XML 22 R12.htm IDEA: XBRL DOCUMENT

Leases

3 Months Ended

Jun. 30, 2021

6. Leases

The Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for our corporate office located in Midland, Texas. This includes 1,112 square feet of office space shared with and reimbursed by our majority shareholder. The lease does not include an option to renew and is a 36-month lease that expired in May 2021. In June 2020, in exchange for a reduction in rent for the months of June and July 2020, the Company agreed to a 2-month extension to its current lease agreement at the regular monthly rate extending its current lease expiration date to July 2021. In June 2021, the Company agreed to extend its current lease for 36 months. The amended lease now expires on July 31, 2024.

The Company determines an arrangement is a lease at inception. Operating leases are recorded in operating lease right-of-use asset, operating lease liability, current, and operating lease liability, long-term on the consolidated balance sheets.

Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. As the Company’s lease does not provide an implicit rate, the Company uses the incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The incremental borrowing rate used at adoption was 3.75%. Significant judgement is required when determining the incremental borrowing rate. Rent expense for lease payments is recognized on a straight-line basis over the lease term.

The balance sheets classification of lease assets and liabilities was as follows:

	June 30, 2021
Assets
Operating lease right-of-use asset, beginning balance	$	20,861
Current period amortization		(16,126	)
Lease amendment		165,007
Total operating lease right-of-use asset	$	169,742

Liabilities
Operating lease liability, current	$	53,958
Operating lease liability, long term		116,540
Total lease liabilities	$	170,498

Future minimum lease payments as of June 30, 2021 under non-cancellable operating leases are as follows:

	Lease Obligation
Fiscal Year Ended March 31, 2022		44,318
Fiscal Year Ended March 31, 2023		58,240
Fiscal Year Ended March 31, 2024		58,240
Fiscal Year Ended March 31, 2025		19,413
Total lease payments	$	180,211
Less: imputed interest		(9,713	)
Operating lease liability		170,498
Less: operating lease liability, current		(53,958	)
Operating lease liability, long term	$	116,540

Net cash paid for our operating lease for the three months ended June 30, 2021 and 2020 was $10,929 and $10,600, respectively. Rent expense, less sublease income of $5,200 and $4,889, respectively, is included in general and administrative expenses.