Audited Financial Statements
Fiscal Year Ended June 30, 2023 (With 2022 summarized financial information)
INDEPENDENT AUDITORS’ REPORT
The Board of Directors
Irvine
Barclay Theatre Operating Company
Opinion
We have audited the accompanying financial statements of Irvine Barclay Theatre Operating Company, which comprise the statement of financial position as of June 30, 2023, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Irvine Barclay Theatre Operating Company as of June 30, 2023, and the changes in its net assets and its cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Irvine Barclay Theatre Operating Company and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Irvine Barclay Theatre Operating Company’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists.
INDEPENDENT AUDITORS’ REPORT (CONTINUED)
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit.
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Irvine Barclay Theatre Operating Company’s internal control. Accordingly, no such opinion is expressed.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Irvine Barclay Theatre Operating Company’s ability to continue as a going concern for a reasonable period of time.
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.
Report on Summarized Comparative Information
We have previously audited Irvine Barclay Theatre Operating Company’s 2022 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated March 17, 2023. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2022 is consistent, in all material respects, with the audited financial statements from which it has been derived.
HASKELL & WHITE LLP
Irvine, California June 28, 2024
IRVINE BARCLAY THEATRE OPERATING COMPANY
Statement of Financial Position
As of June 30, 2023
(With summarized financial information as of June 30, 2022)
See accompanying notes to the financial statements and independent auditors’ report.
IRVINE BARCLAY THEATRE OPERATING COMPANY
Statement of Activities
For The Year Ended June 30, 2023 (With summarized financial information for the Year Ended June 30, 2022)
See accompanying notes to the financial statements and independent auditors’ report.
IRVINE BARCLAY THEATRE OPERATING COMPANY
Statement of Functional Expenses For The Year Ended June 30, 2023 (With summarized financial information for the Year Ended June 30, 2022)
See accompanying notes to the financial statements and independent auditors’ report.
IRVINE BARCLAY THEATRE OPERATING COMPANY
Statement of Cash Flows
For The Year Ended June 30, 2023
(With summarized financial information for the Year Ended June 30, 2022)
Cash flows from operating activities
Change in net assets $(837,762) $2,755,669
Adjustments to reconcile change in net assets to net cash provided by operating activities:
(gains)
Change in operating assets and liabilities:
(26,890)
2,847,961 Cash flows from investing activities
Acquisition of furnishings, fixtures and equipment (936,667) (497,618) Purchase of investments (505,000)Net cash used in investing activities(1,441,667) (497,618) Net (decrease) increase in cash and cash equivalents(541,456) 2,350,343 Cash and cash equivalents - beginning of year3,522,361 1,172,018 Cash and cash equivalents - end of year$2,980,905 $3,522,361 Supplemental cash flow information:
Operating lease right-of-use asset and operating lease liability upon implementation of ASC 842 $245,869 $-
See accompanying notes to the financial statements and independent auditors’ report.
IRVINE BARCLAY THEATRE OPERATING COMPANY
Notes to Financial Statements
Year Ended June 30, 2023
1. Description of Organization and Purpose
Irvine Barclay Theatre Operating Company (the “Company”) is a nonprofit organization established in June 1985 for the purpose of managing, operating, maintaining, programming, and raising funds for the Irvine Barclay Theatre (the “Theatre”). The Theatre began operations in September 1990, is owned by the City of Irvine, and is located on the campus of the University of California, Irvine (“UCI”).
The Company’s mission is threefold: support the production, marketing and sales needs of community cultural organizations, assist UCI in achieving its educational mission, and present unique experiences of artistic and social importance for Orange County audiences.
2. Summary of Significant Accounting Policies
Basis of Accounting and Use of Estimates
The Company’s financial statements have been prepared on the accrual basis of accounting. Accordingly, the Company recognizes revenues when earned, and contributions, including unconditional promises to give, when received. Expenses are recognized when the obligation is incurred.
The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates.
