The Company is subject to contingencies because of environmental laws and regulations. Present and future environmental laws and regulations applicable to the Companys operations could require substantial capital expenditures or could adversely affect its operations in other ways that cannot be predicted at this time. Legal contingency On September 7, 2017, Amazing Energy LLC and Jilpetco Inc. were served with a summons and complaint in Cause No. P-7600-83-CV in the 83rd District Court in Pecos County, Texas. The nature of the litigation is that Amazing Energy &amp; Jilpetco were joined as defendants in a case in Pecos County, Texas, between Fredrick Bartlett Wulff, Sr. et al plaintiffs and Benedum &amp; Trees, LLC et al defendants. The suit alleges breach of lease, breach of implied duty to explore and develop, and requests a declaratory judgment that the leases are terminated, and the suit requests an accounting of lease production. The plaintiffs seek a release of the oil and gas leases except as to Section 91. The Companys counsel handling this case failed to comply with discovery and the court awarded sanctions and legal costs against the Company in July 2019. At October 31, 2019 and July 31, 2019, the Company has accrued $65,492 due to working interest owners related to the Wulff claims, said amount being paid subsequent to October 31, 2019. In addition, at October 31, 2019 and July 31, 2019, the Company has accrued an additional $98,291 in accounts payable for the sanctions and legal costs, said amount being paid subsequent to October 31, 2019. The plaintiffs still contend that a breach of contract remains as to Section 91 leases. In the opinion of the Companys management, the pending litigation claims against it, if decided adversely, will not have a material adverse effect on the Companys financial condition, cash flows or results of operations. On December 11, 2017, Amazing Energy LLC and Jilpetco Inc. were each served with a summons and complaint in Cause No. P-7813-83-CV in the 83rd District Court in Pecos County, Texas. Amazing Energy and Jilpetco were named as defendants in a case by Rumson Royalty Company as the plaintiff. The suit alleges Amazing Energy and Jilpetco have suspended certain royalty and/or overriding interest payments owed to the plaintiff, and requests a declaratory judgment seeking the plaintiffs share of production proceeds and reasonable attorneys fees. Management will vigorously defend the case. It is too early in the litigation to evaluate the likely outcome or to evaluate the financial impact of the lawsuit, if any. In the opinion of the Companys Management, none of the pending litigation, disputes or claims against it, if decided adversely, will have a material adverse effect on the Companys financial condition, cash flows or results of operations. On October 24, 2018 AAPIM, LLC (AAPIM) filed a lawsuit in the District Court of Pecos County, Texas, 112th Judicial District (Cause No. P-12363-112-CV) against Amazing Energy, LLC, a wholly-owned subsidiary of the Company. The Petition alleged Amazing Energy, LLC failed to pay plaintiff its proportionate share of the proceeds from oil and gas production from minerals in Pecos County, Texas. The Company retained counsel to represent Amazing Energy, LLC in the lawsuit. However, counsel for Amazing Energy, LLC failed to answer AAPIMs Petition in a timely manner. AAPIM, on January 7, 2019 filed a Motion for Default Judgment against Amazing Energy, LLC. Amazing Energy, LLC was not notified, by its counsel or its registered agent, of the Motion for Default Judgment and as a result the Motion for Default Judgment was unopposed and on January 9, 2019, AAPIM obtained a Default Judgment against Amazing Energy, LLC. The Company has been in negotiations with AAPIM to settle the amount owed by Amazing Energy, LLC pursuant to the Default Judgment and management believes a settlement of the outstanding amount will occur. For the fiscal year ending July 31, 2019, the Company has recognized an expense for the potential litigation settlement of $340,972 representing the amount of the judgment, and interest expense of $50,303 incurred through October 31, 2019 as an accounts payable. On May 30, 2019 the Company received a request from a Company investor requesting arbitration for allegations of misrepresentation by the Company, and/or its wholly-owned subsidiary Jilpetco, Inc., dating from the period of approximately 2011-2014. The arbitration request stated that unless the matter was resolved by July 5, 2019 the investor would turn to the Texas Attorney Generals office for relief. The Company entered into settlement negotiations with the investor, but those negotiations were not concluded by the stated deadline. The investor thereafter sent the Company a copy of a letter from the