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Leases, Right-to-Use Assets and Related Liabilities

12 Months Ended

Jun. 30, 2020

Leases, Right-to-Use Assets and Related Liabilities

In September 2015, the Company entered into a 37-month operating lease in Englewood, Colorado. In October 2017, the Company signed an amendment to extend the lease for an additional 24 months beginning October 1, 2018. In April 2019, the Company extended the lease for an additional 36 months beginning October 1, 2020. This lease has base rent of approximately $10,000 a month, with total rent over the term of the lease of approximately $0.4 million.

In June 2018, the Company entered into a 12-month operating lease, beginning on August 1, 2018, for office space in Raleigh, North Carolina. This lease has base rent of approximately $1,000 a month, with total rent over the term of the lease of approximately $13,000.

In October 2017, the Company’s subsidiary, Innovus, entered into a commercial lease agreement for 16,705 square feet of office and warehouse space in San Diego, California that commenced on December 1, 2017 and continues until April 30, 2023. The initial monthly base rent was $21,000 with an approximate 3% increase in the base rent amount on an annual basis, as well as, rent abatement for rent due from January 2018 through May 2018. The Company holds an option to extend the lease an additional 5 years at the end of the initial term. On November 18, 2019 (“decision date”), Innovus determined it would no longer utilize the warehouse portion of the lease space, representing approximately 9,729 square feet, and as of December 31, 2019 (“cease use date”) ceased using any such space. In accordance with ASC 842, Leases, the Company assessed the asset value of the separate lease component and amortized such asset from the decision date through the cease use date.

As discussed within Note 2, the Company adopted the FASB issued ASU 2016-02, “Leases (Topic 842)” as of July 1, 2019. With the adoption of ASU 2016-02, the Company recorded an operating right-of-use asset and an operating lease liability on its balance sheet associated with its lease of its corporate headquarters. The right-of-use asset represents the Company’s right to use the underlying asset for the lease term and the lease obligation represents the Company’s commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations are recognized at the later of the commencement date or July 1, 2019; the date of adoption of Topic 842; based on the present value of remaining lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of the lease payments. Rent expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. The lease liability is classified as current or long-term on the balance sheet.

	Total			2021		2022		2023		2024		2025		Thereafter
Remaining office leases	$	1,193,000		$	389,000	$	403,000	$	362,000	$	36,000	$	3,000		-
Less: discount adjustment		(167,000	)		-		-		-		-		-		-
Total lease liability		1,026,000			-		-		-		-		-		-

Lease liability - current portion		301,000			-		-		-		-		-		-
Long-term lease liability	$	725,000			-		-		-		-		-		-

Rent expense for fiscal 2020 and 2019 totaled $0.2 million and $0.1 million, respectively.