Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Leases

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Note 5 - Leases
9 Months Ended
Sep. 30, 2021
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]

5. LEASES

 

The Company leases 7,300 square feet of office space in Hong Kong and 4,900 square feet of office space in Rolling Hills Estates, California for its corporate staff.  In June 2020, the Company extended the Rolling Hills Estates office lease for an additional five years with a term now expiring in September 2030.  Effective July 1, 2020, the Company modified the terms of its largest Hong Kong office lease resulting in a lease extension through June 2023.  To help further develop the market for its products in North America, the Company leases 1,600 square feet of retail space in each of Rowland Heights, California and Richmond, British Columbia and 2,000 square feet of retail space in Metuchen, New Jersey. The Rowland Heights, Richmond and Metuchen locations have terms expiring in November 2025, February 2024, and November 2022, respectively.

 

The Company leases eight branch offices throughout China, and additional office space in Peru, Japan, Taiwan, South Korea, Singapore, Malaysia, Vietnam, Indonesia, Thailand, India, and the Cayman Islands. The Company also leases a factory in Zhongshan, China. The Company contracts with third parties for fulfillment and distribution operations in all of its international markets. None of the Company’s third party logistics contracts contain a lease as the Company does not have the right to access the warehouses or move its inventories at will.

 

The components of lease cost for the three and nine months ended September 30, 2021 and 2020 were as follows (in thousands):

 

   

Three Months Ended September 30,

   

Nine Months Ended September 30,

 
   

2021

   

2020

   

2021

   

2020

 

Operating leases

  $ 338     $ 377     $ 996     $ 1,292  

Short-term leases

    44       72       133       237  

Total lease cost

  $ 382     $ 449     $ 1,129     $ 1,529  

 

Cash paid for amounts included in the measurement of operating leases liabilities was $327,000 and $342,000 for the three months ended  September 30, 2021 and 2020, respectively, and $1.0 million and $1.2 million for the nine months ended September 30, 2021 and 2020, respectively.

 

The weighted-average remaining lease term and discount rate related to operating leases as of September 30, 2021 were as follows:

 

Weighted-average remaining lease term (in years)

    5.1  

Weighted-average discount rate

    3.3 %

 

As most of our leases do not provide an implicit rate, the Company used its incremental borrowing rate, or the rate of each of its subsidiaries if available, based on the information available at the lease commencement date to determine the present value of lease payments.

 

The annual scheduled lease payments of our operating lease liabilities as of September 30, 2021 were as follows (in thousands):

 

Remainder of 2021

  $ 327  

2022

    1,303  

2023

    675  

2024

    272  

2025

    261  

Thereafter

    990  

Total lease payments

  $ 3,828  

Less: imputed interest

    (315 )

Present value of lease liabilities

  $ 3,513  

 

For all asset classes, the Company elected not to recognize assets or liabilities at the acquisition date for leases that, at the acquisition date, have a remaining lease term of 12 months or less. Additionally, for all asset classes, the Company choose not to separate nonlease components from lease components and instead account for the combined lease and nonlease components associated with that lease component as a single lease component.