Leases

3 Months Ended

Jun. 30, 2024

Leases [Abstract]

Leases

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 was to expire 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 at a flat (unescalated) rate for 36 months. In June 2024, the Company agreed to extend its lease at a flat (unescalated) rate for another 36 months. The amended lease now expires on July 31, 2027.

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 of the renewal was 9%. 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, 2024
Assets
Operating lease right-of-use asset, beginning balance	$	19,263
Current period amortization		(14,425	)
Lease extension		158,073
Total operating lease right-of-use asset	$	162,911
Liabilities
Operating lease liability, current	$	48,711
Operating lease liability, long term		114,200
Total lease liabilities	$	162,911

Future minimum lease payments as of June 30, 2024 under non-cancellable operating leases are as follows:

	Lease Obligation
Fiscal Year Ended March 31, 2025	$	45,066
Fiscal Year Ended March 31, 2026		60,320
Fiscal Year Ended March 31, 2027		60,320
Fiscal Year Ended March 31, 2028		20,107
Total lease payments	$	185,813
Less: imputed interest		(22,902	)
Operating lease liability		162,911
Less: operating lease liability, current		(48,711	)
Operating lease liability, long term	$	114,200

Net cash paid for our operating lease for the three months ended June 30, 2024 and 2023 was $10,667. Rent expense, less sublease income of $3,893 is included in general and administrative expenses.