NATURAL HEALTH TRENDS CORP Leases Disclosure

6.     LEASES

 

The Company leases 4,900 square feet of corporate office space in Rolling Hills Estates, California with a term expiring in September 2030, and 7,300 square feet of corporate office space in Hong Kong with a term expiring in June 2026. In January 2026, the Company executed an agreement to sublease a portion of its corporate office space in Rolling Hills Estates, California for the duration of the lease term, effective February 1, 2026. To help further develop the market for its products in North America, the Company leases 1,600 square feet of retail space in Richmond, British Columbia, and 2,000 square feet of retail space in Metuchen, New Jersey. The Richmond and Metuchen locations have terms expiring in February 2027 and December 2028, respectively.

 

The Company leases seven branch offices throughout China, and additional office space in Peru, Japan, Taiwan, South Korea, Malaysia, India, Colombia and the Cayman Islands. 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.

 

In August 2025, the Company entered into a binding offer to lease 5,300 square feet of office space in Hong Kong to replace its existing corporate office space in Hong Kong. The lease is expected to commence on March 1, 2026 with a term expiring February 28, 2031. Monthly base rent is HKD 141,500 ($18,000) for years one through three and HKD 149,500 ($19,000) for years four and five, with base-rent-free periods from March 1, 2026 through April 30, 2026 and from August 1, 2029 through September 30, 2029. In addition, the Company will pay a monthly management fee of HKD 43,979 (6,000). The lease provides the Company with an early termination right upon not less than three months’ prior written notice, exercisable at any time from March 1, 2029 through February 28, 2031. The related right-of-use asset and lease liability will be recognized on the Company’s consolidated balance sheet at the lease commencement date in accordance with FASB ASC Topic 842, Leases.

 

The components of lease cost were as follows (in thousands):

 

		Year Ended December 31,
		2025				2024
Operating leases		$	1,248			$	1,279
Short-term leases			145				143
Total lease cost		$	1,393			$	1,422

 

Cash paid for amounts included in the measurement of operating leases liabilities was $1.3 million for each of 2025 and 2024.

 

The weighted-average remaining lease term and discount rate related to operating leases as of December 31, 2025 were as follows:

 

Weighted-average remaining lease term (in years)			3.2
Weighted-average discount rate			4.0	%

 

As most of the Company’s 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 the Company's operating lease liabilities as of December 31, 2025 were as follows (in thousands):

 

2026		$	900
2027			474
2028			344
2029			216
2030			162
Total lease payments			2,096
Less: imputed interest			(96	)
Present value of lease liabilities		$	2,000

 

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 has chosen not to separate nonlease components from lease components and instead accounts for the combined lease and nonlease components associated with that lease component as a single lease component.