Quarterly report pursuant to Section 13 or 15(d)


3 Months Ended
Sep. 30, 2019
Leases [Abstract]  



The Company leases certain office space, office equipment and autos with remaining lease terms of one year to 10 years under leases classified as financing and operating. For certain leases, the Company has options to extend the lease term for additional periods ranging from one year to 10 years.


The Company treats a contract as a lease when the contract conveys the right to use a physically distinct asset for a period of time in exchange for consideration, or the Company directs the use of the asset and obtains substantially all the economic benefits of the asset. These leases are recorded as right-of-use (“ROU”) assets and lease obligation liabilities for leases with terms greater than 12 months. ROU assets represent the Company’s right to use an underlying asset for the entirety of the lease term. Lease liabilities represent the Company’s obligation to make payments over the life of the lease. A ROU asset and a lease liability are recognized at commencement of the lease based on the present value of the lease payments over the life of the lease. Initial direct costs are included as part of the ROU asset upon commencement of the lease. Since the interest rate implicit in a lease is generally not readily determinable for the operating leases, the Company uses an incremental borrowing rate to determine the present value of the lease payments. The incremental borrowing rate represents the rate of interest the Company would have to pay to borrow on a collateralized basis over a similar lease term to obtain an asset of similar value. The Company used the incremental borrowing rate on July 1, 2019 for all leases that commenced prior to that date. For finance leases, the Company used the incremental borrowing rate implicit in the lease.


The Company reviews the impairment of ROU assets consistent with the approach applied for the Company’s other long-lived assets. The Company reviews the recoverability of long-lived assets when events or changes in circumstances occur that indicate that the carrying value of the asset may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected undiscounted future pre-tax cash flows of the related operations.


The Company elected the practical expedient to exclude short-term leases (leases with original terms of 12 months or less) from ROU asset and lease liability accounts.


Lease expense is recognized on a straight-line basis over the lease term, while variable lease payments are expensed as incurred. Variable payments change due to facts or circumstances occurring after the commencement date, other than the passage of time, and do not result in a remeasurement of lease liabilities. The Company’s variable lease payments include payments for finance leases that are adjusted based on a change in Karachi Inter Bank Offer Rate. The Company’s lease agreements do not contain any significant residual value guarantees or restrictive covenants.


Supplemental balance sheet information related to leases was as follows:


    As of  
    September 30, 2019  
Operating lease assets, net   $ 2,734,762  
Operating   $ 920,115  
Operating     1,912,804  
Total Lease Liabilities   $ 2,832,919  


The components of lease cost were as follows:


    For the Three Months  
    Ended September 30, 2019  
Amortization of finance lease assets   $ 26,330  
Interest on finance lease obligation     22,918  
Operating lease cost     263,577  
Short term lease cost     74,110  
Sub lease income     (8,199 )
Total lease cost   $ 378,736  


Lease term and discount rate were as follows:


    As of  
    September 30, 2019  
Weighted average remaining lease term - Operating leases     3.3 Years  
Weighted average discount rate - Operating leases     5.61 %


Supplemental disclosures of cash flow information related to leases were as follows:


    For the Three
Months Ended
    September 30, 2019  
Cash flows related to lease liabilities        
Operating cash flows related to operating leases   $ 232,268  


Maturities of operating lease liabilities were as follows as of September 30, 2019:


Within year 1   $ 1,045,298  
Within year 2     874,317  
Within year 3     797,007  
Within year 4     305,926  
Within year 5     82,404  
Thereafter     6,235  
Total Lease Payments     3,111,187  
Less: Imputed interest     (278,268 )
Present Value of lease liabilities     2,832,919  
Less: Current portion     (920,115 )
Non-Current portion   $ 1,912,804  


As of June 30, 2019, future minimum lease payments, as defined under the previous lease accounting guidance of ASC Topic 840, under non-cancelable operating leases for the following five fiscal years and thereafter were as follows:


Within year 1   $ 744,549  
Within year 2     514,243  
Within year 3     269,375  
Within year 4     197,872  
Within year 5     36,044  
Total   $ 1,762,083  


The Company is a lessor for certain office space leased by the Company and sub-leased to others under non-cancelable leases. These lease agreements provide for a fixed base rent and terminate by July 2021. All leases are considered operating leases. There are no rights to purchase the premises and no residual value guarantees. For the three months ended September 30, 2019, the Company received $8,199 of lease income.


The company entered into an agreement to acquire additional office space in London for a term of two years which will begin October 1, 2019. The Company will recognize a ROU asset of approximately $505,761, and corresponding lease liability at the inception of lease term.