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Right-of-Use Assets and Lease Liabilities

12 Months Ended

Apr. 30, 2023

6. Right-of-Use Assets and Lease Liabilities

The Company’s leases primarily represent offices, warehouses, vehicles, manufacturing and R&D facilities which expire at various times through 2029 and are operating leases. Contractual arrangements are evaluated at inception to determine if the agreement contains a lease.

New York lease. In February 2019, the Company entered into an agreement to lease a building to be used as a corporate headquarters office and manufacturing facility in Mitchell Field, NY (“New York lease”). The New York lease expires 9/30/2029 and contains renewal options, early termination, rent abatement, and escalation clauses that are factored into our determination of lease payments when appropriate. We include options to extend or terminate leases in the ROU operating lease asset and liability when it is reasonably certain we will exercise these options. As of April 30, 2023 lease options were not included in the calculation of the ROU operating lease asset and liability. 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.

California lease. In October 2017, the Company entered into an agreement to lease a building to be used as an office and manufacturing facility in Garden Grove, CA (“California Lease”). The California lease expires 1/31/2025 and contains renewal options, early termination, rent abatement, and escalation clauses that are factored into our determination of lease payments when appropriate. We include options to extend or terminate leases in the ROU operating lease asset and liability when it is reasonably certain we will exercise these options. As of April 30, 2023 lease options were not included in the calculation of the ROU operating lease asset and liability. 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.

New Jersey lease. In February 2022, the Company entered into an agreement to lease a building to be used as an office and manufacturing facility in Northvale, NJ (“New Jersey lease”). The New Jersey lease expires 1/31/2025 and contains renewal options, early termination, rent abatement, and escalation clauses that are factored into our determination of lease payments when appropriate. We include options to extend or terminate leases in the ROU operating lease asset and liability when it is reasonably certain we will exercise these options. As of April 30, 2023 lease options were not included in the calculation of the ROU operating lease asset and liability. 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 consolidated balance sheet.

The table below presents ROU assets and lease liabilities recorded on the consolidated balance sheets as follows:

	Classification	April 30, 2023		April 30, 2022
		(In thousands)
Assets
Operating lease ROU assets	Right-of-Use assets leases	$	7,382	$	8,805

Liabilities
Operating lease liabilities (short-term)	Lease liability, current		1,753		1,744
Operating lease liabilities (long-term)	Lease liability, non-current		5,883		7,353
Total lease liabilities		$	7,636	$	9,097

Total operating lease expense was approximately $1.9 million and $1.6 million for the fiscal years ended April 30, 2023 and 2022, respectively, the majority of which is included in cost of revenues and the remaining amount in selling and administrative expenses on the consolidated statements of operations. In addition, the Company made cash payments of $1.9 million and $2.0 million for operating leases during the fiscal years ended April 30, 2023 and 2022, respectively, which are included in cash flows from operating activities in our consolidated statements of cash flows. As of April 30, 2023, the Company had no operating lease liabilities that had not commenced.

The table below reconciles the undiscounted cash flows for each of the next five fiscal years and total of the remaining fiscal years to the operating lease liabilities recorded on the consolidated balance sheet as of April 30, 2023:

Fiscal Year Ending April 30,
(in thousands)

2024		1,806
2025		1,832
2026		1,317
2027		937
2028		1,262
Thereafter		1,976
Total lease payments		9,130
Less imputed interest		(1,494	)
Present value of future lease payments		7,636
Less current obligations under leases		(1,753	)
Long-term lease obligations	$	5,883

As of April 30, 2023 and 2022, the weighted-average remaining lease term for all operating leases was 5.6 years and 6.3 years, respectively. The Company does not generally have access to the rate implicit in the leases, therefore, we use a discount rate based on our incremental borrowing rate, which is determined using our credit rating and information available as of the commencement date. The weighted average discount rate for operating leases as of April 30, 2023 and 2022, was 6.23% and 6.16%, respectively.