LEASE LIABILITIES

6 Months Ended

Dec. 31, 2021

LEASE LIABILITIES

LEASE LIABILITIES

NOTE 7 – LEASE LIABILITIES

 The Company leases office space and as a result of our adoption of ASC 842, the operating leases are reflected on our balance sheet within operating lease right-of-use (ROU) assets and the related current and non-current operating lease liabilities. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from lease agreement. Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectation regarding the terms. Variable lease costs such as common area maintenance, property taxes and insurance are expensed as incurred.

When the new accounting standard was adopted on July 1, 2019, the Company had current and long-term operating lease liabilities of $2,275,000 and $6,916,000, respectively, and right of use of assets of $8,348,000.  As of December 31, 2021, the Company had current and long-term operating lease liabilities of $3,109,000 and $5,341,000, respectively, and right of use of assets of $6,356,000.  As of June 30, 2021, the Company had current and long-term operating lease liabilities of $3,344,000 and $5,835,000, respectively, and right of use of assets of $6,887,000.

Future minimum lease payments on a discounted and undiscounted basis under these leases are as follows:

	Troika  Gower			Troika LaBrea			Corporate Englewood			Mission US Brooklyn			Mission US Manhattan			Mission UK London			Undiscounted Cash Flows
Discount rate		5.50	%		5.50	%		5.50	%		5.50	%		5.50	%		5.50	%
Remainder of 2022	$	633,000		$	883,000		$	51,000		$	719,000		$	23,000		$	245,000		$	2,554,000
2023		558,000			-			103,000			497,000			-			635,000			1,793,000
2024		580,000			-			107,000			509,000			-			635,000			1,831,000
2025		346,000			-			110,000			522,000			-			635,000			1,613,000
2026		-			-			113,000			535,000			-			528,000			1,176,000
2027		-			-			9,000			455,000			-						464,000
Total undiscounted minimum future payments	$	2,117,000		$	883,000		$	493,000		$	3,237,000		$	23,000		$	2,678,000		$	9,431,000
Imputed interest		(110,000	)		-			(140,000	)		(381,000	)		-			(350,000	)		(981,000	)
Total operating lease liabilities	$	2,007,000		$	883,000		$	353,000		$	2,856,000		$	23,000		$	2,328,000		$	8,450,000
Short-term lease liabilities	$	827,000		$	883,000		$	88,000		$	844,000		$	23,000		$	444,000		$	3,109,000
Long-term lease liabilities	$	1,180,000		$	-		$	265,000		$	2,012,000		$	-		$	1,884,000		$	5,341,000

Other information related to our operating leases is as follows:

	December 31, 2021
Weighted average remaining lease term in years	3.9 years
Weighted average discount rate		10.4	%

LEASE AGREEMENTS

On February 1, 2018, Troika Media Group entered into a five-year lease agreement for office space in Englewood Cliffs, NJ. The beginning lease expense was $4,120 per month escalating annually at 3.5% and the lease expires on January 31, 2023. In August 2021, the Company terminated the lease and Troika Services, Inc. entered into a new lease agreement for a larger office space within the same building. The beginning lease expense was $8,390 per month escalating annually at 3.0% for a term of five years expiring July 2026. As per accounting standard ASC 842, the Company is treating this lease as new agreement and recorded a loss of $3,000 from the early termination of the operating lease. As a result of the new lease agreement, the Company acquired $467,000 in right-of-use assets.

On January 9, 2014, Mission USA entered into a seven year and five-month lease agreement for office space in New York, NY. The lease expired in January 2022 and was not renewed.

On May 2, 2017, Mission USA entered into a ten-year lease agreement for office space in Brooklyn, NY. The beginning lease expense was $34,278 per month escalating annually at 2.5%. As part of the lease agreement, Mission USA received a rent abatement in months one through four of the lease. The lease expires on May 1, 2027. In August 2021, the Company amended the lease agreement and lowered the base rent beginning in July 2021 to $24,750 for twelve months, escalating to $28,875 in July 2022 for twelve months, and then returning to the original lease agreement. Contingent on the Company abiding by the payment terms stipulated in the amendment regarding the outstanding rent, the landlord agreed to abate $120,405 of this balance and the Company plans to record this abatement in August 2022 after fulfilling its obligations relating to the payment terms.

On April 6, 2016, Mission UK entered into a ten-year lease agreement for office space in London, UK. In April 2021, Mission UK terminated the original lease agreement and has agreed with the landlord to occupy the first floor of the building through June 2021 at £8,858 per month. In April 2021, Mission UK entered into a three-year lease agreement for office space in London, UK ending in April 2024. The lease expense is £39,173 ($52,875) per month throughout the life of the lease.

On February 1, 2020, Troika Production Group, LLC. entered into a five-year lease agreement for office space in Los Angeles, CA. The beginning lease expense is $42,265 and the lease provides for an escalation clause where the Company will be subject to an annual rent increase of 3.5%, year over year. The lease expires on January 31, 2025.

The Company accounts for leases based on the new accounting standard ASC 842 and recorded $940,000 and $746,000 in rent expense for the six months ended December 31, 2021 and 2020, respectively.

SUBLEASE AGREEMENTS

On January 19, 2018, Mission Media USA, Inc. entered into a four-year sublease agreement pertaining to the aforementioned office space in New York, NY. The sublease commenced on March 1, 2018, ended in January 2022, and was not renewed. The lease income was $22,496 per month escalating annually at 3.0%.

On April 19, 2018, Mission-Media Limited entered into a sublease agreement pertaining to a floor within the aforementioned office space in London, UK. The sublease commenced in April 2018 and terminated in March 2021. The lease income was £5,163 per month.