BK Technologies Corp Leases Disclosure

8. Leases

 

The Company accounts for its leasing arrangements in accordance with ASC Topic 842, “Leases”. The Company leases manufacturing and office facilities and equipment under operating leases and determines if an arrangement is a lease at inception. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

 

As most of its leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company has lease agreements with lease and non-lease components, which are accounted for separately.

 

The Company leases approximately 54,000 square feet (not in thousands) of industrial space in West Melbourne, Florida, under a non-cancellable operating lease. The lease has the expiration date of June 30, 2027. The lease includes an option for one additional extension period of five (5) years commencing July 1, 2027 and terminating at midnight June 30, 2032. Rental, maintenance and tax expenses for this facility were approximately $677 and $625 in 2025 and 2024, respectively. In February 2026, we entered into a new lease relating to this property, pursuant to which we will lease approximately 31,500 square feet (not in thousands) of industrial space at 7100 Technology Drive in West Melbourne, Florida. The lease will commence in February 2027, has a term of 125 months, and includes two five year renewal options.

 

In February 2020, the Company entered into a lease for 6,857 square feet (not in thousands) of office space at Sawgrass Technology Park, 1619 NW 136th Avenue in Sunrise, Florida, for a period of 64 months commencing July 1, 2020. The Company executed a lease extension agreement on September 24, 2025, that extended existing terms until an additional 1,514 square feet (not in thousands) of expansion premises is available for occupation by the Company.  At the date that the expansion premises are available for occupancy, the Company will begin a new lease extension period for an additional sixty-two (62) month term, for approximately 8,371 total square feet (not in thousands).  The lease extension includes two (2) additional five (5) year renewal options, at the sole discretion of the Company.  The lease liability and right-of-use asset as of December 31, 2025, include payments for renewal periods that are reasonably certain to be exercised, in accordance with ASC 842.  Annual rental, maintenance and tax expenses for the facility were approximately $225 and $224 in 2025 and 2024, respectively. 

 

Lease costs consist of the following:

 

		December 31,
		2025				2024
Operating lease cost		$	541			$	543
Variable lease cost			134				133
Total lease cost		$	675			$	676

 

Supplemental cash flow information related to leases was as follows:

 

		December 31,
		2025				2024
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows (fixed payments)		$	625			$	611
Operating cash flows (liability reduction)			571				528

 

Other information related to operating leases was as follows:

 

		December 31,
		2025		2024
Weighted average remaining lease term (in years)		2.39		2.36
Weighted average discount rate		5.50%		5.50%

 

Maturity of operating lease liabilities as of December 31, 2025 were as follows:

 

		Year ending
		December 31,
2026		$	666
2027			435
2028			196
2029			199
2029			203
Thereafter			34
Total payments			1,733
Less: imputed interest			(158	)
Total liability		$	1,575