Commitments and Contingencies

9 Months Ended

Mar. 31, 2023

Commitments and Contingencies

Commitments and Contingencies

NOTE 13 - Commitments and Contingencies

Leases

Our lease obligation consists of a 99-year lease, entered into by one of the Company’s foreign subsidiaries, for approximately four acres of land in the Dominican Republic on which the Company’s principal production facility is located. The lease, which commenced on April 26, 1993 and expires in 2092, initially had an annual base rent of approximately $235,000 plus $53,000 in annual service charges. On September 14, 2022, a lease modification was executed which provides for an annual base rent of $235,000 plus $105,000 in annual service charges. The service charges increase 2% annually over the remaining life of the lease. The modification resulted in a remeasurement of the operating lease asset and liability, and the effect was a reduction to the asset and liability of $1.3 million.

Operating leases are included in operating lease right-of-use assets, accrued expenses and operating lease liabilities, non-current on our condensed consolidated balance sheets.

For the three months March 31, 2023 and 2022, cash payments against operating lease liabilities totaled $85,000 and $72,000, respectively. For the nine months March 31, 2023 and 2022, cash payments against operating lease liabilities totaled $249,000 and $216,000, respectively.

Supplemental balance sheet information related to operating leases was as follows:

Weighted-average remaining lease term	69 Years
Weighted-average discount rate	6.25	%

The following is a schedule, by years, of maturities of lease liabilities as of March 31, 2023 (in thousands):

Year Ending June 30,	Amount
2023	$	81
2024		316
2025		299
2026		282
2027		267
Thereafter		4,633
Total	$	5,878

Operating lease expense totaled approximately $123,000 and $80,000 for the three months ended March 31, 2023 and 2022, respectively. Operating lease expense totaled approximately $334,000 and $239,000 for the nine months ended March 31, 2023 and 2022, respectively.

Litigation

In the normal course of business, the Company is a party to claims and/or litigation. Management believes that the settlement of such claims and/or litigation, considered in the aggregate, will not have a material adverse effect on the Company’s financial position and results of operations.

Employment Agreements

As of September 30, 2022, the Company was obligated under two employment agreements and one severance agreement. The employment agreements are with the Company’s CEO and the Senior Vice President of Engineering (“the SVP of Engineering”). The severance agreement is with the Company’s CFO.

The employment agreement with the CEO provides for an annual salary of $872,000, as adjusted for inflation; incentive compensation as may be approved by the Board of Directors from time to time and a termination payment in an amount up to 299% of the average of the prior five calendar years’ compensation, subject to certain limitations, as defined in the agreement. The employment agreement renews annually in August unless either party gives the other notice of non-renewal at least six months prior to the end of the applicable term.

The employment agreement with the SVP of Engineering expires in August 2024 and provides for an annual salary of $361,000, and, if terminated by the Company without cause, severance of nine months’ salary and continued company-sponsored health insurance for six months from the date of termination.

The severance agreement is with the Executive Vice President of Operations and Chief Financial Officer and provides for, if terminated by the Company without cause or within three months of a change in corporate control of the Company, severance of nine months’ salary, continued company-sponsored health insurance for six months from the date of termination and certain non-compete and other restrictive provisions.