Note 7 - Leases

3 Months Ended

Jan. 31, 2022

Notes to Financial Statements

Lessee, Operating and Finance Leases Disclosure [Text Block]

(7) Leases

The Company has an operating lease agreement for approximately 34,000 square feet of office, manufacturing and warehouse space in Plano, Texas (near Dallas). The lease term expires on November 30, 2024.

The Company has an operating lease agreement for approximately 36,000 square feet of warehouse space in Roanoke, Virginia. The lease term expires on April 30, 2023.

The Company also leases certain equipment under operating leases with initial 60 month terms.

OCC leases printers that are used in the Roanoke, Virginia manufacturing facility. The lease term expires on August 22, 2026. The right-of-use asset is being amortized on a straight line basis over seven years. When the lease term ends, the remaining net book value of the right-of-use asset will be classified as property and equipment.

The Company’s lease contracts may include options to extend or terminate the lease. The Company exercises judgment to determine the term of those leases when such options are present and include such options in the calculation of the lease term when it is reasonably certain that it will exercise those options.

The Company includes contract lease components in its determination of lease payments, while non-lease components of the contracts, such as taxes, insurance, and common area maintenance, are expensed as incurred. At commencement, right-of-use assets and lease liabilities are measured at the present value of future lease payments over the lease term. The Company uses its incremental borrowing rate based on information available at the time of lease commencement to measure the present value of future payments.

Operating lease expense is recognized on a straight-line basis over the lease term. Short term leases with an initial term of 12 months or less are expensed as incurred. The Company’s short term leases have month-to-month terms.

Operating lease right-of-use assets of $938,870 and $1,028,639 were included in other assets at January 31, 2022 and October 31, 2021, respectively. Operating lease liabilities of $392,889 and $628,608 were included in accounts payable and accrued expenses, and other noncurrent liabilities, respectively, at January 31, 2022. Operating lease liabilities of $385,463 and $729,753 were included in accounts payable and accrued expenses, and other noncurrent liabilities, respectively, at October 31, 2021. Operating lease expense recognized during the three months ended January 31, 2022 and 2021 totaled $103,333 and $100,348, respectively.

The weighted average remaining lease term was 32.4 months and the weighted average discount rate was 5.0% as of January 31, 2022.

For the three months ended January 31, 2022 and 2021, cash paid for operating lease liabilities totaled $107,284 and $97,300, respectively. For the three months ended January 31, 2022 and 2021, there were no right-of-use assets obtained in exchange for new operating lease liabilities.

Financing lease right-of-use assets of $192,962 and $200,337 were included in other assets at January 31, 2022 and October 31, 2021, respectively.  Financing lease liabilities of $34,476 and $157,862 were included in accounts payable and accrued expenses and other noncurrent liabilities, respectively, at January 31, 2022.  Financing lease liabilities of $34,071 and $166,634 were included in accounts payable and accrued expenses and other noncurrent liabilities, respectively, at October 31, 2021.  Interest expense and amortization expense related to the financing lease totaled $2,350 and $7,374, respectively, for the three months ended January 31, 2022. 

The remaining lease term for the financing lease is 55 months and the discount rate is 4.75% as of January 31, 2022.

For the three months ended January 31, 2022, cash paid for the financing lease liability totaled $2,350 for interest and $8,366 for principal.

The Company’s future payments due under leases reconciled to the lease liabilities are as follows:

Fiscal Year	Operating leases			Finance lease
2022  (1)	$	325,201		$	32,151
2023		382,716			42,868
2024		331,438			42,868
2025		55,023			42,868
2026		—			55,715
Total undiscounted lease payments		1,094,378			216,470
Present value discount		(72,881	)		(24,132	)
Total lease liability	$	1,021,497		$	192,338

(1) Remaining nine months of fiscal year 2022