Note J – Leases

The Company leases office and storage space, vehicles and other equipment under non-cancellable operating leases with initial terms typically ranging from 1 to 5 years. At contract inception, the Company reviews the facts and circumstances of the arrangement to determine if the contract is or contains a lease. The Company follows the guidance in Topic 842 to evaluate whether the contract has an identified asset; if the Company has the right to obtain substantially all economic benefits from the asset; and if the Company has the right to direct the use of the underlying asset. When determining if a contract has an identified asset, the Company considers both explicit and implicit assets, and whether the supplier has the right to substitute the asset. When determining if the Company has the right to direct the use of an underlying asset, the Company considers if they have the right to direct how and for what purpose the asset is used throughout the period of use and if they control the decision-making rights over the asset.

The Company’s lease terms may include options to extend or terminate the lease. The Company exercises judgment to determine the term of those leases when extension or termination 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 has elected to include both lease and non-lease components in the determination of lease payments. Payments made to a lessor for items such as taxes, insurance, common area maintenance, or other costs commonly referred to as executory costs, are also included in lease payments if they are fixed. The fixed portion of these payments are included in the calculation of the lease liability, while any variable portion would be recognized as variable lease expenses, when incurred. Variable payments made to third parties for these, or similar costs, such as utilities, are not included in the calculation of lease payments.

At commencement, lease-related assets and liabilities are measured at the present value of future lease payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company exercises judgment in determining the incremental borrowing rate based on the information available at when the lease commences to measure the present value of future payments.

Operating lease expense is recognized on a straight-line basis over the lease term. Finance lease cost includes amortization, which is recognized on a straight-line basis over the expected life of the leased asset, and interest expense, which is recognized following an effective interest rate method.

Operating leases are included in other assets, current operating lease obligations, and operating lease obligations (less current portion) on the Company’s consolidated balance sheet. Finance leases are included in property, plant and equipment and current and long-term portion of finance lease

Note J – Leases – Continued

obligations on the Company’s consolidated balance sheet. Short term leases with an initial term of 12 months or less are not presented on the balance sheet with expense recognized as incurred.

The following table presents lease assets and liabilities and their balance sheet classification:


			October 31,		April 30,
	Classification		2020		2020
Operating Leases:
Right-of-use Assets	Other assets	$	7,333,290	$	7,235,166
Operating lease current liabilities	Current portion of operating lease obligations		2,078,990		2,150,161
Operating lease noncurrent liabilities	Operating lease obligations, less current portion		5,457,117		5,281,811
Finance Leases:
Right-of-use Assets	Property, plant and equipment		5,702,281		6,443,954
Finance lease current liabilities	Current portion of finance lease obligations		1,650,763		1,902,295
Finance lease noncurrent liabilities	Finance lease obligations, less current portion		1,124,309		1,884,722

The components of lease expense for the three and six month periods ended October 31, 2020 and 2019, are as follows:


		Three Months	Three Months	Six Months	Six Months
		Ended	Ended	Ended	Ended
		October 31,	October 31,	October 31,	October 31,
	Classification	2020	2019	2020	2019
Operating Leases:
Operating lease cost	Operating expenses	353,317	625,339	727,012	1,219,833
Variable lease cost	Operating expenses	78,347	73,897	156,694	147,794
Short term lease cost	Operating expenses	1,350	1,350	2,700	2,700
Finance Leases:
Amortization of right-of-use assets	Operating expenses	493,042	384,192	912,735	731,567
Interest expense	Interest expense	56,043	74,340	122,401	142,126
Total		982,099	1,159,118	1,921,542	2,244,020

Note J – Leases – Continued

The weighted average lease term and discount rates for the quarter ended October 31, 2020 and 2019, are as follows:


	October 31,	October 31,
	2020	2019
Operating Leases:
Weighted average remaining lease term (months)	58.40	44.20
Weighted average discount rate	3.1%	3.9%
Finance Leases:
Weighted average remaining lease term (months)	22.25	29.02
Weighted average discount rate	7.7%	6.5%

Future payments due under leases reconciled to lease liabilities are as follows:


		Operating Leases		Finance Leases
For the remaining 6 months of the fiscal year ending April 30:
2021	$	1,226,071	$	983,279
For the fiscal years ending April 30:
2022		1,638,910		1,374,628
2023		1,925,251		498,307
2024		1,822,917		167,721
2025		635,387		-
2026		146,489		-
Thereafter		199,353		-
Total undiscounted lease payments		7,594,378		3,023,935
Present value discount, less interest		58,271		248,863
Lease liability	$	7,536,107	$	2,775,072

Note J – Leases – Continued

Supplemental disclosures of cash flow information related to leases for the six months ended October 31, 2020 and 2019 are as follows:


	Six Months	Six Months
	Ended	Ended
	October 31,	October 31,
Other Information	2020	2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from finance leases	122,401	142,126
Operating cash flows from operating leases	109,917	126,363
Financing cash flows from finance leases	1,011,945	1,162,403
Supplemental non-cash information on lease labilities arising from obtaining right-of-use assets:
Right-of-use assets obtained in exchange for new finance lease liabilities	-	671,446
Right-of-use assets obtained in exchange for operating lease liabilities	1,162,451	1,630,006