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Note 10 - Leases

6 Months Ended

Jul. 31, 2021

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 are initially expected to be approximately 1.2 million Dirhams (approximately $0.3 million at October 31, 2020), inclusive of rent and common charges, with escalation clauses in the agreement. Rent payments are deferred until August 2022. The lease expires in August 2050.

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. In 2017, the Company obtained three 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 range from 4.0% to 7.8% per annum with monthly principal and interest payments of less than $0.1 million. Two of these leases matured in April 2021 and new leases have been entered into in May 2021 to replace the matured leases. The remaining lease matures in September 2022.

The Company has several significant operating lease agreements, with lease terms of one to 30 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. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not have any arrangements where it acts as a lessor, other than one sub-lease arrangement.

At July 31, 2021, the Company had total operating lease liabilities of $13.3 million and total operating ROU assets of $11.8 million, which are reflected in the consolidated balance sheet. At July 31, 2021, the Company also had total finance lease liabilities of $0.7 million included in current maturities of long-term debt and long-term debt less current maturities, and total finance ROU assets of $0.9 million which were included in property plant and equipment, net of accumulated depreciation in the consolidated balance sheet.

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

*Operating and Finance leases:*	*July 31, 2021*			*January 31, 2021*
Finance leases assets:
Property and Equipment - gross	$	1,245		$	879
Accumulated depreciation and amortization		(371	)		(96	)
Property and Equipment - net	$	874		$	783

Finance lease liabilities:
Finance lease liability short-term	$	361		$	300
Finance lease liability long-term		356			401
Total finance lease liabilities	$	717		$	701

Operating lease assets:
Operating lease ROU assets	$	11,848		$	13,384

Operating lease liabilities:
Operating lease liability short-term	$	1,367		$	1,402
Operating lease liability long-term		11,890			13,174
Total operating lease liabilities	$	13,257		$	14,576

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

Lease costs	*Consolidated Statements of Operations Classification*	*Three Months Ended July 31, 2021*			*Three Months Ended July 31, 2020*			*Six Months Ended July 31, 2021*			*Six Months Ended July 31, 2020*
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	65		$	53		$	119		$	101
Interest on lease liabilities	Interest expense		15			18			28			37
Operating lease costs	Cost of sales, SG&A expenses		625			610			1,273			1,222
Short-term lease costs (1)	Cost of sales, SG&A expenses		102			213			195			236
Sub-lease income	SG&A expenses		(20	)		(20	)		(40	)		(40	)
*Total Lease costs*		$	787		$	874		$	1,575		$	1,556

(1) Includes variable lease costs, which are immaterial

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

	*Six Months Ended July 31, 2021*		*Six Months Ended July 31, 2020*
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash outflows from finance leases	$	203	$	202
Operating cash outflows from finance leases		28		37
Operating cash outflows from operating leases		985		1,385

	*Six Months Ended July 31, 2021*		*Six Months Ended July 31, 2020*
ROU Assets obtained in exchange for new lease obligations:
Finance leases liabilities	$	201	$	-
Operating leases liabilities		45		53

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

	*July 31, 2021*
Weighted-average remaining lease terms (in years):
Finance leases		2.0
Operating leases		13.4

Weighted-average discount rates:
Finance leases		7.8	%
Operating leases		7.4	%

Maturities of lease liabilities as of July 31, 2021, are as follows (in thousands):

Year:	*Operating Leases*			*Finance Leases*
For the six months ended January 31, 2022	$	1,210		$	202
For the year ended January 31, 2023		2,295			393
For the year ended January 31, 2024		2,281			180
For the year ended January 31, 2025		1,520			-
For the year ended January 31, 2026		1,326			-
For the year ended January 31, 2027		1,333			-

Thereafter		12,322			-
Total lease payments		22,287			775
Less: amount representing interest		(9,030	)		(58	)
Total lease liabilities at July 31, 2021	$	13,257		$	717

Rent expense on operating leases, which is recorded on straight-line basis, was $0.7 million for the three months ended July 31, 2021 and 2020, respectively.