NOTE F – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

The Company’s leases primarily represent offices, warehouses, vehicles, and manufacturing and research and development facilities which expire at various times through 2029 and are generally operating leases. Contractual arrangements are evaluated at inception to determine if the agreement contains a lease. Certain lease agreements contain renewal options, rent abatement, and escalation clauses that are factored into our determination of lease payments when appropriate. Right-of-use (“ROU”) assets and lease liabilities are recorded based on the present value of future lease payments which will factor in certain qualifying initial direct costs incurred as well as any lease incentives that may have been received. Lease expenses for operating lease payments are recognized on a straight-line basis over the lease term. Lease terms may factor in options to extend or terminate the lease.

The Company elected the practical expedient for short-term leases which allows leases with terms of twelve months or less to be recorded on a straight-line basis over the lease term without being recognized on the balance sheet.

Effective May 1, 2019, the Company adopted ASU 2016-02. The table below presents ROU assets and liabilities recorded on the respective consolidated balance sheets, related to ASU 2016-02 (in thousands):

	Classification	July 31, 2020		April 30, 2020
		(unaudited)
Assets
Operating lease ROU assets	Right-of-Use assets leases	$	10,546	$	10,864

Liabilities
Operating lease liabilities (short-term)	Lease liability, current		1,822		1,869
Operating lease liabilities (long-term)	Lease liability, non-current		9,172		9,444
Total lease liabilities		$	10,994	$	11,313

Total operating lease expense was $478,000 and $504,000 for the three months ended July 31, 2020 and July 31, 2019, the majority of which is included in cost of revenues and the remaining amount in selling and administrative expenses on the unaudited condensed consolidated statements of operations. There were no new leases entered into during the three months ended July 31, 2020.

The table below reconciles the undiscounted cash flows for each of the first five years and total of the remaining years to the operating lease liabilities recorded on the unaudited consolidated balance sheet as of July 31, 2020:

Fiscal Year Ending July 31,
(in thousands)

Remainder of 2021	$	1,312
2022		1,886
2023		1,815
2024		1,834
2025		1,723
Thereafter		5,492
Total lease payments		14,062
Less imputed interest		(3,068	)
Present value of future lease payments		10,994
Less current obligations under leases		(1,822	)
Long-term lease obligations		9,172

As of July 31, 2020, the weighted-average remaining lease term for all operating leases was 8.1 years. The Company does not generally have access to the rate implicit in the leases and therefore utilized the Company’s borrowing rate as the discount rate. The weighted average discount rate for operating leases as of July 31, 2020 was 6.20%.