| OPERATING LEASE |
7. OPERATING LEASE
Effective July 1, 2019, Citius entered
into a 76-month lease for office space in Cranford, NJ. Citius will pay its proportionate share of real estate taxes and operating
expenses in excess of the base year expenses. These costs are considered to be variable lease payments and are not included in
the determination of the lease’s right-of-use asset or lease liability.
The Company identified and assessed the
following significant assumptions in recognizing its right-of-use assets and corresponding lease liabilities:
| |
● |
As the Company’s current Cranford lease does not provide an implicit rate, the Company estimated the incremental borrowing rate in calculating the present value of the lease payments. The Company estimated its incremental borrowing rate based on the remaining lease term as of the adoption date. |
| |
● |
Since the Company elected to account for each lease component and its associated non-lease components as a single combined component, all contract consideration was allocated to the combined lease component. |
| |
● |
The expected lease terms include noncancelable lease periods. |
The elements of lease expense are as follows:
| Lease cost |
|
Three Months
Ended
December 31,
2020 |
|
|
Three Months
Ended
December 31,
2019 |
|
| Operating lease cost |
|
$ |
59,706 |
|
|
$ |
57,349 |
|
| Variable lease cost |
|
|
194 |
|
|
|
— |
|
| Total lease cost |
|
|
59,900 |
|
|
$ |
57,349 |
|
| |
|
|
|
|
|
|
|
|
| Other information |
|
|
|
|
|
|
|
|
| Weighted-average remaining lease term - operating leases |
|
|
4.8 Years |
|
|
|
5.8 Years |
|
| Weighted-average discount rate - operating leases |
|
|
8.0 |
% |
|
|
8.0 |
% |
Maturities of lease liabilities due under the Company’s
non-cancellable leases as of December 31, 2020 is as follows:
| Year Ending September 30, |
|
December 31,
2020 |
|
| 2021 (excluding the 3 months ended December 31, 2020) |
|
$ |
176,139 |
|
| 2022 |
|
|
239,306 |
|
| 2023 |
|
|
244,165 |
|
| 2024 |
|
|
249,024 |
|
| 2025 and thereafter |
|
|
275,343 |
|
| Total lease payments |
|
|
1,183,977 |
|
| Less: interest |
|
|
(207,779 |
) |
| Present value of lease liabilities |
|
$ |
976,198 |
|
| Leases |
|
Classification |
|
December 31,
2020 |
|
|
September 30,
2020 |
|
| Assets |
|
|
|
|
|
|
|
|
| Lease asset |
|
Operating |
|
$ |
946,533 |
|
|
$ |
986,204 |
|
| Total lease assets |
|
|
|
$ |
946,533 |
|
|
$ |
986,204 |
|
| |
|
|
|
|
|
|
|
|
|
|
| Liabilities |
|
|
|
|
|
|
|
|
|
|
| Current |
|
Operating |
|
$ |
163,423 |
|
|
$ |
158,999 |
|
| Non-current |
|
Operating |
|
|
812,775 |
|
|
|
855,471 |
|
| Total lease liabilities |
|
|
|
$ |
976,198 |
|
|
$ |
1,014,470 |
|
Interest expense on the lease liability
was $20,035 and $22,780 for the three months ended December 31, 2020 and 2019, respectively.
|