Leases

9 Months Ended

Dec. 31, 2020

Leases [Abstract]

Leases

7. Leases

The Company leases approximately 4,160 rentable square feet of office space from an unaffiliated third party for the corporate office located in Midland, Texas. This includes 1,021 square feet of office space shared with and reimbursed by the majority shareholder. The lease is a 36-month lease that expires in May 2021 and does not include an option to renew. 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.

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:

	December 31, 2020
Assets
Operating lease right-of-use asset, beginning balance	$	76,130
Current period amortization		(48,503	)
Lease amendment		(1,622	)
Lease extension		10,982
Total operating lease right-of-use asset, ending balance	$	36,987
Liabilities
Operating lease liability, current	$	38,438
Operating lease liability, long term		-
Total lease liabilities	$	38,438

Future minimum lease payments as of December 31, 2020 under non-cancellable operating leases are as follows:

	Lease Obligation
Fiscal Year Ended March 31, 2021		16,473
Fiscal Year Ended March 31, 2022		21,965
Total lease payments	$	38,438
Less: imputed interest		-
Operating lease liability		38,438
Less: operating lease liability, current		(38,438	)
Operating lease liability, long term	$	-

Net cash paid for our operating lease for the nine months ended December 31, 2020 and 2019 was $34,121 and $35,300, respectively. Rent expense, less sublease income of $14,315 and $13,167, respectively, is included in general and administrative expenses.