The Company adopted ASC Topic 842-Leases as of July 1, 2019, using the cumulative effective adjustment method wherein the Company applied the new lease standard at adoption date. Accordingly, all periods prior to July 1, 2019 were presented in accordance with the previous ASC Topic 840, Leases, and no retrospective adjustments were made to the comparative periods presented. Adoption of ASC 842 resulted in an increase to total assets and liabilities due to the recording of operating right of use (ROU) assets and operating lease liabilities of approximately $1,138,000 and $1,208,000 respectively, as of July 1, 2019. The adoption did not materially impact the Company's unaudited condensed consolidated statements of operations or cash flows but it did impact the debt to capital ratio.

The Company determines if a contract contains a lease at inception. US GAAP requires that the Company's leases be evaluated and classified as operating or finance leases for financial reporting purposes. The classification evaluation begins at the commencement date and the lease term used in the evaluation includes the non-cancellable period for which the Company has the right to use the underlying asset, together with renewal option periods when the exercise of the renewal option is reasonable certain and failure to exercise such option which result in an economic penalty.

The Company has operating leases for manufacturing, research and corporate office facilities and certain equipment. Leases with an initial term of 12 months or less are not recorded in the balance sheet. The Company has elected the practical expedient to account for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. The Company also elected the package of practical expedients permitted within the new standard, which among other things, allows the Company to carry forward historical lease classification. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense.

ROU assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term. The Company's lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. As the Company's operating leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the comment date in determining the present value of future lease payments.

The components of lease costs included in cost of goods sold and marketing, general and administrative costs were as follows:



	Three Months Ended		Nine Months Ended
	March 31, 2020		March 31, 2020
Operating lease costs:
Fixed	99,570		308,468
Total:	$	99,570	$	308,468

Supplemental cash flow information was as follows:



	Three Months Ended		Nine Months Ended
	March 31, 2020		March 31, 2020
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases	95,375		296,004
Total	$	95,375	$	296,004

Leases recorded on the balance sheet consist of the following:



		March 31,
Leases (operating)	Classification on the Balance Sheet	2020
Assets
Operating lease ROU assets	Right-of-use asset	$	1,179,240
Liabilities
Current	Current portion of operating lease liabilities	284,647
Non-current	Operating lease liabilities	962,823

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 on the unaudited condensed consolidated balance sheets as of March 31, 2020:

As of January 1st, 2020, the Company had an additional operating lease for its Pennsylvania headquarters location with a present value of approximately $285,000. The operating lease commenced in January 1st, 2020 with a lease term of 5 years.

The aggregate future lease payments for operating leases as of March 31, 2020 were as follows:



	Operating

2020 (excluding the nine months ending March 31, 2020)	$	95,629
2021	339,925
2022	325,285
2023	256,121
2024	257,720
Thereafter	131,214
Total lease payments	1,405,894
Less interest	158,424
Present value of lease liabilities	$	1,247,470

Average lease terms and discount rates were as follows:



	March 31,
	2020
Weighted-average remaining lease terms (years)
Operating leases	4.30
Weighted-average discount rate
Operating leases	5.65	%

Disclosures related to periods prior to adoption of ASU 2016-02

The Company adopted ASU 2016-02 using a modified retrospective adoption method at July 1, 2019 as noted in note 3. As required, the following disclosure is provided for periods prior to adoption. Minimum operating lease commitments as of June 30, 2019 that have initial or remaining lease terms in excess of one year are as follows:



	Operating

2019	$	356,414
2020	272,881
2021	256,311
2022	188,755
2023	189,790
Thereafter	96,830
Total lease payments	$	1,360,981

The rent expense for the three months ended March 31, 2019 was approximately $120,000.