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Note 7 - Leases

3 Months Ended

Jan. 31, 2025

Lessee, Operating and Finance Leases Disclosure [Text Block]

(7)

Leases

The Company has an operating lease agreement for approximately 34,000 square feet of office, manufacturing and warehouse space in Plano, Texas (near Dallas). The lease term expires on November 30, 2029.

The Company has an operating lease agreement for approximately 36,000 square feet of warehouse space in Roanoke, Virginia. The lease term expires on April 30, 2026.

The Company also leases certain office equipment under an operating lease with an initial 60-month term. The lease term expires in November 2029.

OCC leases printers that are used in the Roanoke, Virginia manufacturing facility. The lease term expires on August 22, 2026. The right-of-use asset is being amortized on a straight line basis over seven years. When the lease term ends, title of the printers will transfer to the Company and the remaining net book value of the right-of-use asset will be classified as property and equipment.

The Company’s lease contracts may include options to extend or terminate the leases. The Company exercises judgment to determine the term of those leases when such 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 includes contract lease components in its determination of lease payments, while non-lease components of the contracts, such as taxes, insurance, and common area maintenance, are expensed as incurred. At commencement, right-of-use assets and lease liabilities are measured at the present value of future lease payments over the lease term. The Company uses its incremental borrowing rate based on information available at the time of lease commencement to measure the present value of future payments.

Operating lease expense is recognized on a straight-line basis over the lease term. Short term leases with an initial term of 12 months or less are expensed as incurred. The Company’s short term leases have month-to-month terms.

Operating lease right-of-use assets of $2,009,125 and $1,872,206 were included in other assets at January 31, 2025 and October 31, 2024, respectively. Operating lease liabilities of $415,740 and $1,641,997 were included in accounts payable and accrued expenses, and other noncurrent liabilities, respectively, at January 31, 2025. Operating lease liabilities of $376,965 and $1,525,423 were included in accounts payable and accrued expenses, and other noncurrent liabilities, respectively, at October 31, 2024. Operating lease expense recognized during the three months ended January 31, 2025 and 2024 totaled $155,393 and $109,144, respectively.

The weighted average remaining lease term was 54.9 months and the weighted average discount rate was 9.4% as of January 31, 2025.

For the three months ended January 31, 2025 and 2024, cash paid for operating lease liabilities totaled $137,517 and $111,188, respectively. For the three months ended January 31, 2025, right-of-use assets obtained in exchange for new operating lease liabilities totaled $266,141 and there was a reduction in right-of-use assets for terminated lease liabilities totaling $21,344. For the three months ended January 31, 2024, there were no right-of-use assets obtained in exchange for new operating lease liabilities.

Finance lease right-of-use assets of $104,470 and $111,844 were included in other assets at January 31, 2025 and October 31, 2024, respectively. Finance lease liabilities of $39,745 and $44,061 were included in accounts payable and accrued expenses, and other noncurrent liabilities, respectively, at January 31, 2025. Finance lease liabilities of $39,277 and $54,174 were included in accounts payable and accrued expenses, and other noncurrent liabilities, respectively, at October 31, 2024. Interest expense related to the finance lease totaled $1,072 and $1,518 for the three months ended January 31, 2025 and 2024, respectively. For the three months ended January 31, 2025 and 2024, amortization expense related to the finance lease totaled $7,374.

The remaining lease term for the finance lease is 19 months and the discount rate is 4.75% as of January 31, 2025.

For the three months ended January 31, 2025, cash paid for the finance lease liability totaled $1,072 for interest and $9,645 for principal. For the three months ended January 31, 2024, cash paid for the finance lease liability totaled $1,518 for interest and $9,199 for principal.

The Company’s future payments due under leases reconciled to the lease liabilities are as follows:

Fiscal Year	Operating leases			Finance lease
2025 (1)	$	442,401		$	32,151
2026		540,420			55,714
2027		493,180			—
2028		510,241			—
2029		527,981			—
Thereafter		44,122			—
Total undiscounted lease payments		2,558,345			87,865
Present value discount		(500,608	)		(4,059	)
Total lease liability	$	2,057,737		$	83,806

(1) Remaining nine months of fiscal year 2025.