| LEASES |
At the inception of a contract, the
Group determines if the arrangement is, or contains, a lease. Right-of-use assets represent the Group’s right to use an underlying
asset over the lease term and lease liabilities represent the Group’s obligation to make lease payments derived from the lease.
Operating lease and finance lease ROU
assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease terms. Operating
leases mainly relate to plants and offices, while finance leases consist of production equipment and vehicles. Rent expense is recognized
on a straight-line basis over the lease terms.
On September 1, 2022, the Group
renewed leased plants with an original lease term expired on August 31, 2022 and extended the lease term for another five years
to August, 2027.
On November 7, 2023, the Group renewed
leased equipment with original leases term expired on August 20, 2023 and extended the lease term for another five years to February
19, 2028. The Group will obtain control of the equipment upon maturity of the leases.
On December 1, 2025, the Group renewed
the lease for its production plants whose original lease term expired on November 30, 2025, and extended the lease term for another two years
to November 30, 2027.
On December 24, 2024, the Group entered
into a finance lease agreement for a vehicle with monthly payments through June 20, 2029. Ownership of the vehicle will transfer to the
Group at lease expiration.
Balance sheet information related to
ROU assets and lease liabilities are as follows:
| | |
As of March 31, | |
| | |
2026 | | |
2025 | |
| Operating lease right-of-use assets | |
$ | 1,792,622 | | |
$ | 1,835,921 | |
| Less: accumulated amortization of operating lease right-of-use assets | |
| (924,204 | ) | |
| (729,897 | ) |
| Operating lease right-of-use assets, net | |
$ | 868,418 | | |
$ | 1,106,024 | |
| | |
| | | |
| | |
| Operating lease liabilities, current | |
$ | 573,650 | | |
$ | 473,116 | |
| Operating lease liabilities, non-current | |
| 296,436 | | |
| 633,249 | |
| Total operating lease liabilities | |
$ | 870,086 | | |
$ | 1,106,365 | |
| | |
As of March 31, | |
| | |
2026 | | |
2025 | |
| Finance lease right-of-use assets | |
$ | 214,314 | | |
$ | 203,764 | |
| Less: accumulated amortization of finance lease right-of-use-assets | |
| (67,582 | ) | |
| (9,286 | ) |
| Finance lease right-of-use assets, net | |
$ | 146,732 | | |
$ | 194,478 | |
| | |
| | | |
| | |
| Finance lease liabilities, current | |
$ | 38,816 | | |
$ | 36,277 | |
| Finance lease liabilities, non-current | |
| 88,723 | | |
| 127,834 | |
| Total finance lease liabilities | |
$ | 127,539 | | |
$ | 164,111 | |
The weighted average remaining lease
terms and discount rates for the operating lease and finance lease as of March 31, 2026 and 2025 are as follows:
| | | As of March 31, | | | | | 2026 | | | 2025 | | | Remaining lease term and discount rate: | | | | | | | | Weighted average remaining lease term (years) | | | | | | | | Operating lease | | | 1.52 | | | | 2.34 | | | Finance lease | | | 3.12 | | | | 4.11 | | | Weighted average discount rate (1) | | | | | | | | | | Operating lease | | | 4.33 | % | | | 4.77 | % | | Finance lease | | | 6.02 | % | | | 6.15 | % |
| (1) | The weighted-average discount rate is calculated on the basis of both (i) the discount rate for the lease that was used to calculate the lease liability balance for each lease as of the reporting date; and (ii) the remaining balance of the lease payments for each lease as of the reporting date. The Company’s lease agreements do not have a discount rate that is readily determinable. The incremental borrowing rate is determined at lease commencement or lease modification and represents the rate of interest the Group would have to pay to borrow on a collateralized basis over a similar term and an amount equal to the lease payments in a similar economic environment. |
The components of lease expenses for
the years ended March 31, 2026, 2025 and 2024 are as follows:
| | |
For the years ended March 31, | |
| | |
2026 | | |
2025 | | |
2024 | |
| Operating lease: | |
| | |
| | |
| |
| Operating lease expense | |
$ | 581,553 | | |
$ | 567,188 | | |
$ | 589,105 | |
| Short-term lease expense | |
| 49,024 | | |
| 45,086 | | |
| 86,084 | |
| Total operating lease expenses | |
| 630,577 | | |
| 612,274 | | |
| 675,189 | |
| Finance leases: | |
| | | |
| | | |
| | |
| Amortization expense | |
| 47,323 | | |
| 15,301 | | |
| 4,675 | |
| Interest expense | |
| 9,272 | | |
| 3,251 | | |
| 888 | |
| Total finance lease expenses | |
| 56,595 | | |
| 18,552 | | |
| 5,563 | |
| Total lease expenses | |
$ | 687,172 | | |
$ | 630,826 | | |
$ | 680,752 | |
For the years ended March 31, 2026, 2025 and 2024, cash paid for operating
leases were $581,553, $571,159 and $575,014, and cash paid for finance leases were $45,580, $49,345 and $4,322, respectively. The following table summarizes the
maturity of lease liabilities and future minimum payments of leases as of March 31, 2026:
| | |
Operating
lease | | |
Finance
lease | |
| Year ending March 31, | |
| | |
| |
| 2027 | |
$ | 597,686 | | |
$ | 45,549 | |
| 2028 | |
| 295,205 | | |
| 44,650 | |
| 2029 | |
| 4,049 | | |
| 40,160 | |
| 2030 | |
| - | | |
| 10,040 | |
| Total lease payments | |
| 896,940 | | |
| 140,399 | |
| Less: imputed interest | |
| (26,854 | ) | |
| (12,860 | ) |
| Total lease liabilities | |
$ | 870,086 | | |
$ | 127,539 | |
|