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Leases

9 Months Ended

Jun. 30, 2020

NOTE 10 – LEASES

ASC 842, “Leases”, requires that a lessee recognize the assets and liabilities that arise from operating leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee is permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. In transition, lessees and lessors are required to recognize and measure leases at either the effective date (the “effective date method”) or the beginning of the earliest period presented (the “comparative method”) using a modified retrospective approach. Under the effective date method, the Company’s comparative period reporting is unchanged. In contrast, under the comparative method, the Company’s date of initial application is the beginning of the earliest comparative period presented, and the Topic 842 transition guidance is then applied to all comparative periods presented. Further, under either transition method, the standard includes certain practical expedients intended to ease the burden of adoption. The Company adopted ASC 842 October 1, 2019 using the effective date method and elected certain practical expedients allowing the Company not to reassess:

	●	whether expired or existing contracts contain leases under the new definition of a lease;
	●	lease classification for expired or existing leases; and
	●	whether previously capitalized initial direct costs would qualify for capitalization under Topic 842.

The Company also made the accounting policy decision not to recognize lease assets and liabilities for leases with a term of 12 months or less.

The Company entered into a financing lease for a single vehicle in the Industrial services segment with a term of 3 years. The Company enters into operating leases for its facilities in New York, United Kingdom, and India, as well as for vehicles for use in our Industrial Services segment. The operating lease terms range from 2 to 7 years. The Company excluded the renewal option on its applicable facility leases from the calculation of its right-of-use assets and lease liabilities.

Finance and operating lease liabilities consist of the following:

	June 30,		September 30,
	2020		2019
Lease liabilities - current
Finance leases	$	22,452	$	22,452
Operating leases		671,726		-
		694,178		22,452

Lease liabilities - net of current portion
Finance leases	$	6,223	$	20,061
Operating leases		1,838,942		-
	$	1,845,165	$	20,061

A reconciliation of undiscounted cash flows to finance and operating lease liabilities recognized in the condensed consolidated balance sheet at June 30, 2020 is set forth below:

Years ending September 30,	Finance leases			Operating Leases			Total
Remainder of 2020	$	11,872		$	288,033		$	299,905
2021		17,604			769,867			787,471
2022		-			630,534			630,534
2023		-			504,539			504,539
2024		-			378,949			378,949
2025					344,624			344,624
2026					344,624			344,624
2027					172,312			172,312
Undiscounted lease payments		29,476			3,433,482			3,462,958
Amount representing interest		(801	)		(922,814	)		(923,615	)
Discounted lease payments	$	28,675		$	2,510,668		$	2,539,343

Additional disclosures of lease data are set forth below:

	Nine months ended
	June 30, 2020
Lease costs:
Finance lease costs:
Amortization of right-of-use assets		11,456
Interest on lease liabilities		416

Operating lease costs:		156,777
Total lease cost		168,649

Other information:
Cash paid for amounts included in the measurement of lease liabilities:
Operating leases		11,872
Finance leases		398,580
		410,452

Weighted-average remaining lease term - finance leases (months)		13
Weighted-average remaining lease term - operating leases (months)		73

Weighted-average discount rate - finance leases		6.95	%
Weighted-average discount rate - operating leases		6.98	%

The Company used the rate implicit in the lease, where known, or its incremental borrowing rate as the rate used to discount the future lease payments.