Leases

3 Months Ended

Jun. 30, 2019

Leases [Abstract]

Leases

5. 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 1,021 square feet of office space shared with and reimbursed by our majority shareholder. The lease is a 36 month lease that expires in May 2021 and does not include an option to renew.

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 6.0%. Significant judgement is required when determining the incremental borrowing rate. The Company chose not to discount because the difference is not significant. 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, 2019
Assets
Operating lease right-of-use asset, beginning balance	$	141,385
Current period amortization		(16,314	)
Total operating lease right-of-use asset	$	125,071
Liabilities
Operating lease liability, current	$	64,941
Operating lease liability, long term		60,403
Total lease liabilities	$	125,344

Future minimum lease payments as of June 30, 2019 under non-cancellable operating leases are as follows:

	Lease Obligation
Fiscal Year Ended March 31, 2020	$	48,641
Fiscal Year Ended March 31, 2021		65,721
Fiscal Year Ended March 31, 2022		10,982
Total lease payments	$	125,344
Less: imputed interest		-
Operating lease liability		125,344
Less: operating lease liability, current		(64,941	)
Operating lease liability, long term	$	60,403

Net cash paid for our operating lease for the three months ended June 30, 2019 and 2018 was $12,102 and $7,919, respectively. Rent expense, less sublease income of $3,938 and $2,846, respectively, is included in general and administrative expenses.