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LEASE COMMITMENTS AND CONTINGENCIES

6 Months Ended

Dec. 31, 2022

LEASE COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS AND CONTINGENCIES

NOTE 11 — LEASE COMMITMENTS AND CONTINGENCIES

Operating Leases: The Company leases executive office and warehouse space in Fountain Valley, CA, pursuant to separate lease agreements. Under ASC 842, at contract inception the Company determined whether the contract is or contains a lease and whether the lease should be classified as on operating or a financing lease. Operating leases are included in ROU (right-of-use) assets and operating lease liabilities in our condensed consolidated balance sheet.

The Company’s executive office and warehouse lease agreements are classified as operating leases.

The lease agreements, as amended, expire on January 31, 2025 and do not include any renewal options. The agreements provide for initial monthly base amounts plus annual escalations through the term of the leases.

In addition to the monthly base amounts in the lease agreements, the Company is required to pay a portion of real estate taxes and common operating expenses during the lease terms.

The Company’s operating lease expense was $73,000 and $70,000 for the three months ended December 31, 2022 and 2021, respectively. The Company's operating lease expense was $141,000 and $141,000 for the six months ended December 31, 2022 and 2021, respectively.

Future minimum lease payments at December 31, 2022 under these arrangements are as follows:

​

​	​	​	​
​		(in thousands)
​	​	Total
Operating leases	​	Payments
2023	​	$	148
2024	​		302
2025	​		154
Total undiscounted operating lease payments	​	$	604
Less imputed interest (at 8%)	​	​	(43)
Present value of operating lease payments	​	$	561

​

The Present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which was determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term.

The following table sets forth the ROU assets and operating lease liabilities as of December 31, 2022:

​

​	​	​	​
Assets		​	(in thousands)
ROU assets-net	​	$	543
​	​	​	​
Liabilities	​
Current operating lease liabilities	​	$	265
Long-term operating lease liabilities	​		296
Total ROU liabilities	​	$	561

​

The Company’s weighted average remaining lease term for its operating leases is 2.0 years.

​

Legal Matters: From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no pending significant legal proceedings to which the Company is a party for which management believes the ultimate outcome would have a material adverse effect on the Company’s financial position.

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The entire disclosure for commitments and contingencies.

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