Note 11 - Leases

9 Months Ended

Oct. 31, 2024

Notes to Financial Statements

Lessee, Operating and Finance Leases [Text Block]

Note 11 - Leases

The Company classifies its leases as either operating or finance leases, which are recorded on the Company's consolidated balance sheets. Operating leases are included in operating lease right-of-use (“ROU”) assets, operating lease liabilities short-term, and operating lease liabilities long-term in the Company's consolidated balance sheets. Finance leases are included in property, plant and equipment, current maturities of long-term debt, and long-term debt less current maturities in the Company's consolidated balance sheets.

In calculating the ROU asset and lease liability, the Company elects to combine lease and non-lease components. Additionally, most of the Company's leases do not provide an implicit rate, resulting in the Company using its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

The Company excludes short-term leases having an initial term of 12 months or less in accordance with an accounting policy election and recognizes rent expense on a straight-line basis over the lease term.

Operating Leases. 

In August 2020, the Company entered into a new lease in Abu Dhabi for land upon which the Company built a facility. The initial annual payments were approximately 1.2 million U.A.E. Dirhams (approximately $0.3 million at  October 31, 2024), inclusive of rent, escalation clauses, and other common charges contained in the agreement. The lease expires in August 2050. 

In March and December 2022, the Company served Notices of Termination to its lessor in connection with a lease of land and buildings in Fujairah in the U.A.E., for which the Company intended to relocate to a different facility in Abu Dhabi. Portions of the leased space were vacated in December 2022, and the Company expects to vacate the remaining space in December 2024. In connection with the Notices of Termination, the Company was required to pay an additional amount equal to three months' rent. This also resulted in adjustments to reduce the carrying balances attributable to short-term and long-term operating lease liabilities and operating lease right-of-use assets by $0.4 million, $6.0 million, and $5.5 million, respectively. The additional payment and the effect of these adjustments were recorded in prior periods, and did not impact the Company's consolidated financial statements for the year ended  January 31, 2024, or during the three and nine months ended October 31, 2024. There were no other adjustments in connection with the Notices the Termination.

Finance Leases. 

The Company has several 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 ROU assets as the Company is not reasonably certain to exercise the options. 

At  October 31, 2024, the Company had finance lease liabilities of $0.1 million included in current maturities of long-term debt and long-term debt less current maturities, and financial ROU assets of $0.3 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: 

Operating and Finance leases	October 31, 2024			January 31, 2024
Finance leases assets:
Property and Equipment - gross	$	935		$	970
Accumulated depreciation and amortization		(615	)		(536	)
Property and Equipment - net	$	320		$	434
Finance lease liabilities:
Finance lease liability short-term	$	33		$	113
Finance lease liability long-term		53			-
Total finance lease liabilities	$	86		$	113
Operating lease assets:
Operating lease ROU assets	$	7,403		$	6,467
Operating lease liabilities:
Operating lease liability short-term	$	1,061		$	914
Operating lease liability long-term		7,104			6,270
Total operating lease liabilities	$	8,165		$	7,184

Total lease costs consist of the following: 

		Three Months Ended October 31,					Nine Months Ended October 31,
Lease costs	Consolidated Statements of Operations Classification	2024		2023			2024		2023
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	25	$	37		$	100	$	121
Interest on lease liabilities	Interest expense		1		3			5		7
Operating lease costs	Cost of sales, SG&A expenses		463		564			1,361		1,450
Short-term lease costs (1)	Cost of sales, SG&A expenses		151		99			384		350
Sub-lease income	SG&A expenses		-		(20	)		-		(61	)
Total Lease costs		$	640	$	683		$	1,850	$	1,867

(1) Includes variable lease costs, which are not material.

Supplemental cash flow information related to leases is as follows:

	Nine Months Ended October 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash outflows from finance leases	$	23	$	176
Operating cash outflows from finance leases		5		7
Operating cash outflows from operating leases		1,690		1,399
ROU assets obtained in exchange for new lease obligations:
Finance leases liabilities	$	-	$	139
Operating leases liabilities	$	1,718	$	3,615

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

	October 31, 2024
Weighted-average remaining lease terms (in years):
Finance leases		2.5
Operating leases		12.3
Weighted-average discount rates:
Finance leases		6.4	%
Operating leases		10.1	%

Maturities of lease liabilities as of October 31, 2024, are as follows:

		Operating Leases			Finance Leases
For the six months ending January 31, 2025	$	396		$	9
For the year ended January 31, 2026		2,154			37
For the year ended January 31, 2027		2,148			37
For the year ended January 31, 2028		2,147			9
For the year ended January 31, 2029		1,805			-
For the year ended January 31, 2030		773			-
Thereafter		7,162			-
Total lease payments	$	16,585		$	92
Less: amount representing interest		(8,420	)		(6	)
Total lease liabilities at October 31, 2024	$	8,165		$	86

Rent expense attributable to operating leases was $0.6 million for the three months ended  October 31, 2024 and 2023, respectively.