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Operating Leases

12 Months Ended

Jun. 30, 2023

Note 7. Operating Leases

The Company has operating leases for corporate offices, warehouses and office equipment that have remaining lease terms of 1 year to 5 years.

During November 2019, the Company entered into a lease for a Nevada facility that commenced on November 13, 2019, and recorded a right of use asset and corresponding lease liability. The Company uses this leased facility for office, manufacturing, and warehouse space. The Company is responsible for real estate taxes, utilities, and repairs under the terms of certain of the operating leases. Therefore, all lease and non-lease components are combined and accounted for as single lease component. Lease expense was $568,031 for the year ended June 30, 2022. Lease expenses for the year ended June 30, 2023 are included discontinued operations. The operating lease expired in 2022 and the Company continues to occupy the facility and pays rent on a month-to-month basis.

During May 2021, the Company entered into a lease for an additional Nevada facility that commenced on May 1, 2021, and recorded a right of use asset and corresponding lease liability. The Company uses this leased facility for additional warehouse space. Lease expense was $117,992 for each of the years ended June 30, 2023 and 2022.

During September 2020, the Company entered into a one-year lease for a Colorado facility that commenced on September 1, 2020, and recorded a right of use asset and corresponding lease liability. The Company used this facility for office and manufacturing space. Lease expense was $22,803 for the year ended June 30, 2022.

During November 2018, the Company entered into a lease for equipment that commenced on November 1, 2018, and recorded a right of use asset and corresponding lease liability. Lease expenses were $6,744 and $6,428 for the years ended June 30, 2023 and June 30, 2022, respectively.

On July 1, 2021, the Company entered into a 39-month lease for Florida facility and recorded a right to use asset and corresponding lease liability for Interactive Offers. The Company uses this facility for office space. Lease expense was $39,820 for each of the years ended June 30, 2023 and 2022 and has been included in discontinued operations.

During October 2021, the Company entered into a 3-year lease for a California warehouse. The Company recorded a right of use asset and corresponding lease liability of $295,305. The Company will use this leased facility for assembly and distribution of finished goods. Lease expenses were $105,600 and $79,200 for the years ended June 30, 2023 and 2022, respectively.

On April 1, 2022, the Company acquired Cygnet which had entered into a lease for a Florida facility that commenced on October 8, 2021, and Cygnet had recorded a right of use asset and corresponding lease liability. The lease expires on October 8, 2026. The Company uses this leased facility for warehouse and office space. The Company is responsible for real estate taxes, utilities, and repairs under the terms of certain of the operating leases. Therefore, all lease and non-lease components are combined and accounted for as single lease component. Lease expenses were $102,228 and $21,800 for the years ended June 30, 2023 and 2022, respectively.

The table below reconciles the undiscounted future minimum lease payments (displayed by year and in the aggregate) under noncancelable operating leases with terms of more than one year to the total operating lease liabilities recognized in the condensed consolidated balance sheet as of June 30, 2023:

2024	$	318,636
2025		143,302
2026		121,273
2027		33,683
2028		-
Total undiscounted future minimum lease payments		616,893
Less: Imputed interest		(34,091	)
Present value of operating lease obligation	$	582,802

The Company’s weighted average remaining lease term and weighted average discount rate for operating leases as of June 30, 2023 are:

Weighted average remaining lease term		29 Months
Weighted average incremental borrowing rate			5.0	%

For the years ended June 30, 2023 and 2022, the components of lease expense, included general and administrative expenses and interest expense in the condensed consolidated statement of operations, are as follows:

	June 30, 2023		June 30, 2022
Operating lease cost:
Operating lease cost	$	341,644	$	368,680
Amortization of ROU assets		304,827		273,746
Interest expense		35,003		38,290
Total lease cost	$	681,474	$	680,716