| LEASES |
NOTE 8 – LEASES
The Company leases retail store facilities and
distribution centers under non-cancellable operating leases, with terms ranging from one to 15 years, as well as finance leases for software,
equipment, and furniture with a term of five years. The Company considers those renewal or termination options that are reasonably certain
to be exercised in the determination of the lease term and initial measurement of right-of-use assets and lease liabilities.
Operating lease expenses for lease payment are
recognized on a straight-line basis over the lease term. Finance lease cost includes amortization, which is recognized on a straight-line
basis over the expected life of the leased assets, and interest expenses, which are recognized following an effective interest rate method.
Leases with an initial term of 12 months or less are not recorded on the balance sheet.
Operating Leases
The table below presents the operating lease related
assets and liabilities recorded on the consolidated balance sheets as of March 31, 2025 and 2024:
| | |
March 31,
2025 | | |
March 31,
2024 | |
| Operating lease right-of-use lease assets | |
$ | 6,031,284 | | |
$ | 3,979,727 | |
| | |
| | | |
| | |
| Operating lease liabilities – current | |
$ | 2,068,399 | | |
$ | 1,523,222 | |
| Operating lease liabilities – non-current | |
| 4,003,366 | | |
| 2,488,823 | |
| Total operating lease liabilities | |
$ | 6,071,765 | | |
$ | 4,012,045 | |
Other supplemental information for all of operating
leases as of March 31, 2025 and 2024 was as follows:
| | | March 31,
2025 | | | March 31,
2024 | | | Remaining lease term and discount rate: | | | | | | | | Weighted average remaining lease term (years) | | | 4.00 | | | | 4.25 | | | Weighted average discount rate (1) | | | 6.36 | % | | | 4.77 | % | | Gains on sales and leaseback transactions (2) | | $ | - | | | $ | 731,638 | |
| (1) | The Company used incremental borrowing rates ranging from 2.03% to 6.69% for its lease contracts in Japan; incremental borrowing rates ranging from 2.83% to 3.19% for its lease contracts in Hong Kong; and incremental borrowing rates of 5.25% and 8.50% for its lease contracts in Canada and the United States, respectively. |
| (2) | On December 14, 2023, the Company entered into a Real Estate Sales Agreement (“Sales Agreement”) with a third-party buyer (the “Buyer”). Pursuant to the agreement, the Company sold its head office in Japan including the building and land to the Buyer for a total consideration of ¥430.0 million. On February 28, 2024, the Company entered into a Rental Agreement with the Buyer, pursuant to the agreement, the Company leased the same building for its head office for two years from February 28, 2024 to February 27, 2026, with a monthly rental of ¥1.75 million. The Company determined that these transactions should be accounted as sales and leaseback transaction as the control of the head office was transferred to the Buyer, and recognized a gain of $731,638 on disposal of the building and land on February 29, 2024. |
During the fiscal years ended March 31, 2025,
2024, and 2023, the Company incurred total operating lease expenses of $2,567,419, $1,978,211, and $2,126,918, respectively.
Finance Leases
The components of finance lease expenses were as follows:
| | |
For the Fiscal Years Ended March 31, | |
| | |
2025 | | |
2024 | | |
2023 | |
| Finance leases cost: | |
| | |
| | |
| |
| Amortization of right-of-use assets | |
$ | 120,005 | | |
$ | 351,626 | | |
$ | 237,802 | |
| Interest on lease liabilities | |
| 58,671 | | |
| 80,738 | | |
| 72,678 | |
| Total finance leases cost | |
$ | 178,676 | | |
$ | 432,364 | | |
$ | 310,480 | |
Supplemental cash flow information related to finance leases was as
follows:
| | |
For the Fiscal Years Ended March 31, | |
| | |
2025 | | |
2024 | | |
2023 | |
| Cash paid for amounts included in the measurement of lease liabilities: | |
| | |
| | |
| |
| Operating cash flows from finance leases | |
$ | 58,671 | | |
$ | 80,738 | | |
$ | 72,678 | |
Supplemental balance sheet information related
to leases as of March 31, 2025 and 2024 was as follows:
| | |
March 31,
2025 | | |
March 31,
2024 | |
| Finance leases cost: | |
| | |
| |
| Software | |
$ | 499,591 | | |
$ | 496,438 | |
| Equipment and furniture | |
| 1,024,140 | | |
| 1,082,560 | |
| Subtotal | |
| 1,523,731 | | |
| 1,578,998 | |
| Less: accumulated depreciation | |
| (1,343,156 | ) | |
| (1,324,770 | ) |
| Property and equipment, net | |
$ | 180,575 | | |
$ | 254,228 | |
The weighted average remaining lease terms and
discount rates for all of finance leases as of March 31, 2025 and 2024 were as follows:
| | | March 31,
2025 | | | March 31,
2024 | | | Remaining lease term and discount rate: | | | | | | | | Weighted average remaining lease term (years) | | | 1.96 | | | | 2.67 | | | Weighted average discount rate | | | 8.07 | % | | | 8.07 | % |
The following is a schedule, by years, of maturities
of lease liabilities as of March 31, 2025:
| | |
Operating Leases | | |
Finance Leases | |
| 2026 | |
$ | 2,395,872 | | |
$ | 156,629 | |
| 2027 | |
| 1,558,333 | | |
| 101,914 | |
| 2028 | |
| 1,255,566 | | |
| 20,331 | |
| 2029 | |
| 938,817 | | |
| 793 | |
| 2030 | |
| 365,302 | | |
| - | |
| Thereafter | |
| 454,304 | | |
| - | |
| Total lease payments | |
| 6,968,194 | | |
| 279,667 | |
| Less: imputed interest | |
| (896,429 | ) | |
| (22,419 | ) |
| Present value of lease liabilities | |
$ | 6,071,765 | | |
$ | 257,248 | |
|