Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Sep. 30, 2019
Leases [Abstract]  



In February 2016, the FASB issued ASU No. 2016.02 “Leases (Topic 842)”. The new lease guidance supersedes Topic 840. The core principle of the guidance is that entities should recognize the assets and liabilities that arise from leases. Topic 840 does not apply to leases to explore for, or to use, minerals, oil, natural gas and similar nongenerative resources including the intangible right to explore for those natural resources and rights to use the land in which those natural resources are contained. In July 2018, the FASB issued “Leases (Topic 842): Targeted Improvements”, which provides entities with and alternative modified transition method to elect not to recast the comparative periods presented when adopting Topic 842. The Company adopted Topic 842 as of April 1, 2019, using the alternative modified transition, for which, comparative periods, including the disclosures related to those periods, are not restated.


In addition, the Company elected practical expedients provided by the new standard, and the Company has elected to not reassess its prior conclusions about lese identification, lease classification, and initial direct costs and to retain off-balance sheet treatment of short-term leases (i.e., 12 months or less which do not contain purchase options that the Company is reasonably likely to exercise). As a result of the short-term expedient election, the Company did not have leases that require the recording of a net lease asset and lease liability on the Company’s consolidated balance sheet or have a material impact on consolidated earnings or cash flows as of as of April 1, 2019. Moving forward, the Company will evaluate any new lease commitments for application of topic 842.


As part of the Lineal Acquisition, the Company acquired various operating and finance leases for sales and administrative offices, motor vehicles and machinery and equipment. The Company’s leases have remaining lease terms of 1 year to 4 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend the lease when it is reasonably certain that the Company will exercise those options. Some leasing arrangements require variable payments that are dependent on usage, output, or may vary for other reasons, such as insurance and tax payments. The variable lease payments are not presented as part of the initial Right of Use (“ROU”) asset or lease liability. The Company’s lease agreements do not contain any material restrictive covenants. The Company recognized a right of use asset and operating lease liability of $913,396 as part of the purchase price accounting, based on estimated values at the acquisition date. 


The components of lease cost for operating and finance leases for the three and six months ended September 30, 2019 were as follows:

Lease Cost  

Three Months Ended

September 30, 2019


Six Months Ended

September 30, 2019

Operating lease cost   $ 185,840     $ 185,840  
Finance lease cost                
Amortization of right-of-use assets     17,476       17,476  
Interest on lease liabilities     5,770       5,770  
Total finance lease cost     23,246       23,246  
Short-term lease cost     350,396       350,396  
Total lease cost   $ 559,482     $ 559,482  


Supplemental cash flow information related to leases was as follows:

Other Lease Information   Six Months Ended September 30, 2019  
Cash paid for amounts included in the measurement of lease liabilities:        
Operating cash flows from operating leases   $ 185,840  
Operating cash flows from finance leases   $ 5,770  
Financing cash flows from finance leases   $ 37,456  


The following table summarizes the lease-related assets and liabilities recorded in the consolidated balance sheet at September 30, 2019:

Lease Position September 30, 2019  
Operating Leases    
Operating lease right-of-use assets       
Operating lease liabilities short-term $ 389,857  
Operating lease liabilities long-term 367,406  
Total operating lease liabilities $ 757,263  
Finance Leases    
Equipment $ 350,306  
Accumulated depreciation (17,476 )
Net Property $ 332,830  
Long-term debt due within one year $      156,284  
Long-Term Debt 119,731  
Total finance lease liabilities $ 276,015  


The Company utilizes the incremental borrowing rate in determining the present value of lease payments unless the implicit rate is readily determinable.


Lease Term and Discount Rate   September 30, 2019  
Weighted-average remaining lease term (years)        
Operating leases     2.1  
Finance leases     2.1  
Weighted-average discount rate        
Operating leases     10.0 %
Finance leases     7.8 %


The following table provides the maturities of lease liabilities at September 30, 2019:


Maturity of Lease Liabilities at September 30, 2019

Operating Leases   Finance Leases  
2020 $ 289,084   $ 86,452  
2021 314,078   126,604  
2022 210,747   80,304  
2023 30,896   8,736  
2025 and thereafter    
Total future undiscounted lease payments   844,805     302,097  
Less: Interest (87,542 ) (26,082 )
Present value of lease liabilities $ 757,263   $ 276,015  


At September 30, 2019, the Company had no additional leases which had not yet commenced.


In October 2018, the Company entered into a settlement agreement for the unexpired lease term of the Houston office and agreed to pay the landlord $100,000 plus $10,000 per month for each of the next 20 months. In the event that an aggregate of $150,000 was paid by April 15, 2019, in addition to the $100,000 payment made in October 2018, the remaining $50,000 of payments would be forgiven and waived. The Company made the payments prior to March 31, 2019, resulting in no remaining unpaid amounts at March 31, 2019. See also “NOTE 8 – Commitments and Contingencies – Legal Proceedings – MidFirst”.


Effective August 1, 2018, the Company entered into a month-to-month lease at 1415 Louisiana, Suite 3500, Houston, Texas 77002. The entity providing use of the space without charge is affiliated with the Company’s Chief Financial Officer.