Natural Health Trends Corp. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

LEASES

LEASES

3 Months Ended

Mar. 31, 2019

The Company leases 9,600 square feet of office space in Hong Kong with a term expiring in February 2021.

The Company leases 4,900 square feet of office space in Rolling Hills Estates, California with a term expiring in September 2025. To help further develop the market for its products in North America, the Company leases 2,400, 1,600 and 2,000 square feet of retail space in Monterey Park, California, Richmond, British Columbia, and Metuchen, New Jersey, respectively. The Monterey Park, Richmond and Metuchen locations have terms expiring in August 2020, February 2021, and November 2022, respectively.

The Company leases 9,000 square feet of office and retail space in Peru with a term expiring in July 2019. The Company leases nine branch offices throughout China, and additional office space in Japan, Taiwan, South Korea, Singapore, Malaysia,

Vietnam, Indonesia, Thailand, and the Cayman Islands. The Company also leases a multi-purpose facility and factory in Zhongshan, China and 11 service stations throughout the city of Guangzhou, China that serve or will in the future serve the needs of its Chinese consumers. 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 months ended March 31, 2019 were as follows (in thousands):



Operating leases	$	509
Short-term leases	66
Total lease cost	$	575

Cash paid for amounts included in the measurement of operating leases liabilities was $511,000 for the three months ended March 31, 2019.

The weighted-average remaining lease term and discount rate related to operating leases as of March 31, 2019 were as follows:



Weighted-average remaining lease term (in years)	3.4
Weighted-average discount rate	5.5	%

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 March 31, 2019 were as follows (in thousands):



Remainder of 2019	$	1,435
2020	1,566
2021	530
2022	403
2023	247
Thereafter	400
Total lease payments	$	4,581
Less: imputed interest	(474		)
Present value of lease liabilities	$	4,107

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.