Note 12 - Restricted Cash and Gain on Insurance Proceeds

6 Months Ended

Apr. 30, 2023

Notes to Financial Statements

Unusual or Infrequent Items, or Both, Disclosure [Text Block]

(12) Restricted Cash and Gain on Insurance Proceeds

Restricted Cash

At the end of December 2022, an office building and its contents at the Company’s Asheville facilities sustained water damage resulting from a burst pipe in the sprinkler system. The office building is separate from the Company’s manufacturing building which houses its manufacturing operations and certain offices at the same location. The Company has insurance coverage for the office building, its contents and certain business expenses to cover damages and any losses incurred.

As of April 30, 2023, the Company has restricted cash of $1,517,885, resulting from the receipt of a portion of the proceeds from the insurance claim for which offsetting expenses have not yet been incurred. The insurance proceeds recorded as restricted cash relate to the collateral for the Company’s real estate term loans with Northeast Bank and, as a result, are held in escrow. Cash may be released from escrow as the Company submits details of expenses incurred for restoration and repair of the related property to Northeast Bank. Any cash remaining in escrow after any restoration and repairs are completed, will be available for the benefit of the Company or to pay down the real estate term loans once Northeast Bank is satisfied that the collateral has been returned to an acceptable state. Cash may also be released from escrow in the event the Company pays off the real estate term loans with Northeast Bank.

Gain on Insurance Proceeds

During the second quarter of fiscal year 2023, the Company received insurance proceeds in connection with the office building and its contents at the Company’s Asheville facilities sustaining water damage from a burst pipe at the end of December 2022. The office building damaged is separate from the Company’s manufacturing building, which houses its manufacturing operations and certain offices at the same location. There was no significant impact to the Company’s operations as a result of this event.

Insurance proceeds for all assets covered, net of applicable deductibles, received through April 30, 2023 totaled $2,056,008. During the first half of fiscal year 2023, the Company recorded a loss on property and equipment totaling $7,538 and incurred expenses for building stabilization and cleaning, removal of damaged items, and other miscellaneous and related activities totaling $359,718.

Insurance proceeds received in excess of expenses incurred through April 30, 2023, a net total of $1,696,290, is included in other income (expense), net as a gain on insurance proceeds received for damage to property and equipment on the Company’s condensed consolidated statement of operations. To the extent the Company incurs expenses in future periods for renovation, repair or replacement or damaged assets, the Company may recognize offsetting losses in those future periods. The Company does not expect any future restoration and repair costs to exceed any insurance proceeds.