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Note 10 - Leases

9 Months Ended

Oct. 31, 2023

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 built a facility. The initial annual payments were approximately 1.2 million U.A.E. Dirhams (approximately $0.3 million), inclusive of rent, escalation clauses, and other common charges contained in the agreement. Rent payments previously deferred until August 2022 have commenced, and the lease expires in August 2050.

In March and December 2022, the Company served Notices of Termination to its lessor for the Company's lease of land and buildings in Fujairah in the U.A.E. The Company served the Notices of Termination in connection with the Company's intended relocation to a different facility in Abu Dhabi. The Company vacated portions of the leased space in December 2022 and expects to vacate the remaining space in 2023. The first Notice of Termination required that the Company pay an additional amount equal to three months' rent after that termination to enable the lessor to prepare the assets for lease by another party. As a result of the termination, the Company has recognized adjustments to the amounts recorded in the consolidated financial statements as of October 31, 2023. The termination resulted in decreases of $0.3 million, $4.0 million and $3.6 million to operating lease liability short-term, operating lease liability long-term and operating lease right-of-use asset, respectively, in the consolidated balance sheets as of October 31, 2023. The termination also resulted in a decrease in rent expense of $1.1 million in the consolidated statement of operations for the year ended January 31, 2023.

Finance Leases. The Company has several significant operating 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 right-of-use ("ROU") assets as the Company is not reasonably certain to exercise the options. The Company does not have any arrangements where it acts as a lessor.

At October 31, 2023, the Company had total operating lease liabilities of $7.1 million and operating ROU assets of $6.4 million, which are reflected in the consolidated balance sheets. At October 31, 2023, the Company also had total finance lease liabilities of $0.1 million included in current maturities of long-term debt, and total finance ROU assets of $0.5 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, 2023*			*January 31, 2023*
Finance leases assets:
Property and Equipment - gross	$	940		$	1,161
Accumulated depreciation and amortization		(482	)		(700	)
Property and Equipment - net	$	458		$	461

Finance lease liabilities:
Finance lease liability short-term	$	31		$	164
Total finance lease liabilities	$	117		$	164

Operating lease assets:
Operating lease ROU assets	$	6,376		$	4,527

Operating lease liabilities:
Operating lease liability short-term	$	920		$	912
Operating lease liability long-term		6,143			4,252
Total operating lease liabilities	$	7,063		$	5,164

Total lease costs consist of the following:

		*Three Months Ended October 31,*						*Nine Months Ended October 31,*
Lease costs	*Consolidated Statements of Operations Classification*	*2023*			*2022*			*2023*			*2022*
Finance Lease Costs
Amortization of ROU assets	Cost of sales	$	37		$	62		$	121		$	125
Interest on lease liabilities	Interest expense		3			8			7			18
Operating lease costs	Cost of sales, SG&A expenses		564			694			1,450			587
Short-term lease costs (1)	Cost of sales, SG&A expenses		99			13			350			72
Sub-lease income	SG&A expenses		(20	)		(27	)		(61	)		(40	)
Total Lease costs		$	683		$	750		$	1,867		$	762

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

Supplemental cash flow information related to leases is as follows:

	*Nine Months Ended October 31,*
	*2023*		*2022*
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash outflows from finance leases	$	176	$	251
Operating cash outflows from finance leases		7		24
Operating cash outflows from operating leases		1,399		1,377

ROU liabilities obtained in exchange for new lease obligations:
Operating leases liabilities	$	3,615	$	-

	*Nine Months Ended October 31,*
	*2023*		*2022*
ROU liabilities obtained in exchange for new lease obligations:
Finance leases liabilities	$	139	$	-
Operating leases liabilities		3,615		-

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

	*October 31, 2023*
Weighted-average remaining lease terms (in years):
Finance leases		3.3
Operating leases		14.9

Weighted-average discount rates:
Finance leases		10.2	%
Operating leases		8.9	%

Maturities of lease liabilities as of October 31, 2023, are as follows:

	Operating Leases			Finance Leases
For the three months ending January 31, 2024	$	565		$	9
For the year ending January 31, 2025		1,515			37
For the year ending January 31, 2026		1,349			37
For the year ending January 31, 2027		1,326			37
For the year ending January 31, 2028		1,273			9
For the year ending January 31, 2029		947			-
Thereafter		7,465			-
Total lease payments	$	14,440		$	129
Less: amount representing interest		(7,377	)		(12	)
Total lease liabilities at October 31, 2023	$	7,063		$	117

Rent expense on operating leases, which is recorded on straight-line basis, was $0.7 million for the three months ended October 31, 2023 and 2022, respectively.