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OPERATING LEASES | 6 Months Ended
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Jun. 30, 2024
Operating Leases |
OPERATING LEASES | NOTE 7 – OPERATING LEASES At the time of this filing, the Company has operating lease agreements for offices in Florida and Hong Kong and a retail location in New York expiring in various years through 2038. The Company entered into an operating lease agreement, effective October 1, 2017, for our corporate headquarters located in Fort Lauderdale, Florida where we lease approximately 6,500 square feet of office space which expired on March 31, 2024. On February 22, 2024, the Company executed a lease extension for 14 months effective April 1, 2024, and expires on May 31, 2025. The base rent on the extension is approximately $10,000 per month subject to a 3% annual adjustment. The Singing Machine Company, Inc. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2024 and 2023 (Unaudited) The Company entered into an operating lease on August 23, 2023, for approximately 10,000 square feet of ground floor retail space and a portion of the basement underneath the ground floor retail space. The lease expires August 22, 2038, and the monthly base rent is $30,000, subject to annual increases. The lease includes a 11-month free rent period between July 1, 2023, and June 30, 2024 and also includes a $700,000 reimbursement for tenant improvements upon completion of construction milestones as defined in the lease. Due to uncertainties as to whether these milestones will be met timely, the Company has not recorded any amounts related to the tenant improvement allowance in our condensed consolidated financial statements at lease inception for the three and six months ended June 30, 2024. (See Note 6). Supplemental balance sheet information related to leases as of June 30, 2024 and December 31, 2023 is as follows: SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES
Assets: |  | June 30, 2024 |  |  | December 31, 2023 |
Operating lease - right-of-use assets |  | $ | 178,000 |  |  | $ | 3,926,000 |
Liabilities |  |  |  |  |  |  |  |
Current |  |  |  |  |  |  |  |
Current portion of operating leases |  | $ | 165,000 |  |  | $ | 84,000 |
Operating lease liabilities, net of current portion |  | $ | 4,136,000 |  |  | $ | 3,925,000 |
Supplemental statement of operations information related to operating leases is as follows: SCHEDULE OF LEASE TERM AND DISCOUNT RATE
|  | Three Months Ended |  |  | Three Months Ended |  |  | Six Months Ended |  |  | Six Months Ended |
|  | June 30, 2024 |  |  | June 30, 2023 |  |  | June 30, 2024 |  |  | June 30, 2023 |
Operating lease expense as a component of general and administrative expenses |  | $ | 203,000 |  |  | $ | 237,000 |  |  | $ | 399,000 |  |  | $ | 483,000 |
Supplemental cash flow information related to operating leases is as follows: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Operating cash flow paid for operating leases |  | $ | 46,000 |  |  | $ | 252,000 |  |  | $ | 91,000 |  |  | $ | 504,000 |
Lease term and Discount Rate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Weighted average remaining lease term (years) |  |  | 14.3 |  |  |  | 13.2 |  |  |  |  |  |  |  |  |
Weighted average discount rate |  |  | 12.0 | % |  |  | 6.5 | % |  |  |  |  |  |  |  |
Minimum future payments under all operating leases as of June 30, 2024, are as follows: SCHEDULE OF OPERATING LEASE MINIMUM FUTURE PAYMENTS
Payments due by period |  | Amount |
2024 (remaining six months) |  | $ | 271,000 |
2025 |  |  | 408,000 |
2026 |  |  | 529,000 |
2027 |  |  | 585,000 |
2028 |  |  | 611,000 |
Thereafter |  |  | 7,555,000 |
Total minimum future payments |  | $ | 9,959,000 |
Less: Interest |  |  | 5,658,000 |
Total operating lease liabilities |  | $ | 4,301,000 |
Less: current portion of lease liabilities |  |  | 165,000 |
Operating lease liabilities, net of current portion |  | $ | 4,136,000 |

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- Definition The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 842 -SubTopic 20 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/842-20/tableOfContent + Details
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