Basis of Presentation
The Company reflects net assets and revenues, gains, expenses, and losses based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Company, and changes thereto, are classified and reported as without donor restrictions and with donor restrictions, as follows:
Without Donor Restrictions – Net assets that are not subject to donor-imposed restrictions and are available to support general operations. Board-designated amounts, if any, are included in net assets without donor restrictions. Any cumulative net investment income from net assets with donor restrictions are immediately available for expenditure, and as a result, any such amounts are also included in net assets without donor restrictions.
Notes to Financial Statements (continued)
Year Ended June 30, 2023
2. Summary of Significant Accounting Policies (continued)
Basis of Presentation (continued)
With Donor Restrictions – Net assets that are subject to donor-imposed restrictions that require either the passage of time, the occurrence of a specific event, or that the principal be maintained in perpetuity and invested for the purpose of producing present and future income for unrestricted (without donor restrictions) use by the Company.
Comparative Financial Information
The accompanying statements of financial position, activities and functional expenses include prior-year summarized comparative information in total, but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with GAAP. Accordingly, such information should be read in conjunction with the Company’s June 30, 2022 financial statements, from which the summarized information was derived.
Revenue from Contracts with Customers
The Financial Accounting Standards Board (“FASB”) created Topic 606, Revenue from Contracts with Customers (“ASC 606”), in the Accounting Standards Codification (“ASC”), to establish a core principle that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services.
The following summarizes the Company’s performance obligations and associated revenue recognition policies:
Barclay presents and services
Barclay presents and services represent the sums actually paid for individual tickets of admission to a performance including handling and other fees. Tickets and the related fees are non-refundable at the time of receipt, unless a performance is cancelled. Tickets purchased in advance are recorded as contract liabilities. Advanced ticket sales are recorded as revenues when the performances related to the ticket sales are complete. Revenue is recognized at a specific point in time, which is when the related performance is complete.
Notes to Financial Statements (continued)
Year Ended June 30, 2023
2. Summary of Significant Accounting Policies
(continued)
Facility usage
Facility usage represents the sums paid for rent of the Company’s theatre for events and performances. The funds paid for the rental of the theatre in advance are recorded as contract liabilities. Revenue is recognized over the term of the theatre rental, which is typically very short in duration.
Contributions and Contributions Receivable
Contributions received are recorded as without donor restrictions or with donor restrictions depending on the existence or nature of any donor restrictions. Contributions with donor restrictions that are received and whose restrictions are satisfied in the same year as related funds are expended are reported as contributions without donor restrictions in the accompanying financial statements.
Contributions, including unconditional promises to give, are recognized in the period received. Conditional promises to give are not recognized until related conditions have been substantially met. Contributions to be received after one year are recorded at the present value of their estimated future cash flows. The discount on these amounts is computed using risk adjusted market interest rates applicable to the years in which the promises are expected to be received. Amortization of the discount is recorded as additional contribution revenue in accordance with donor-imposed restrictions, if any, on the contributions.
An allowance for uncollectible contributions receivable is established when needed based upon management’s judgment including such factors as prior collection history, aging statistics of contributions, and the nature of the receivable.
Donated Materials and Services
Contributions of noncash assets are measured on a nonrecurring basis and recorded at fair value in the period received. There were no donated materials during the years ended June 30, 2023 and 2022.
Contributed services are recognized in accordance with FASB ASC 958-605, Accounting for Contributions Received and Contributions Made, if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Company. Such items are capitalized or charged to operations at fair value as appropriate. During the years ended June 30, 2023
Notes to Financial Statements (continued)
Year Ended June 30, 2023
2. Summary of Significant Accounting Policies (continued)
Donated Materials and Services (continued)
and 2022, the Company did not receive any material donated services. A number of unpaid volunteers have made significant contributions of their time to the Company; however, the value of these services is not reflected in these financial statements because the recognition criteria under FASB ASC 958-605 were not met.
In September 2020, the FASB issued Accounting Standards Update (“ASU”) 2020-07, Not-for-Profit Entities (Topic 958): Presentation and Disclosures by Not-for-Profit Entities for Contributed Nonfinancial Assets, which requires a not-for-profit entity to present contributed nonfinancial assets in the statement of activities as a line item that is separate from contributions of cash or other financial assets. ASU 2020-07 also requires additional qualitative and quantitative disclosures about contributed nonfinancial assets received, disaggregated by category. The Company adopted the new standard effective July 1, 2021, and the adoption of this ASU did not have a significant impact on the Company’s financial statements.
