3. Operating Lease

3 Months Ended

Sep. 30, 2019

Lessee Disclosure [Abstract]

Operating Lease

Note 3 – Operating Lease

The Company leases certain warehouse and corporate office space under lease agreement with monthly payments over a period of 67 months. We determine if an arrangement is a lease at inception. Lease assets are presented as operating lease right-of-use assets and the related liabilities are presented as lease liabilities in our consolidated balance sheets.

Operating lease right-of-use (“ROU”) assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Generally, the implicit rate of interest in lease arrangements is not readily determinable and the Company utilizes its incremental borrowing rate in determining the present value of lease payments. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be. The operating lease ROU asset includes any lease payments made and excludes lease incentives.

The components of lease expense and supplemental cash flow information related to leases for the period are as follows:

	Three Months Ended September 30, 2019
Lease cost
Operating lease cost (included in general and administrative in the Company’s unaudited condensed statement of operations)	$	19,000
Other information
Cash paid for amounts included in the measurement of lease liabilities	$	–
Weighted average remaining lease term – operating leases (in years)		5.33
Average discount rate – operating leases		8.5%

The supplemental balance sheet information related to leases for the period is as follows:

	At September 30, 2019
Operating leases
Long-term right-of-use assets	$	313,000
Short-term operating lease liabilities	$	41,000
Long-term operating lease liabilities		273,000
Total operating lease liabilities	$	314,000

Year ending June 30	Operating Leases
2020 (remaining 9 months)	$	52,000
2021		71,000
2022		72,000
2023		75,000
2024		78,000
2025 and thereafter		47,000
Total lease payments		395,000
Less: Imputed interest/present value discount		(81,000	)
Present value of lease liabilities	$	314,000