4. Lease Commitments

The Company leases vehicles and equipment, generally for terms of three to five years.

As described in Note 2, “Summary of Significant Accounting Policies” the Company adopted ASC Topic 842, Leases (“ASC 842” or “Topic 842”), utilizing the modified retrospective adoption method with an effective date of July 1, 2019. The Company made the election to not apply the recognition requirements in Topic 842 to short-term leases (i.e., leases of 12 months or less). Instead, as permitted by Topic 842, the Company recognizes the lease payments under its short-term leases in profit or loss on a straight-line basis over the lease term. The Company elected this accounting policy for all classes of underlying assets. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Right-of-use assets and liabilities are recognized at the lease commencement date based on the estimated present value of lease payments over the lease term. The Company generally uses the rate implicit in the lease to discount lease payments to present value.

As of June 30, 2020, the Company had vehicles and equipment financed under operating leases with lease terms expiring through 2024. Rent expense consists of monthly rental payments under the terms of the Company’s lease agreements recognized on a straight-line basis.

The following table sets forth the Company’s future minimum lease payments under operating lease liabilities recorded on the Company’s balance sheet as of June 30, 2020.


	Maturity of
	Operating Lease
Fiscal years ending	Liabilities

2021	$	6,065
2022	$	6,065
2023	$	6,065
2024	$	3,032

Total lease payments	$	21,227
Less: amounts representing interest	$	3,901
Present value of lease liabilities	$	17,326
Less: current portion	$	4,249
Long-term portion	$	13,077

The Company’s operating lease cost amounted to $74,009 in 2020. Expenses are classified within selling, general and administrative expenses in the Company’s statement of operations for the year ended June 30, 2020.

The table below presents lease-related terms and discount rates as of June 30, 2020.


	June 30, 2020
Weighted average remaining lease terms
Operating leases	3.5 years
Weighted average discount rate
Operating leases	12	%