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OPERATING LEASES | 9 Months Ended
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Dec. 31, 2023
Operating Leases |
OPERATING LEASES | NOTE 8 – 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. The lease expired on March 31, 2024. The base rent payment is approximately $9,950 per month, subject to annual adjustments. 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 $10,553 per month subject to a 3% annual adjustment. 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 consolidated financial statements for the nine months ended December 31, 2023, at lease inception in the balance sheet of our consolidated financial statements. On August 31, 2023, our Ontario, California operating lease agreement for our primary warehouse expired. The Company did not renew the lease and instead transferred all of its warehousing and logistics operations to a third-party logistics facility. We entered into an operating lease agreement, effective October 15, 2022, for our administrative office located in Hong Kong where we lease approximately 1,890 square feet of office space. The lease expires on October 14, 2025. The base rent payment is approximately $4,900 per month for the entire term of the lease. THE SINGING MACHINE COMPANY, INC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2023, and March 31, 2023 and 2022 Lease expense for our operating leases is recognized on a straight-line basis over the lease terms. Supplemental balance sheet information related to leases as of December 31, 2023 and March 31, 2023 is as follows: SCHEDULE OF SUPPLEMENTAL INFORMATION RELATED TO LEASES
|  | December 31, 2023 |  |  | March 31, 2023 |
Assets: |  |  |  |  |  |  |  |
Operating lease - right-of-use assets |  | $ | 3,926,000 |  |  | $ | 561,000 |
Liabilities |  |  |  |  |  |  |  |
Current portion of operating leases |  | $ | 84,000 |  |  | $ | 509,000 |
Operating lease liabilities, net of current portion |  | $ | 3,925,000 |  |  | $ | 88,000 |
Supplemental statement of operations information related to leases for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023 is as follows: SCHEDULE OF LEASE TERM AND DISCOUNT RATE
|  | Nine Months Ended |  |  | Fiscal Year Ended |
|  | December 31 2023 |  |  | March 31, 2023 |
Operating lease expense as a component of general and administrative expenses |  | $ | 717,000 |  |  | $ | 1,058,000 |
Supplemental cash flow information related to leases for the nine months ended December 31, 2023 and fiscal year ended March 31, 2023 is as follows: |  |  |  |  |  |  |  |
Cash paid for amounts included in the measurement of lease liabilities: |  |  |  |  |  |  |  |
Operating cash flow paid for operating leases |  | $ | 858,000 |  |  | $ | 960,000 |
Lease term and Discount Rate |  |  |  |  |  |  |  |
Weighted average remaining lease term (months) |  |  |  |  |  |  |  |
Operating leases |  |  | 15.0 |  |  |  | 12.4 |
Weighted average discount rate |  |  |  |  |  |  |  |
Operating leases |  |  | 12.0 | % |  |  | 6.5 | %
Minimum future payments under all operating leases as of December 31, 2023, are as follows: SCHEDULE OF OPERATING LEASE MINIMUM FUTURE PAYMENTS
Payments due by period |  | Amount |
2024 |  | $ | 269,000 |
2025 |  |  | 355,000 |
2026 |  |  | 529,000 |
2027 |  |  | 585,000 |
2028 |  |  | 610,000 |
Thereafter |  |  | 7,555,000 |
Total minimum future payments |  |  | 9,903,000 |
Less: interest |  |  | 5,894,000 |
Total operating lease liabilities |  | $ | 4,009,000 |
Less: current portion of lease liabilities |  |  | 84,000 |
Operating lease liabilities, net of current portion |  | $ | 3,925,000 |

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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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