Quarterly report pursuant to Section 13 or 15(d)

Note 10 - Leases

v3.20.4
Note 10 - Leases
3 Months Ended
Dec. 31, 2020
Notes to Financial Statements  
Lessee, Operating Leases [Text Block]
Note
10.
Leases
 
The Company leases an
85,000
square foot facility at
7050
Winnetka Avenue North, Brooklyn Park, Minnesota consisting of our corporate offices, manufacturing and warehouse space. The lease term is
ten
years and
two
months, ending on
February 28, 2025. 
Upon proper notice and payment of a termination fee of approximately
$249,000,
the Company has a
one
-time option to terminate the lease effective as of the last day of the
eighth
year of the term after the Company commenced paying base rent. The renewal and termination options have
not
been included within the lease term because it is
not
reasonably certain that the Company will exercise either option.
 
On
October 9, 2020,
the Company entered into an indirect lease arrangement for its original
46,000
square foot manufacturing facility in Tijuana, Mexico. The Company had previously been leasing this facility on a month to month basis after its
three
-year lease expired on
July 31, 2020.
The new lease term is
three
years. This lease contains a written option to renew and rent payments that increase annually based on U.S. inflation for the preceding
12
months.
 
On
February 12, 2020,
the Company entered into an indirect lease arrangement for an additional
52,000
square foot manufacturing facility in Tijuana, Mexico. The lease term is approximately
42
months and commenced on
February 12, 2020.
The lease contains written options to renew for
two
additional consecutive periods of
three
years each.
 
Right-of-use lease assets and lease liabilities are recognized as of the commencement date based on the present value of the remaining lease payments over the lease term which includes renewal periods the Company is reasonably certain to exercise. The Company's leases do
not
contain any material residual value guarantees or material restrictive covenants. As of
December 31, 2020,
the Company does
not
have material lease commitments that have
not
commenced.
 
Operating lease expense included within cost of goods sold and selling, general and administrative expense was as follows for the
three
months ended
December 31, 2020:
 
Operating lease expense under ASC842, Leases, within:   Three months ended
December 31, 2020
  Three months ended
December 31, 2019
Cost of goods sold   $
252,936
    $
185,628
 
Selling, general and administrative    
55,398
     
56,366
 
Total lease expense   $
308,334
    $
241,994
 
 
Future maturities of lease liabilities were as follows as of
December 31, 2020:
 
FY2021   $
725,783
 
FY2022    
986,844
 
FY2023    
943,682
 
FY2024    
516,725
 
FY2025    
217,552
 
Thereafter    
-
 
Total lease payments    
3,390,586
 
Less: Interest    
(208,720
)
Present value of lease liabilities   $
3,181,866
 
 
The weighted average term and weighted average discount rate for the Company's leases as of
December 31, 2020
were
3.56
years and
3.40%,
respectively, compared to
4.94
years and
3.51%,
respectively, as of
December 31, 2019.
For the
three
months ended
December 31, 2020,
the operating cash outflows from the Company's leases was
$239,735,
compared to
$167,840
for the
three
months ended
December 31, 2019.