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Leases, Right-to-Use Assets and Related Liabilities

3 Months Ended

Sep. 30, 2020

Leases Right-to-use Assets And Related Liabilities

Leases, Right-to-Use Assets and Related Liabilities

The Company previously 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 the 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 were 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.

As of September 30, 2020, the maturities of the Company’s operating lease liabilities were as follows:

	Year Ending June 30,
2021 (remaining 9 months)	$	90,412
2022		123,883
2023		126,883
2024		35,883
2025		2,942
Total lease payments		380,003
Less: Imputed interest		(45,048	)
Lease liabilities	$	334,955

Cash paid for amounts included in the measurement of operating lease liabilities for the three months ended September 30, 2020 and 2019 was $66,000 and $0, respectively, and was included in net cash used in operating activities in the consolidated statements of cash flows.

As of September 30, 2020, the weighted average remaining lease term is 2.42 years, and the weighted average discount rate used to determine operating lease liabilities was 8.0%. Rent expense for the three months ended September 30, 2020 and 2019 totaled $70,000 and $32,000, respectively.

On August 28, 2020, the Company’s Innovus subsidiary signed a lease termination agreement with its lessor to terminate its lease effective September 30, 2020. The original lease termination date was April 30, 2023. As part of the agreement, Innovus agreed to make a cash payment to the landlord the equivalent of two additional months’ rent aggregating to $44,306 plus $125,000 less the security deposit of $20,881. The fair value of the lease liability related to this facility lease was approximately $0.7 million as of June 30, 2020. The Company recognized a gain of approximately $343,000 during the three months ended September 30, 2020.