Concentration of Support
For the year ended June 30, 2023, 50% of the Company’s contributions were made by the City of Irvine and UCI. Contributions from these two parties represented 28% of the Company’s contributions for the year ended June 30, 2022.
Cash and Cash Equivalents
The Company considers cash equivalents to be highly liquid investments with maturities of three months or less when acquired.
At June 30, 2023, cash and cash equivalents include $804,317 on deposit with the State of California Local Agency Investment Fund (“LAIF”), which is a California Treasury special fund through which local agencies may pool investments. LAIF deposits are highly liquid and can be converted to cash by the Company within 24 hours. Investment types that are authorized by the California Government Code and the State Treasurer’s Office investment policy for its pooled investment program include U.S. Treasury Securities, Federal Agency and Supranational Securities, Certificates of Deposit, Bankers Acceptances, Commercial Paper, Corporate Bonds/Notes, Repurchase Agreements and Reverse Repurchase Agreements. The Pooled Money Investment Board provides oversight of the State Treasurer’s pooled investment program and administers the program consistent with the goals of safety, liquidity and yield.
2.
Notes to Financial Statements (continued)
Year Ended June 30, 2023
Summary of Significant Accounting Policies
(continued)
Concentration of Credit Risk
The Company deposits its funds with counterparties that are considered by management to be of high-credit quality. At times, balances in cash accounts may exceed insurance limits established by the Federal Deposit Insurance Corporation. Amounts deposited in the LAIF are not insured.
Fair Value and Valuation
GAAP defines fair value as the price that the Company would receive to sell an asset, or pay to transfer a liability, in an orderly transaction between market participants at the measurement date. GAAP also establishes a framework for measuring fair value and a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability.
Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available under the circumstances.
The Company’s investments are assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below.
Level 1 - inputs are quoted prices in active markets.
Level 2 - inputs are observable, directly or indirectly.
Level 3 - inputs are unobservable and reflect assumptions of the reporting entity.
The fair values of the Company’s investments are based on quoted prices in active markets and consisted of the following as of June 30, 2023:
2.
Notes to Financial Statements (continued)
Year Ended June 30, 2023
Summary of Significant Accounting Policies
(continued)
Fair Value and Valuation (continued)
The following is a description of the valuation methodologies used for assets measured at fair value:
Mutual funds: Such investments are valued at the daily closing price as reported by the respective fund. Mutual funds held by the Company are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value (“NAV”) and to transact at that price. The mutual funds held by the Company are deemed to be actively traded.
Exchange-traded funds: Such investments are valued at the closing price reported on the active market on which the individual securities are traded.
Money market funds: Money market funds are reported using a net asset value of $1.00 per share, which approximates fair value.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while management believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the valuation methodologies used during the year ended June 30, 2023.
The Company invests in various investment securities and such securities are exposed to various risks, such as interest rate, market, and credit risks. Because of the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the Company’s account balances and the amounts reported in the statement of financial position.
As discussed above, at June 30, 2023, the Company has $804,317 on deposit with the State of California LAIF, a California Treasury special fund through which local agencies may pool investments. The value of the deposits in the LAIF is equal to the dollars deposited into the program plus any accrued interest. While the fair value of the position in the program may be greater or less than the value of the deposits, there are no share value adjustments to reflect changes in value.
2.
IRVINE BARCLAY THEATRE OPERATING COMPANY
Notes to Financial Statements (continued)
Year Ended June 30, 2023
Summary of Significant Accounting Policies
(continued)
Furnishings, Fixtures and Equipment
Furnishings, fixtures and equipment are recorded at cost (or estimated fair value, if donated) and depreciated over estimated useful lives of five to ten years using the straightline method. Expenditures for repairs and maintenance are expensed as incurred, unless related expenditures extend estimated useful lives or result in significant betterments.
Impairment
Management reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when the sum of the undiscounted future cash flows is less than the carrying amount of the asset, in which case a write-down is recorded to reduce the related asset to its estimated fair value. No impairment losses were recognized on longlived assets during the year ended June 30, 2023.
