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Commitments and contingencies | 9 Months Ended
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Mar. 31, 2022
Commitments and Contingencies Disclosure [Abstract] |
Commitments and contingencies | Note 18 - Commitments and contingencies Lease commitment The Company has adopted ASC842 since its inception date, April 11, 2018. The Company has entered into a lease agreement for office and warehouse space with a lease period from December 1, 2018 until December 31, 2020. On August 24, 2020, the Company negotiated for new terms to extend the lease. As a result, the lease term was amended and extended through December 31, 2023. On September 1, 2020, in addition to the primary fulfillment center, the Company leased a second fulfillment center in City of Industry, California. The base rental fee is $27,921 to $29,910 per month through October 31, 2023. On February 15, 2022, upon completion of the acquisition of Anivia Limited, the Company assumed operating lease of offices in Shenzhen, People’s Republic of China. On July 28, 2021, the Company entered into a Lease agreement (the “Lease Agreement”) with 9th & Vineyard, LLC, a Delaware limited liability company (the “Landlord”), to lease from the Landlord approximately 99,347 square feet of space located at 8798 9th Street, Rancho Cucamonga, California (the “Premises”). The term of the Lease Agreement was for 62 months, commencing on the date on which the Landlord completes certain prescribed improvements on the property (the “Rent Commencement Date”). The Lease Agreement does not provide for an option to renew. In addition, the Company will be responsible for its pro rata share of certain costs, including utility costs, insurance and common area costs, as further detailed in the Lease Agreement. Following the Rent Commencement Date, the first two months of the Base Rent will be abated. The lease was not started under the original agreement as the construction was not completed. On February 23, 2022, the Company entered into an amended agreement to extend the lease term to 74 months. The lease commencement date is February 10, 2022, the rent commencement date is May 11, 2022 and the expiration date is May 31, 2028. The base rental fee is $114,249 to $140,079 per month through the expiration date, May 31, 2028. Total commitment for the full term of these leases is $10,466,658. $9,095,158 and $1,819,421 of operating lease right-of-use assets and $9,364,298 and $1,901,496 of operating lease liabilities were reflected on the March 31, 2022 and June 30, 2021 financial statements, respectively. Three Months Ended March 31, 2022 and 2021:
Schedule of lease cost and other information |  |  |  |  |  |  |  |
Lease cost |  | March 31, 2022 |  |  | March 31, 2021 |
Operating lease cost (included in selling and fulfillment expenses in the Company's statement of operations) |  | $ | 427,692 |  |  | $ | 189,647 |
Other information |  |  |  |  |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities |  | $ | 234,504 |  |  | $ | 130,893 |
Remaining term in years |  |  | 1.33 – 6.17 |  |  |  | 2.5 |
Average discount rate - operating leases |  |  | 5% – 8% |  |  |  | 8% |
Nine Months Ended March 31, 2022 and 2021:
Lease cost |  | March 31, 2022 |  |  | March 31, 2021 |
Operating lease cost (included in selling and fulfillment expenses in the Company's statement of operations) |  | $ | 838,726 |  |  | $ | 559,606 |
Other information |  |  |  |  |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities |  | $ | 656,961 |  |  | $ | 473,285 |
Remaining term in years |  |  | 1.33 – 6.17 |  |  |  | 2.5 |
Average discount rate - operating leases |  |  | 5% – 8% |  |  |  | 8% |
The supplemental balance sheet information related to leases for the period is as follows:
Supplemental balance sheet information related to leases |  |  |  |  |  |  |  |
Operating leases |  | March 31, 2022 |  |  | 6/30/2021 |
Right of use asset - non-current |  | $ | 9,095,158 |  |  | $ | 1,819,421 |
Lease Liability - current |  | $ | 1,790,688 |  |  | $ | 731,944 |
Lease Liability - non-current |  |  | 7,573,610 |  |  |  | 1,169,552 |
Total operating lease liabilities |  | $ | 9,364,298 |  |  | $ | 1,901,496 |
Maturities of the Company’s lease liabilities are as follows:
Schedule of maturities of lease liabilities |  |  |  |
For years ending June 30: |  | Operating Lease |
2022 |  | $ | 473,908 |
2023 |  |  | 2,381,601 |
2024 |  |  | 1,815,637 |
2025 |  |  | 1,486,231 |
2026 and after |  |  | 4,579,896 |
Total lease payments |  |  | 10,737,273 |
Less: Imputed interest/present value discount |  |  | (1,372,975 | )
Present value of lease liabilities |  | $ | 9,364,298 |
Contingencies Except as disclosed below, the Company is not currently a party to any material legal proceedings, investigation or claims. However, the Company may, from time to time, be involved in legal matters arising in the ordinary course of its business. While the Company is not presently subject to any material legal proceedings, other than the proceeding detailed below, there can be no assurance that such matters will not arise in the future or that any such matters in which the Company is involved, or which may arise in the ordinary course of the Company’s business, will not at some point proceed to litigation or that such litigation will not have a material adverse effect on the business, financial condition or results of operations of the Company. Pursuant to an engagement agreement, dated and effective August 31, 2020 (the “Engagement Agreement”), with Boustead Securities LLC (“Boustead”), the Company engaged Boustead to act as its exclusive placement agent for private placements of its securities and as a potential underwriter for its initial public offering. On February 28, 2021, the Company informed Boustead that it was terminating the Engagement Agreement and any continuing obligations the Company may have had under its terms. On April 15, 2021, the Company provided formal written notice to Boustead of its termination of the Engagement Agreement and all obligations thereunder, effective immediately. On April 30, 2021, Boustead filed a statement of claim with the Financial Institute Regulatory Authority, or FINRA, demanding to arbitrate the dispute, and is seeking, among other things, monetary damages against the Company and D.A. Davidson & Co. (who acted as underwriter in the Company’s IPO). The FINRA arbitration, which had originally been scheduled for June 20, 2022, has now been delayed and is tentatively scheduled to be heard at the end of October, 2022. The Company has agreed to indemnify D.A. Davidson & Co. and the other underwriters against any liability or expense they may incur or be subject to arising out of the Boustead dispute. Additionally, Chenlong Tan, the Company’s Chairman, President and Chief Executive Officer and a beneficial owner more than 5% of the Company’s Common Stock, has agreed to reimburse the Company for any judgments, fines and amounts paid or actually incurred by the Company or an indemnitee in connection with such legal action or in connection with any settlement agreement entered into by the Company or an indemnitee up to a maximum of $3.5 million in the aggregate, with the sole source of funding of such reimbursement to come from sales of shares then owned by Mr. Tan. In an effort to contain or slow the COVID-19 outbreak, authorities across the world have implemented various measures, some of which have been subsequently rescinded or modified, including travel bans, stay-at-home orders and shutdowns of certain businesses. The Company anticipates that these actions and the global health crisis caused by the COVID-19 outbreak, including any resurgences, will continue to negatively impact global economic activity. While the COVID-19 outbreak has not had a material adverse impact on the Company’s operations to date, it is difficult to predict all of the positive or negative impacts the COVID-19 outbreak will have on the Company’s business. In February 2022, the Russian Federation began conducting military operations against Ukraine, resulting in global economic uncertainty and increased cost of various commodities. In response to these types of events, we might suspend operations, implement extraordinary procedures, seek alternate sources for product supply, or suffer consequences that are unexpected and difficult to mitigate. Any of these risks might have a materially adverse impact on our business operations and our financial position or results of operations. Although, it is difficult to predict the impact that these factors may have on our business in the future, they did not have a material effect on our results of operations, financial condition, or liquidity for the period ended March 31, 2022.

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