OPERATING LEASES

6 Months Ended

Sep. 30, 2023

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 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 August 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 for the three and nine months ended September 30, 2023. The Company recorded a right of use asset of approximately $3,875,000 at lease inception in the balance sheet of our condensed 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.

THE SINGING MACHINE COMPANY, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023 and 2022

(Unaudited)

Supplemental balance sheet information related to leases as of September 30, 2023 is as follows:

Supplemental balance sheet information related to leases as follows:

	As of September 30, 2023		As of March 31, 2023
Assets:
Operating lease - right-of-use assets	$	4,002,595	$	561,185
Liabilities
Current
Current portion of operating leases	$	112,647	$	508,515
Operating lease liabilities, net of current portion	$	3,825,115	$	87,988

Supplemental statement of operations information related to operating leases is as follows:

	Three Months Ended			Three Months Ended		Six Months Ended		Six Months Ended
	September 30, 2023			September 30, 2022		September 30, 2023		September 30, 2022
Operating lease expense as a component of general and administrative expenses	$	283,450		$	227,839	$	520,457		457,088
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	$	560,559		$	232,770	$	812,872		463,521
Lease term and Discount Rate
Weighted average remaining lease term (years)		15.1
Weighted average discount rate		12	%

The following table summarizes information regarding lease maturities and balance due as follows:

Year	Operating Leases
2023 (remaining three months)	$	45,222
2024		268,669
2025		355,033
2026		529,000
2027		585,000
2028		610,500
Thereafter		7,554,718
Total minimum future payments		9,948,142
Less: interest		6,010,380
Total operating lease liabilities	$	3,937,762
Less: current portion of lease liabilities		112,647
Operating lease liabilities, net of current portion	$	3,825,115