Quarterly report pursuant to Section 13 or 15(d)


6 Months Ended
Dec. 31, 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  
    December 31, 2019  
Operating lease assets, net   $ 3,050,885  
Current Operating   $ 1,182,850  
Non-current Operating     1,966,770  
Total Lease Liabilities   $ 3,149,620  


The components of lease cost were as follows:


    For the Six Months  
December 31, 2019
Amortization of finance lease assets   $ 135,000  
Interest on finance lease obligation     52,331  
Operating lease cost     598,069  
Short term lease cost     152,972  
Sub lease income     (16,713 )
Total lease cost   $ 921,659  


Lease term and discount rate were as follows:


    As of  
    December 31, 2019  
Weighted average remaining lease term - Operating leases     2.9 Years  
Weighted average discount rate - Operating leases     5.6 %


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


    For the Six Months  
December 31, 2019
Cash flows related to lease liabilities        
Operating cash flows related to operating leases   $ 566,589  


Maturities of operating lease liabilities were as follows as of December 31, 2019:


Within year 1   $ 1,323,467  
Within year 2     1,074,055  
Within year 3     723,321  
Within year 4     228,248  
Within year 5     61,578  
Thereafter     3,836  
Total Lease Payments     3,414,505  
Less: Imputed interest     (264,885 )
Present Value of lease liabilities     3,149,620  
Less: Current portion     (1,182,850 )
Non-Current portion   $ 1,966,770  


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 and six months ended December 31, 2019, the Company received $8,514 and $16,713 of lease income.