Functional Expenses
The costs of providing various programs and supporting activities have been summarized on a functional basis in the statement of activities and are detailed in the statement of functional expenses for the year ended June 30, 2023. Accordingly, production and operational costs are primarily allocated among program services and supporting activities on the basis of estimated usage and/or benefit as determined by the Company’s management.
Income Taxes
The Company qualifies as a not-for-profit corporation under Section 501(c)(3) of the Internal Revenue Code and Section 23701(d) of the California Revenue and Taxation Code and, therefore, is not subject to income tax. Accordingly, no provision for income taxes is included in the accompanying financial statements. Management regularly evaluates potential tax exposures that may result from unrelated business income tax and activities that may jeopardize the Company’s tax exempt status. As a result of management’s evaluation, no tax provision was recorded.
Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases. This update changes the accounting for leases, requiring lessees to recognize the assets and liabilities that arise from all leases on their balance sheets. The new lease standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of
Notes to Financial Statements (continued)
Year Ended June 30, 2023
2. Summary of Significant Accounting Policies (continued)
Recent Accounting Pronouncements (continued)
initial application, with an option to use certain transition relief. Pursuant to ASU 202005, the standard was effective for the Company for its fiscal year ended June 30, 2023, and effective July 1, 2022, the Company adopted the new lease standard (Note 8).
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses. This update requires immediate recognition of management’s estimates of current expected credit losses (CECL) (under the current model, losses are recognized as they are incurred). The estimate of expected credit losses considers not only historical information, but also current and future anticipated economic conditions and events. The new model is applicable to most financial assets, including trade receivables, but contributions (pledges) are specifically excluded from the new standard. CECL is effective for all not-for-profit entities for fiscal years beginning after December 15, 2022. Management is assessing the potential impact of adopting CECL on the Company’s financial statements.
3. Furnishings, Fixtures and Equipment
Furnishings, fixtures and equipment consist of the following as of June 30, 2023: Building improvements3,362,917 $ Stage equipment1,617,622
and fixtures 395,711
5,530,501 Less: accumulated depreciation (2,650,430) 2,880,071 $
Depreciation expense was $479,816 for the year ended June 30, 2023.
4. Endowment Disclosures
Background
The Company follows ASC 958, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for all Endowment Funds (“ASC 958”), with respect to the net asset classification of donor-restricted and board-designated endowment funds subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (“UPMIFA”). The State of California adopted UPMIFA, effective January 1, 2009.
Notes to Financial Statements (continued)
Year Ended June 30, 2023
Endowment Disclosures (continued)
The Company classifies as net assets with donor restrictions (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. In accordance with UPMIFA, the following factors are considered in making a determination to appropriate or accumulate donor-restricted endowment funds:
1) The duration and preservation of the fund
2) The purpose of the organization and the donor-restricted endowment fund
3) General economic conditions
4) The possible effect of inflation and deflation
5) The expected total return from income and the appreciation of investments
6) Other resources of the organization
7) The investment policy of the organization
Return Objectives, Strategies and Spending Policies
As of June 30, 2023, the Company’s net assets with donor restrictions totaled $1,793,803 and include receivables with donor restrictions of $619,100 (Note 5), cash and cash equivalents with donor restrictions of $218,591 and investments with donor restrictions of $956,112. As of June 30, 2023, the Company’s endowment is comprised of the following investments:
To satisfy its long-term rate-of-return objectives, the Company relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Company targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. The Company does not currently have an endowment spending policy and considers any cumulative net investment gains to be available for expenditure.
Notes to Financial Statements (continued)
Year Ended June 30, 2023
4. Endowment Disclosures (continued)
Return Objectives, Strategies and Spending Policies (continued)
Net investment income is comprised of the following for the year ended June 30, 2023:
5. Contributions Receivable
Contributions receivable at June 30, 2023 aggregated $631,100, which includes $619,100 of contributions receivable with donor restrictions. No allowance has been made against these receivables, as management believes receivables are fully collectable. Such amounts are due as follows:
6.
