Quarterly report pursuant to Section 13 or 15(d)

LEASE OBLIGATIONS

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LEASE OBLIGATIONS
9 Months Ended
Dec. 31, 2019
LEASE OBLIGATIONS  
NOTE 10 - LEASE OBLIGATIONS
On October 1, 2019, the Company entered into a two-year extension related to 2,100 square feet of office space leased by its subsidiary, Applied Products LLC. The lease requires the Company to pay rent of $2,750 per month or $33,000 per year. The rent shall be increased at the end of each year by the same percentage as any increase in the Consumer Price Index (“CPI”) as published by the U.S. Department of Labor for the most recent preceding 12 month period. Also beginning on October 1, 2019, the Company entered into a five-year extension related to 3,734 square feet of office space leased by its subsidiary, Trace Analytics. The new rent is $5,716 per month or $68,592 per year.
 
Effective April 1, 2019, the Company adopted the guidance of ASC 842,
Leases,
which requires an entity to recognize a right-of-use asset (“ROU”) and a lease liability for virtually all leases. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. In conjunction with the lease extensions entered into on October 1, 2019, the Company recorded a ROU asset and liability of $372,490. The Company used an implicit rate of interest to determine the present value of lease payments utilizing its incremental borrowing rate, as the implicit rate of interest in the respective leases is not readily determinable. The Company’s incremental borrowing rate is a hypothetical rate based on its understanding of what its credit rating would be.
 
The components of rent expense and supplemental cash flow information related to leases for the period are as follows:
 
 
Nine Months
Ended
December 31,
2019
 
Lease Cost
 
Operating lease cost (included in general and administration in the Company’s unaudited condensed statement of operations)
 
$
25,398
 
Other Information
 
Cash paid for amounts included in the measurement of lease liabilities
 
$
-
 
Weighted average remaining lease term – operating leases (in years)
 
4.3
 
Average discount rate – operating leases
 
4
%
 
The supplemental balance sheet information related to leases for the period is as follows:
 
 
At
December 31, 2019
 
Operating leases
 
Long-term right-of-use assets
 
$
350,752
 
Short-term operating lease liabilities
 
$
89,136
 
Long-term operating lease liabilities
 
261,616
 
Total operating lease liabilities
 
$
350,752
 
Maturities of the Company’s lease liabilities are as follows:
 
Fiscal Year Ending March 31,
 
Operating Leases
 
2020 (remaining 3 months)
 
$
25,398
 
2021
 
101,593
 
2022
 
85,092
 
2023
 
60,593
 
2024
 
68,593
 
2025
 
34,296
 
Total lease payments
 
383,565
 
Less: Imputed interest/present value discount
 
(32,813
)
 
$
350,752
 
Rent expense for the nine months ended December 31, 2019 and 2018 was $85,950 and $24,750, respectively.