Note 4 - Leases

6 Months Ended

Jun. 30, 2025

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note 4.  Leases

The Company leases space under non-cancellable operating leases for manufacturing facilities, research and development offices and certain storage facilities and apartments. These leases do not contain contingent rent provisions. The Company also leases certain machinery, office equipment and a vehicle under operating leases. The Company determines if an arrangement is or contains a lease at contract inception. Many of its leases include both lease (e.g. fixed payments including rent, taxes, and insurance costs) and non-lease components (e.g. common-area or other maintenance costs) which are accounted for as a single lease component as the Company has elected the practical expedient to group lease and non-lease components for all leases. Several of the leases include one or more options to renew which have been assessed and either included or excluded from the calculation of the lease liability of the right of use ("ROU") asset based on management’s intentions and individual fact patterns. Several warehouses and apartments have non-cancellable lease terms of less than one-year and therefore, the Company has elected the practical expedient to exclude these short-term leases from its ROU asset and lease liabilities

On  October 7, 2024, Prime World entered into a Land and Building Lease Agreement with San Ho Enterprise Co., Ltd., under which Prime World will lease approximately 3,537 square meters, or approximately 38,072 square feet, of two adjoining parcels of land, in New Taipei City. The lease also includes a building on these parcels, totaling approximately 3,406 square meters, or approximately 36,662 square feet. The lease term is for fifteen years, commencing on  December 1, 2024, and ending on  November 30, 2039. A two-month renovation period from  October 1 to  November 30, 2024,  preceded the lease term, during which no rent was charged by San Ho Enterprise Co., Ltd. During the lease term, the monthly rent will increase by three percent (3%) every three years. 

On June 7, 2025, Prime World entered into a Land and Building Lease Agreement with San Ho Electric Machinery Industry Co., Ltd., under which Prime World will lease a parcel of land with a total area of approximately 10,040 square meters, or approximately 108,070 square feet, in Taoyuan City. The lease also includes a building on the parcel, totaling approximately 12,226 square meters, or approximately 131,600 square feet. The lease term is for fifteen years, commencing on September 1, 2025, and ending on August 31, 2040. A three-month renovation period from June 1 to August 31, 2025, will precede the lease term, during which no rent will be charged by San Ho Electric Machinery Industry Co., Ltd. During the lease term, the monthly rent will increase by three percent (3%) every three years.

As most of the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. Based on the applicable lease terms and current economic environment, the Company applies a location approach for determining the incremental borrowing rate.

Lease expense is included under general and administrative expenses and were $0.8 million and $0.3 million for the three months ended June 30, 2025 and 2024, respectively. Lease expense is included under general and administrative expenses and were $1.3 million and $0.6 million for the six months ended June 30, 2025 and 2024, respectively. The components of lease expense were as follows for the periods indicated (in thousands):

	Three months ended June 30,				Six months ended June 30,
	2025		2024		2025		2024
Operating lease expense	$	509	$	290	$	915	$	586
Short Term lease expense		285		10		357		22
Total lease expense	$	794	$	300	$	1,272	$	608

Maturities of lease liabilities are as follows for the future one-year periods ending  June 30, 2025 (in thousands):

Fiscal years:	Operating
2025 (remaining 6 months)	$	1,259
2026		2,654
2027		2,653
2028		2,667
2029		2,682
2030 and thereafter		17,346
Total lease payments		29,261
Less imputed interest		(6,266	)
Present value	$	22,995

The weighted average remaining lease term and discount rate for the leases were as follows for the periods indicated:

	Six months ended June 30,
	2025			2024
Weighted Average Remaining Lease Term (Years) - operating leases		12.81			4.71
Weighted Average Discount Rate - operating leases		3.13	%		3.13	%

Supplemental cash flow information related to the leases was as follows for the periods indicated (in thousands):

	Six months ended June 30,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,079	$	318