COMMITMENTS AND CONTINGENCIES

6 Months Ended

Dec. 31, 2023

Commitments and contingencies (See Note 12)

COMMITMENTS AND CONTINGENCIES

NOTE 12. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Company leases its facilities under a non-cancelable operating lease which now expires February 28, 2027. Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Right-of-use assets and liabilities for the lease renewal were recognized at the inception date which is November 2, 2020 based on the present value of lease payments over the lease term, using the Company’s incremental borrowing rate based on the information available. At December 31, 2023, the weighted average remaining lease term for the lease renewal is 4 years and the weighted average discount rate is 14.49%. Supplemental balance sheet information related to leases at December 31, 2023 is as follows:

Operating leases	Balance Sheet Classification	(in thousands)
Right-of-use assets	Operating lease right-of-use assets, net	$	1,723
Current lease liabilities	Operating lease liabilities	$	427
Non-current lease liabilities	Long-term operating lease liabilities		1,444
Total lease liabilities		$	1,871

Maturities of lease liabilities at December 31, 2023 are as follows:

Payments	(in thousands)
2024	$	350
2025		721
2026		762
2027 and thereafter		528
Total undiscounted lease payments		2,361
Less: Present value discount		(490	)
Total lease liability balance	$	1,871

Equipment Notes Payable

The Company has acquired equipment under the provisions of long-term equipment notes. For financial reporting purposes, minimum note payments relating to the equipment have been capitalized. The equipment acquired with these equipment notes has a total cost of $2,290,061. These assets are included in the fixed assets listed in Note 5 - Equipment and Leasehold Improvements and include production equipment. The equipment notes have stated or imputed interest rates ranging from 7.29% to 11.3%.

The following is an analysis of the minimum future equipment note payable payments subsequent to December 31, 2023:

Years ending June 30,	(in thousands)
2024	$	232
2025		427
2026		309
2027		130
2028		39
Future Minimum Note Payable Payments		1,137
Less Amount Representing Interest		(118	)
Present Value of Minimum Note Payable Payments		1,019
Less Current Portion		(383	)
Long-Term Obligations under Equipment Notes Payable	$	636

Finance Leases Payable

The Company has lease obligations for equipment under the provisions of long-term finance leases. For financial reporting purposes, minimum lease payments relating to the equipment have been capitalized. The equipment acquired with these leases has a total cost of approximately $58,152. These assets are included in the finance lease and include production equipment.

On June 22, 2020 the Company entered into finance lease agreement with Wells Fargo in the amount of $34,761 with monthly payment of $850 with 48-month term at an imputed interest rate of 8.09%.

On February 1, 2022 the Company entered into finance lease agreement with Raymond in the amount of $22,862 with monthly payment of $514 with 48-month term at an imputed interest rate of 3.75%.

The following is an analysis of the minimum finance lease payable payments subsequent to December 31, 2023:

Year ending June 30,	(in thousands)
2024		8
2025		6
2026		3
Future Minimum Finance Lease Payable Payments	$	17
Less Amount Representing Interest		(1	)
Present Value of Minimum Finance Lease Payable Payments		16
Less Current Portion		(11	)
Long-Term Obligations under Finance Lease Payable	$	5

Employment Agreements

The Company has entered into an employment agreement with Louis Friedman, President and CEO. The agreement provides for an annual base salary of $155,000 and eligibility to receive a bonus. In certain termination situations, the Company is liable to pay severance compensation to Mr. Friedman for up to nine months at his current salary. As of December 31, 2023 the Company has not accrued a liability as it is not probable.

Legal Proceedings

As of the date of this Quarterly Report, there are no material pending legal or governmental proceedings relating to our Company or properties to which we are a party, and to our knowledge there are no material proceedings to which any of our directors, executive officers or affiliates are a party adverse to us or which have a material interest adverse to us.