Liquidity and Availability of Financial Assets
The Company’s working capital and cash flows have seasonal variations during the year attributable to the annual cash receipts for prepaid single ticket revenue in the fourth quarter of the fiscal year in advance of the upcoming season and a concentration of contributions received near calendar year end and fiscal year end.
Monthly cash outflows vary each year based on the specific requirements of the productions programmed for that particular season.
As part of the Company’s liquidity management, it aims to have liquid assets to cover general expenditures and liabilities throughout the year.
Funding from its public partners is weighted toward the beginning of each fiscal year to ensure financial needs are met for the start of the season, while the remainder of the season can be managed with operational cash flow. Further, in January 2020, the Company obtained a line of credit in the amount of $100,000 to fund unexpected costs in the event liquidity challenges arise (Note 7).
Notes to Financial Statements (continued)
Year Ended June 30, 2023
6. Liquidity and Availability of Financial Assets (continued)
The following reflects the Company’s financial assets as of June 30, 2023, reduced by amounts not available for general use within one year because of contractual or donorimposed restrictions or internal designations. Amounts available include donor-restricted amounts that are available for expenditure in the following year. Cash and cash equivalents2,980,905 $ Investments1,060,493
4,433,276 Financial assets with donor restrictions(1,793,803) Financial assets available to meet cash needs for expenditures within one year 2,639,473 $
The Company’s financial assets presented above do not include amounts not available for general use due to donor imposed restrictions at June 30, 2023 and amounts restricted by donors for long-term investing in endowments.
7. Line of Credit
In January 2020, the Company obtained a revolving line of credit with a lender. The line of credit agreement provides for borrowings of up to a maximum amount of $100,000. Borrowings are uncollateralized and bear a variable interest rate equal to the bank’s prime rate plus 2.5% (10.75% as of June 30, 2023). There were no amounts outstanding under this line as of June 30, 2023.
8. Commitments and Contingencies
Employee Benefit Plan
Effective July 1, 2000, the Company instituted a qualified profit-sharing plan under the provisions of Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). Under the terms of the 401(k) Plan, participants may reduce their taxable compensation pursuant to federally mandated calculations to contribute to the 401(k) Plan. All employees are eligible to participate in the 401(k) Plan if they meet certain pre-established requirements. The Company’s contributions to the 401(k) Plan are discretionary, and the Company incurred related employer matching expenses of $38,439 to the 401(k) Plan during the year ended June 30, 2023.
Notes to Financial Statements (continued)
Year Ended June 30, 2023
8. Commitments and Contingencies (continued)
Office Lease Agreement
In June 2015, the Company executed an operating lease agreement for office space in Irvine, California starting September 14, 2015, and originally expiring on August 15, 2020. On August 14, 2020, the Company entered into a new five-year lease agreement for the same office facilities. During the year ended June 30, 2023, rent expense related to the lease totaled $77,196.
As required, the Company adopted ASC 842 effective July 1, 2022, and determines if an arrangement is, or contains, a lease at contract inception. The Company recognizes a rightof-use asset and a lease liability at the lease commencement date. The lease liability is initially measured at the present value of the unpaid lease payments as of the lease commencement date. Key estimates and judgments include how the Company determines (1) the discount rate it uses to discount the unpaid lease payments to present value, (2) the lease term, and (3) lease payments. The Company uses a practical expedient that allows it to use a risk-free interest rate as a discount rate. The lease term is typically provided for in the lease agreement, and when an option to extend the lease following the initial term exists, such is included in the lease term only if it is reasonably certain the Company will exercise the option to renew. The Company has elected the practical expedient to account for the lease and non-lease components as a single lease component. Leases with an initial term of 12 months or less are not recorded on the statement of financial position, and instead, the Company recognizes lease expense on a straight-line basis over the lease term.
Minimum future lease payments under the lease agreement are as follows for each of the years ending June 30 and thereafter:
202480,117 $ 202582,921 202617,398
Total lease payments180,436 Less imputed interest(5,856)
Total operating lease liability174,580 $
9. Subsequent Events
Management has evaluated subsequent events that occurred through June 28, 2024, the date the financial statements were available to be issued.