Note 10 - Leases

3 Months Ended

Apr. 30, 2023

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note 10 - Leases

Operating Leases. In August 2020, the Company entered into a new lease in Abu Dhabi for land upon which the Company intends to build a facility. The annual payments were initially approximately 1.2 million U.A.E. Dirhams (approximately $0.8 million at April 30, 2023), inclusive of rent and common charges, with escalation clauses in the agreement. Rent payments were deferred until August 2022 and have now commenced. The lease expires in August 2050. 

In March and December 2022, the Company served Notices of Termination to its lessor for the Company's lease of land and buildings in Fujairah in the U.A.E. The Company served the Notices of Termination in connection with the Company's intended relocation to a different facility in Abu Dhabi. The Company vacated portions of the leased space in December 2022 and is expected to vacate the remaining space in 2023. The first Notice of Termination required that the Company pay an additional amount equal to three months' rent after that termination to enable the lessor to prepare the assets for lease by another party. As a result of the termination, the Company has recognized adjustments to the amounts recorded in the consolidated financial statements as of April 30, 2023. The termination resulted in decreases of $0.3 million, $4.0 million and $3.6 million to operating lease liability short-term, operating lease liability long-term and operating lease right-of-use asset, respectively, in the consolidated balance sheets as of April 30, 2023. The termination also resulted in a decrease in rent expense of $1.1 million in the consolidated statement of operations for the year ended January 31, 2023. 

Finance Leases. In 2019, the Company obtained two finance leases for a total of CAD 1.1 million (approximately $0.8 million at the prevailing exchange rates on the transaction dates) to finance vehicle equipment. The interest rates for these finance leases were 8.0% per annum with monthly principal and interest payments of less than $0.1 million. These leases mature in August 2023.  

The Company has several significant operating lease agreements, with lease terms of one to thirty years, which consist of real estate, vehicles and office equipment leases. These leases do not require any contingent rental payments, impose any financial restrictions or contain any residual value guarantees.  Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right-of-use ("ROU") assets as the Company is not reasonably certain to exercise the options.  The Company does not have any arrangements where it acts as a lessor, other than one sub-lease arrangement. 

At April 30, 2023, the Company had total operating lease liabilities of $5 million and operating ROU assets of $4.3 million, which are reflected in the consolidated balance sheets. At April 30, 2023, the Company also had total finance lease liabilities of $0.1 million included in current maturities of long-term debt, and total finance ROU assets of $0.4 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheets.

Supplemental balance sheet information related to leases is as follows (in thousands): 

Operating and Finance leases:	April 30, 2023			January 31, 2023
Finance leases assets:
Property and Equipment - gross	$	825		$	1,161
Accumulated depreciation and amortization		(422	)		(700	)
Property and Equipment - net	$	403		$	461
Finance lease liabilities:
Finance lease liability short-term	$	79		$	164
Total finance lease liabilities	$	79		$	164
Operating lease assets:
Operating lease ROU assets	$	4,338		$	4,527
Operating lease liabilities:
Operating lease liability short-term	$	823		$	912
Operating lease liability long-term		4,210			4,252
Total operating lease liabilities	$	5,033		$	5,164

Total lease costs consist of the following (in thousands): 

		Three Months Ended April 30,
Lease costs	Consolidated Statements of Operations Classification	2023			2022
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	53		$	64
Interest on lease liabilities	Interest expense		3			10
Operating lease costs	Cost of sales, SG&A expenses		456			(107	)
Short-term lease costs (1)	Cost of sales, SG&A expenses		179			66
Sub-lease income	SG&A expenses		(20	)		(20	)
Total Lease costs		$	671		$	13

(1) Includes variable lease costs, which are immaterial.

Supplemental cash flow information related to leases is as follows (in thousands):

	Three Months Ended April 30,
	2023		2022
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash outflows from finance leases	$	83	$	90
Operating cash outflows from finance leases		3		10
Operating cash outflows from operating leases		468		343
ROU Assets obtained in exchange for new lease obligations:
Operating leases liabilities	$	129	$	132

	Three Months Ended April 30,
	2023		2022
ROU Assets obtained in exchange for new lease obligations:
Operating leases liabilities		129		132

Weighted-average lease terms and discount rates are as follows: 

	April 30, 2023
Weighted-average remaining lease terms (in years):
Finance leases		0.3
Operating leases		20.2
Weighted-average discount rates:
Finance leases		16.3	%
Operating leases		8.2	%

Maturities of lease liabilities as of April 30, 2023, are as follows (in thousands):

	Operating Leases			Finance Leases
For the nine months ending January 31, 2024	$	1,108		$	81
For the year ending January 31, 2025		694			-
For the year ending January 31, 2026		487			-
For the year ending January 31, 2027		453			-
For the year ending January 31, 2028		415			-
For the year ending January 31, 2029		378			-
Thereafter		7,147			-
Total lease payments		10,682			81
Less: amount representing interest		(5,649	)		(2	)
Total lease liabilities at April 30, 2023	$	5,033		$	79

Rent expense on operating leases, which is recorded on straight-line basis, was $0.7 million and $0.9 millionfor the three months ended  April 30, 2023 and 2022, respectively.