4. Leases

9 Months Ended

Jul. 31, 2022

Notes

4. Leases

4. Leases

The Company accounts for leases under the guidance of Topic 842, requiring the recognition of ROU assets and associated lease liabilities related to operating leases. The accounting for finance leases under Topic 842 is consistent with the prior accounting for capital leases. The Company elected not to apply the measurement and recognition requirements of Topic 842 to short-term leases (i.e., leases with a term of 12 months or less). Accordingly, short-term leases will not be recorded as ROU assets or lease liabilities on the Company’s consolidated balance sheets, and the related lease payments will be recognized in net earnings on a straight-line basis over the lease term.

The Company recognizes a lease liability and a related ROU asset at the commencement date for leases on its consolidated balance sheet, excluding short-term leases as noted above. The lease liability is equal to the present value of unpaid lease payments over the remaining lease term. The Company’s lease term at the commencement date may reflect options to extend or terminate the lease when it is reasonably certain that such options will be exercised. To determine the present value of the lease liability, the Company uses an incremental borrowing rate, which is defined as the rate of interest that the Company would have to pay to borrow (on a collateralized basis over a similar term) an amount equal to the lease payments in similar economic environments. The ROU asset is based on the corresponding lease liability adjusted for certain costs such as initial direct costs, prepaid lease payments and lease incentives received. Both operating and finance lease ROU assets are reviewed for impairment, consistent with other long-lived assets, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. After a ROU asset is impaired, any remaining balance of the ROU asset is amortized on a straight-line basis over the shorter of the remaining lease term or the estimated useful life.

After the lease commencement date, the Company evaluates lease modifications, if any, that could result in a change in the accounting for leases. For a lease modification, an evaluation is performed to determine if it should be treated as either a separate lease or a change in the accounting of an existing lease. In addition, significant changes in events or circumstances within the Company’s control are assessed to determine whether a change in the accounting for leases is required.

Certain of the Company’s leases provide for variable lease payments for the right to use an underlying asset that vary due to changes in facts and circumstances occurring after the commencement date, other than the passage of time. Variable lease payments that are dependent on an index or rate (e.g., Consumer Price Index) are included in the initial measurement of the lease liability, the initial measurement of the ROU asset, and the lease classification test based on the index or rate as of the commencement date. Any changes from the commencement date estimation of the index- and rate-based variable payments are expensed as incurred in the period of the change. Variable lease payments that are not known at the commencement date and are determinable based on the performance or use of the underlying asset, are not included in the initial measurement of the lease liability or the ROU asset, but instead are expensed as incurred. The Company’s variable lease payments primarily include common area maintenance and real estate taxes.

As of July 31, 2022, the Company had operating leases primarily for offices and its now-decommissioned PASSUR and Surface Multilateration (“SMLAT”) systems, with remaining terms of approximately two months to 4.5 years. The Company’s office lease contracts include options to extend the leases for up to five years. The Company’s office located in Stamford, Connecticut, was previously located in a 5,300 square foot office at an average annual cost of $220,000, under a lease expiring on June 30, 2023. On October 6, 2020, the Company modified this agreement, reducing the amount of square footage under rental and extending the term to June 30, 2025, at the reduced average annual rental rate of $61,000. The Company’s office located in Orlando, Florida, was subject to a lease through August 31, 2021, at an average annual rental rate of $74,000. Effective as of September 1, 2021, the Company entered into a new lease for its Orlando office, for approximately 1,800 square feet for a term of 64 months at an average annual rental of $51,400.

A summary of total lease costs and other information for the period relating to the Company’s operating leases is as follows:

	Three Months Ended	Three Months Ended	Nine Months Ended	Nine Months Ended
Total lease cost	July 31, 2022	July 31, 2021	July 31, 2022	July 31, 2021
Operating lease cost	$31,441	$46,969	$85,806	$144,104
Short-term lease cost	$3,398	$17,848	$10,335	$56,555
Variable lease cost	$2,093	$1,414	$6,338	$8,867
Total	$36,932	$66,231	$102,479	$209,526

Other information
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$106,392
Right-of-use assets obtained in exchange for new operating lease liabilities	$-
Weighted-average remaining lease term - operating leases	3.77	years
Weighted-average discount rate - operating leases	9.75%

The total future minimum lease payments, over the remaining lease term, relating to the Company’s operating leases for the remainder of fiscal year 2022 and for each of the next four fiscal years and thereafter is as follows:

Fiscal Year Ended October 31:	Operating Leases
2022	$29,713
2023	117,944
2024	116,657
2025	96,523
2026	57,806
Thereafter	9,873
Total future minimum lease payments	$428,516
Less imputed interest	(67,462)
Total	$361,054

The following table summarizes scheduled maturities of the Company’s contractual obligations relating to operating leases for which cash flows are fixed and determinable as of July 31, 2022:

Fiscal Year Ended October 31:	Payments Due in Fiscal Year (1)
2022	$28,180
2023	113,495
2024	115,082
2025	96,523
2026	57,806
Thereafter	9,873
Total contractual obligations	$420,959

(1)Minimum operating lease commitments only include base rent. Certain leases provide for contingent rents that are not measurable at inception and primarily include common area maintenance and real estate taxes. These amounts are excluded from minimum operating lease commitments and are included in the determination of total rent expense when it is probable that the expense has been incurred and the amount is reasonably measurable. Such amounts have not been material to total rent expense. 

As of July 31, 2022, the Company did not have any finance leases or leases that had not yet commenced as of such date. As described above, effective as of September 1, 2021, the Company entered into a new lease for its primary software development facility, located in Orlando, Florida.