LEASE COMMITMENTS AND CONTINGENCIES

9 Months Ended

Mar. 31, 2025

LEASE COMMITMENTS AND CONTINGENCIES

LEASE COMMITMENTS AND CONTINGENCIES

NOTE 7 — 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 an operating or a financing lease. Operating leases are included in ROU (right-of-use) assets and operating lease liabilities in our condensed consolidated balance sheets.

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

On July 23, 2024, the Company renewed its Fountain Valley location effective February 1, 2025 by an additional five years with a January 31, 2030 lease expiration date. Both parties agreed that July 23, 2024 was the effective modification date. The monthly rent payable for the first year of the extended term will be $19,362 and increases by 4% on each anniversary date. On June 4, 2024, the Company notified its Grace facility location landlord of its intent to vacate at the end of the current January 31, 2025 lease term.

On October 30, 2024, the Company entered into a new 4,344 square foot facility lease with a three-year lease term and a February 1, 2028.lease expiration date. The monthly rent payable for the first year of the extended term will be $6,299 and increases by 4% on each anniversary date.

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.

NOTE 7 — LEASE COMMITMENTS AND CONTINGENCIES (continued)

The Company’s operating lease expense was $98,000 and $72,000 for the three months ended March 31, 2025 and 2024, respectively. The Company’s operating lease expense was $283,000 and $218,000 for the nine months ended March 31, 2025 and 2024, respectively.

Future minimum lease payments at March 31, 2025 under these arrangements are as follows:

	(in thousands)
	Total
Operating leases	Payments
2025	$	77
2026		313
2027		326
2028		303
2029		266
2030		159
Total undiscounted operating lease payments	$	1,444
Less imputed interest (at 8.42%)		(246)
Present value of operating lease payments	$	1,198

The following table sets forth the ROU assets and operating lease liabilities as of March 31, 2025:

Assets	(in thousands)
ROU assets-net	$	1,142
Liabilities
Current operating lease liabilities	$	219
Long-term operating lease liabilities		979
Total ROU liabilities	$	1,198

The Company’s weighted average remaining lease term for its operating leases is 4.5 years using a weighted average discount rate of 8.42%.

Legal Matters: From time to time, the Company is involved in routine litigation that arises in the ordinary course of business. There are no significant legal proceedings pending 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.