Leases

9 Months Ended

Mar. 31, 2020

9. Leases

Effective July 1, 2019, the Company adopted Accounting Standards Codification (“ASC”) Topic 842 - Leases using the modified retrospective transition approach and electing the package of practical expedients. This resulted in the recognition of right-of-use assets of $441 and total operating lease liabilities of $463. There was no cumulative-effect adjustment recorded to retained earnings upon adoption.

The Company leases its Texas manufacturing facilities under an operating lease agreement. During the nine months ended March 31, 2020, the Company exercised its option to extend the term of this lease agreement by one year, so that it now expires in April 2021. The Company also leases office equipment under lease agreements that expire at various dates through April 2024.

The Company also leases its Minnesota headquarters facility as discussed in Note 6. This transaction did not qualify for sale leaseback accounting upon adoption of ASC 842 and continues to be accounted for as a financing obligation.

Operating lease right-of-use assets and liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement dates. The Company considers fixed or variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination or purchase options affect the lease term used for determining lease asset value only if the option is reasonably certain to be exercised. The Company uses its incremental borrowing rate based on information available at the lease commencement date in determining the present value of lease payments unless the lease provides an implicit interest rate.

Operating lease cost is classified within the consolidated statement of operations based on the nature of the leased asset. The Company's operating lease cost was $121 and $362 for the three and nine months ended March 31, 2020, respectively. Cash paid for operating lease liabilities approximated operating lease cost for the nine months ended March 31, 2020. There was $437 of operating lease right-of-use assets obtained in exchange for new lease liabilities during the nine months ended March 31, 2020.


	March 31,
	2020
Right-of-use assets
Other assets	$	545
Operating lease liabilities
Accrued expenses	$	492
Other liabilities	57
Total operating lease liabilities	$	549

Future minimum lease payments under the agreements as of March 31, 2020 are as follows:


Remainder of fiscal 2020	$	127
Fiscal 2021	423
Fiscal 2022	11
Fiscal 2023	3
Fiscal 2024	2
Thereafter	—
Total lease payments	566
Less imputed interest	(17)
Total operating lease liabilities	$	549

As of March 31, 2020, the weighted average remaining lease term for operating leases was 1.2 years and the weighted average discount rate used to determine operating lease liabilities was 5.25%.