |  |  |  |  |
Operating lease assets |  | Operating lease assets |  | $ | 7,571,878 |  |  | $ | 9,571,604 |
Finance lease assets |  | Property and equipment, net(1) |  |  | 637,581 |  |  |  | 542,105 |
Total lease assets |  |  |  | $ | 8,209,459 |  |  | $ | 10,113,709 |
Liabilities: |  |  |  |  |  |  |  |  |  |
Current: |  |  |  |  |  |  |  |  |  |
Operating leases |  | Operating lease liabilities, current |  | $ | 1,016,940 |  |  | $ | 969,890 |
Finance leases |  | Finance lease liabilities, current |  |  | 112,352 |  |  |  | 103,646 |
Noncurrent: |  |  |  |  |  |  |  |  |  |
Operating leases |  | Operating lease liabilities, less current portion |  |  | 8,773,442 |  |  |  | 8,393,248 |
Finance leases |  | Finance lease liabilities, less current portion |  |  | 340,716 |  |  |  | 341,201 |
Total lease liabilities |  |  |  | $ | 10,243,450 |  |  | $ | 9,807,985 |
(1) | Finance lease assets were recorded net of accumulated depreciation of approximately $92,000 and $72,000 as of September 30, 2023 and June 30, 2023, respectively.
Lease term and discount rate information related to leases was as follows:
Lease Term and Discount Rate |  | September 30, 2023 |
Weighted Average Remaining Lease Term (in years) |
Operating leases |  |  | 10.1 |
Finance leases |  |  | 4.2 |
Weighted Average Discount Rate |  |  |  |
Operating leases |  |  | 2.9 | %
Finance leases |  |  | 5.7 | %
Supplemental cash flow information:
|  | Three Months Ended September 30, |
|  | 2023 |  |  | 2022 |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |
Operating cash used for operating leases |  | $ | 180,077 |  |  | $ | 268,580 |
Operating cash used for finance leases |  | $ | 7,536 |  |  | $ | 2,683 |
Financing cash used for finance leases |  | $ | 27,062 |  |  | $ | 37,079 |
Future maturities of lease liabilities were as follows as of September 30, 2023:
Fiscal year ending: |  | Finance Leases |  |  | Operating Leases |
June 30, 2024 (remaining nine months) |  | $ | 106,949 |  |  | $ | 794,979 |
June 30, 2025 |  |  | 130,447 |  |  |  | 1,125,653 |
June 30, 2026 |  |  | 108,132 |  |  |  | 1,097,131 |
June 30, 2027 |  |  | 89,371 |  |  |  | 1,125,616 |
June 30, 2028 |  |  | 82,466 |  |  |  | 1,154,784 |
Thereafter |  |  | — |  |  |  | 6,751,714 |
Total future minimum payments |  |  | 517,365 |  |  |  | 12,049,877 |
Less imputed interest |  |  | (64,297 | ) |  |  | (2,259,495 | )
Present value of lease liabilities |  | $ | 453,068 |  |  | $ | 9,790,382 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//842-20/tableOfContent + Details
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