Note

- Leases:

February 2016,

the FASB issued ASU

No.

2016

02,

“Leases (Topic

842

)”. This ASU requires that, for leases longer than

one

year, a lessee recognizes in the statements of financial position a right-of-use asset, representing the right to use the underlying asset for the lease term, and a lease liability, representing the liability to make lease payments. It also requires that for finance leases, a lessee recognizes interest expense on the lease liability, separately from the amortization of the right-of-use asset in the statements of earnings, while for operating leases, such amounts should be recognized as a combined expense. The firm adopted this ASU in

May 2019

under a modified retrospective approach.

The Company adopted ASU

2016

using a modified retrospective transition approach as of the Effective Date as permitted by the amendments in ASU

2018

11,

which provides an alternative modified retrospective transition method. As a result, the Company was

not

required to adjust its comparative period financial information for effects of the standard or make the new required lease disclosures for periods before the date of adoption (i.e.

May 1, 2019).

The Company has elected to employ the transitionary relief offered by the FASB and, therefore, has

not

reassessed (

) whether existing or expired contracts contain a lease, (

) lease classification for existing or expired leases or (

) the accounting for initial direct costs that were previously capitalized.

The Company leases office space in New York, NY and a warehouse and appurtenant office space in Lyndhurst, NJ. The Company has evaluated these leases and determined that they are operating leases under the definitions of the guidance of ASU

2016

02.

The right-of-use asset is initially measured at cost, which comprises the initial amount of the net present value of the lease liability adjusted for lease payments made at or before the lease commencement date, plus any initial direct costs incurred less any lease incentives received. For operating leases, the right-of-use asset is subsequently measured throughout the lease term at the carrying amount of the net present value of the lease liability, plus initial direct costs, plus (minus) any prepaid (accrued) lease payments, less the unamortized balance of lease incentives received.

May 1, 2019,

the Company recorded a right-of-use asset in the amount of

$9,575,000,

which represents the lease liability of

$10,340,000

adjusted for previously recorded unamortized lease incentives in the amount of

$765,000.

The right-of-use asset will be amortized over the remaining lease term in the amount equal to the difference between the calculated straight-line expense of the total lease payments less the monthly interest calculated on the remaining lease liability. As of

January 31, 2020,

the Company had a long-term lease asset of

$8,799,000

recorded in property and equipment in its consolidated condensed balance sheets.

The Company will recognize lease expense, calculated as the remaining cost of the lease allocated over the remaining lease term on a straight-line basis. Lease expense will be presented as part of continuing operations in the consolidated condensed statements of income. For the

nine

months ended

January 31, 2020,

the Company recognized

$1,125,000

in lease expense.

For the

nine

months ended

January 31, 2020,

the Company paid

$1,047,000

in rent relating to the leases. As a payment arising from an operating lease, the

$1,047,000

will be classified within operating activities in the consolidated condensed statements of cash flows.

The Company’s leases generally do

not

provide an implicit interest rate, and therefore the Company estimated an incremental borrowing rate, or IBR, as of the commencement date, to determine the present value of its operating lease liabilities. The IBR is defined under ASC

842

as the rate of interest that the Company would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments in a similar economic environment. The following table reconciles the undiscounted future minimum lease payments to the total operating lease liabilities recognized on the condensed consolidated balance sheet as of

January 31, 2020:

Fiscal years ended April 30,	(in thousands)
2020 *	$	354
2021		1,432
2022		1,506
2023		1,597
2024		1,634
Thereafter		5,265
Total undiscounted future minimum lease payments		11,788
Less: difference between undiscounted lease payments & the present value of future lease payments		2,144
Total operating lease liabilities	$	9,644

* Excludes the

nine

months ended

January 31, 2020