Leases

3 Months Ended

Jun. 30, 2023

The Company’s leasing activities primarily consist of real estate leases acquired during the acquisition of PetCareRx for use in the business operations. The leases had initial terms ranging from 5 years to 10 years. Some of the initial lease terms have already matured and the remaining leases have maturity dates ranging from 2024 to 2027. The Company assesses whether each lease is an operating lease or a finance lease at the lease commencement date. The Company does not have any material leases, individually or in the aggregate, classified as a finance lease.

Variable Lease Costs

Certain of the Company’s leases require payments for taxes, insurance, and other costs applicable to the property, in addition to the minimum lease payment. These costs are considered variable costs which are based on actual expenses incurred by the lessor. Therefore, these amounts are not included in the calculation of the right-of-use assets and lease liabilities.

The Company has lease agreements which provide for fixed and scheduled escalations, which are included in the calculation of the right-of-use assets and lease liabilities.

Options to Extend or Terminate Leases

The Company’s leases may contain an option to extend the lease term for periods from one to five years The exercise of lease renewal options is at the Company’s sole discretion. If it is reasonably certain that the Company will exercise such options, the periods covered by such options are included in the lease term and are recognized as part of the Company’s right-of-use assets and lease liabilities. The Company’s leases do not generally contain options to early terminate.

Other Lease items

The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company's operating leases are included in operating lease right-of-use assets, other current liabilities, and operating lease liabilities on the accompanying unaudited Condensed Consolidated Balance Sheets.

Discount Rate and Lease Term

As of June 30, 2023, the weighted average remaining lease term and discount rate for the Company’s operating leases were 3.4 years and 6.6%. As the rate implicit in the lease is generally not readily determinable for the Company’s operating leases, the Company uses its estimated incremental borrowing rate based on the information available at the date of acquisition, April 3, 2023 in determining the present value of future payments.

Lease Costs and Activity

The Company’s lease costs are recorded in the general and administrative costs and activity for the three months ended June 30, 2023 are as follows (in thousands):


Lease cost	Three Months Ended June 30, 2023
Operating lease cost - fixed	$	215
Operating lease costs - variable	14
Total lease cost	$	229

Supplemental cash flow information for the three months ended June 30, 2023 are as follows (in thousands):


	Three Months Ended June 30, 2023
Cash paid for the amounts included in the measurement of operating lease liabilities	$	209
Right-of-use assets obtained in exchange for new operating lease liabilities as a result of acquisition	$	2,220

Maturity of Lease Liabilities

The maturity of the Company’s lease liabilities on an undiscounted cash flow basis and a reconciliation to the operating lease liabilities recognized on the Company’s unaudited Condensed Consolidated Balance Sheet as of June 30, 2023 were as follows (in thousands):


	June 30, 2023
Nine months ending March 31, 2024	$	623
2025	501
2026	488
2027	502
2028	42
Total lease payments	2,156
Less: Imputed Interest	(126)
Present value of lease liabilities	$	2,030