Texas Attorney Generals office, dated July 24, 2019, acknowledging the investors correspondence with the Texas Attorney Generals office and alleged violations of Texas consumer protection laws and deceptive business practices. The Company has not directly received any communications from the Texas Attorney Generals office, and the investor has informed the Company he has withdrawn his complaint with the Attorney Generals office. On August 28, 2019, TCI Business Capital, Inc. (TCI) filed a petition, in the 416th District Court of Colin County, Texas (Case No. 416-04883-2019), against the Company and its wholly-owned subsidiary Jilpetco, Inc. TCI is a commercial factoring company that purchased certain accounts receivable from Diligent Well Site Services, LLC (Diligent). Diligent had previously performed services to Jilpetco. On October 10, 2019, the Company and Jilpetco entered into a settlement agreement with TCI whereby the Company/Jilpetco agreed to pay TCI the total amount of $66,085 in two installments. The first installment of $33,085 was paid on October 16, 2019. The second installment, in the amount of $33,000 was due on or before October 30, 2019. The Company failed to make the second installment and on November 11, 2019, the Company was served, by TCI, with an amended petition. The total amount of $66,085 was accrued as an accounts payable at July 31, 2019. The Company paid the second installment ($ 33,000) to TCI on November 22, 2019, and on November 25, 2019, paid TCI an additional $ 2,500 for legal fees that were incurred in connection with the case. This matter was resolved in full on November 22, 2019. Lease commitments The Companys principal offices are located at 5700 West Plano Parkway, Suite 3600 in Plano, Texas. Prior to May 1, 2019, the Company subleased office space from a tenant under an approved sublease agreement. On May 1, 2019, the Company agreed to assume the remaining lease obligations (through November 30, 2019) of the former tenant and became the new lessee under a new agreement that extended the lease term to February 28, 2023. Terms of the new lease agreement require monthly lease payments of $6,892, with periodic increases, plus additional amounts for reimbursement of certain operating costs. The lease does not include any provision that would allow the lessor or lessee to elect to extend or terminate the lease or buy the building at the end of the lease term. At October 31, 2019, the remaining lease term is 3.3 years. Upon implementation of ASC 842 on August 1, 2019, the Company recognized an operating lease liability and right-of-use asset of $256,092 for its one operating lease for its principal offices in Plano, Texas. To calculate the operating lease liability and right to use asset, the Company utilized a 10.0% incremental borrowing rate to discount the future rent payments over the remaining lease term of 3.58 years. The incremental borrowing rate was estimated based on the interest rate the Company would expect to incur if it borrowed the funds to purchase the office on a collateralized basis with similar terms. The Company subleases a small portion of the office space to multiple tenants on a non-binding month-to-month basis. The Company has no leases or subleases with any related parties. As of October 31, 2019, total future lease payments are as follows: For the 12 months ended October 31, 2020 $ 84,163 2021 85,357 2022 86,947 2023 29,159 Total 285,626 Less imputed interest (43,928 ) Net lease liability 241,698 Current portion (62,815 ) Long-term portion $ 178,883 For the quarter ended October 31, 2019, costs relating to the operating lease were recognized as lease expense in the income statement as follows: Base rent pursuant to lease agreement $ 21,730 Variable lease operating costs 5,587 Sublease income (12,501 ) Total lease costs $ 14,816 Oil and gas lease commitments Royalties: The Company is obligated to pay royalties to holders of oil and natural gas interests in its operations. Working Interest Holders: The Company is obligated to pay working interest holders a pro-rata portion of revenue in oil operations net of shared operating expenses. The amounts are based on monthly oil and gas sales and are charged monthly net of oil and gas revenue and recognized as Due to working interest owners on the Companys Consolidated Balance Sheet. The typical oil and natural gas lease agreement covering our acreage positions in Pecos County, Texas and Lea County, New Mexico. provides for the payment of royalties to the mineral owners for all oil and natural gas produced form any wells drilled on the leased premises. The lessor royalties and other leasehold burdens on our properties generally range from 20% to 25%, resulting in a net revenue interest to the Company working interest generally ranging from 75% to 80%.