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Leases

12 Months Ended

Jun. 30, 2021

7. Leases

The Company has entered into various operating lease agreements for certain of its offices, manufacturing facilities and equipment, and finance lease agreements for certain equipment. These leases have original lease periods expiring between 2022 and 2024. Most leases include one or more options to renew and the exercise of a lease renewal option typically occurs at the discretion of both parties. Certain leases also include options to purchase the leased property. For purposes of calculating operating lease liabilities, lease terms are deemed not to include options to extend the lease termination until it is reasonably certain that the Company will exercise that option. The Company’s lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.

Upon the closing of the Neos Merger on March 19, 2021, pursuant to the guidance under ASC 805, Neos recognized operating lease ROU asset and lease liability of $3.5 million, which represented the present value of the remaining lease payments as of the acquisition date, for its office space and manufacturing facilities at Grand Prairie, Texas. As the lease agreement does not provide an implicit rate, Neos used its borrowing rate of 6.7% to determine the present value of future lease payments. Furthermore, as of the acquisition date, no assets or liabilities of the operating

leases that have a remaining lease term of less than twelve months were recognized. The finance leases are related to Neos equipment finance leases with fixed contract terms and an implicit interest rate of approximately 5.9%.

The components of lease expenses are as follows;


	Year Ended
	June 30,
	2021		2020		Statement of Operations Classification

	(In thousands)
Lease cost:
Operating lease cost	$	476	$	199	Operating expenses
Short-term lease cost		109		9	Operating expenses
Finance lease cost:
Amortization of leased assets		21		—	Cost of sales
Interest on lease liabilities		6		—	Other (expense), net
Total net lease cost	$	612	$	208

Supplemental balance sheet information related to leases is as follows:


	June 30,				Balance Sheet Classification
	2021		2020

	(In thousands)
Assets:
Operating lease assets	$	3,563	$	634	Operating lease right-of-use asset
Finance lease assets		329		—	Fixed assets, net
Total leased assets	$	3,892	$	634
Liabilities:
Current:
Operating leases	$	940	$	300	Current operating lease liabilities
Finance leases		102		—	Current portion of debt
Long-term
Operating leases		2,624		725	Long-term operating lease liabilities
Finance leases		180		—	Long-term debt
Total lease liabilities	$	3,846	$	1,025

Remaining lease terms and discount rates used are as follows;


	June 30,
	2021			2020
Weighted-Average Remaining Lease Term (years)
Operating lease assets		3.42			2.96
Finance lease assets		2.72			—
Weighted-Average Discount Rate
Operating lease assets		6.62	%		10.02	%
Finance lease assets		6.41	%		—

Supplemental cash flow information related to leases is as follows:


	Year Ended
	June 30,
	2021		2020

	(In thousands)
Cash flow classification of lease payments:
Operating cash flows from operating leases	$	467	$	199
Operating cash flows from finance leases	$	5	$	—
Financing cash flows from finance leases	$	25	$	—

As of June 30, 2021, maturities of lease liabilities are as follows:


	Operating		Finance

	(In thousands)
2022	$	1,154	$	117
2023		1,182		104
2024		1,117		88
2025		556		—
Total lease payments		4,009		309
Less: Imputed interest		(445)		(27)
Lease liabilities	$	3,564	$	282