LEASES

The Company adopted ASU

2016

02,

Leases (“ASC

842”

) on

April 1, 2019

using the optional transition method under which the new standard is applied only to the most current period presented and the cumulative effect of applying the new standard to existing lease agreements is recognized at the date of initial application. Under this adoption method, reporting periods beginning after

April 1, 2019

are presented under the new standard, while prior period amounts are

not

adjusted and continue to be reported under the accounting standards in effect for the prior period. The adoption of ASC

842

resulted in the recording of initial ROU asset and lease liabilities of approximately

$63,000

April 1, 2019.

The Company’s lease of its office space in Longview, Texas is the only operating lease included in the ROU asset and lease liability. The lease calls for monthly rent payments of

$4,128

and expires on

April 30, 2021.

The Company’s other operating leases for items such as IT equipment and storage space are either short-term in nature or immaterial.

October 2019,

the Company received a new heavy-duty forklift under a

-year finance lease arrangement with a financed amount of

$518,616

and a monthly payment of

$9,074.

The components of expense related to leases were as follows for the

twelve

months ended

March 31, 2020:

	Twelve Months Ended March 31, 2020
Finance lease – amortization of ROU asset	$	49,640
Finance lease – interest on lease liability		4,806
Operating lease expense		36,936
	$	91,382

Rental expense for operating leases classified under the previous accounting standard, Accounting Standards Codification Topic

840,

for the

twelve

months ended

March 31, 2019

was

$32,736.

The following table illustrates the balance sheet classification for ROU assets and lease liabilities as of

March 31, 2020:

	March 31, 20 20		Balance Sheet Classification
Assets
Operating lease right-of-use asset	$	51,535	Other assets
Finance lease right-of-use asset	$	507,812	Property, plant & equipment
Total right-of-use assets	$	559,347

Liabilities
Operating lease liability, current	$	47,431	Accrued expenses
Finance lease liability, current		100,728	Current portion of finance lease
Operating lease liability, non-current		4,104	Other non-current liabilities
Finance lease liability, non-current		368,248	Other non-current liabilities
Total lease liabilities	$	520,511

As of

March 31, 2020,

the weighted-average remaining lease term was

year for operating leases and

4.5

years for finance leases. The weighted average discount rate was

for operating leases and

1.9%

for finance leases.

Maturities of lease liabilities as of

March 31, 2020

were as follows:

	Operating Leases			Finance Leases
Fiscal 2021		49,536			108,888
Fiscal 2022		4,128			108,888
Fiscal 2023		—			108,888
Fiscal 2024		—			108,888
Fiscal 2025		—			54,444
Total undiscounted lease payments	$	53,664		$	489,996
Less: imputed interest		(2,129	)		(21,020	)
Present value of lease liability	$	51,535		$	468,976