Note 8 - Commitments and Contingencies

9 Months Ended

Nov. 30, 2024

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

8. COMMITMENTS AND CONTINGENCIES

Finance lease:

In connection with the Acquisition of MEI, the Company also entered into a Lease Agreement pursuant to which it agreed to lease the facility occupied by MEI, consisting of approximately 10,926 square feet of useable office and production space in Orange County, Florida for $10,650 per month. The Lease Agreement had an initial term of three years, with two five-year renewal options. The Lease Agreement also provided the Company with an option to purchase the leased property for $1,750,000 at any time before the six-month anniversary of the Lease Agreement. The Company exercised its option and completed the purchase on May 21, 2024. Accordingly, the right of use asset and lease liability were removed and the Company recorded the previously leased facility as property, plant, and equipment. See note 9 for the mortgage terms related to this purchase.

Under ASC 842-10-25-2 there are five criteria to determine if a lease is a finance lease, one of those criteria is if a purchase option is reasonably certain to be exercised. Since the purchase option was likely to be exercised, we treated the lease as a finance lease and included the purchase price of $1,750,000 as a current liability. The Company used an imputed interest rate of 8%.

	February 29, 2024
Fiscal Year Ending February 29	Amount
2024		1,750,000
Total Future Undiscounted Cash Flows	$	1,750,000
Less Imputed Interest to be recognized in lease expense		-
Finance Lease Liabilities, as reported	$	1,750,000

Balance Sheet Classification	February 29, 2024
Assets
Finance lease right-of-use assets, September 1, 2023	$	1,744,000
Amortization for the six months ended February 29, 2024		(29,000	)
Total finance lease right-of-use asset, February 29, 2024	$	1,715,000
Liabilities
Current
Finance lease liability, short-term	$	1,750,000
Non-current
Finance lease liability, long-term		-
Total lease liabilities	$	1,750,000

Contingencies:

We may from time to time become a party to various legal proceedings arising in the ordinary course of business. As of November 30, 2024, we had no known material current, pending, or threatened litigation.