Commitments and Contingent Liabilities

12 Months Ended

Oct. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingent Liabilities

NOTE 15 Commitments and Contingent Liabilities

Operating Leases – The Company leases the property for several Prestige retail sales centers from various unrelated entities under operating lease agreements expiring through December 2020. The Company also leases certain equipment under unrelated operating leases. These leases have varying renewal options.

On November 3, 2019, the Company adopted ASC Topic 842 using the modified retrospective method applied to leases that were in place as of November 3, 2019. Results for reporting periods beginning after November 3, 2019 are presented under Topic 842, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting under Topic 840.

The Company elected the package of practical expedients permitted under the transition guidance, which allows for the historical lease classification to be carried forward, the Company’s assessments on whether a contract is or contains a lease, and the Company’s initial direct costs for any leases that exist prior to adoption of the new standard. The Company also elected the short-term lease recognition exemption for all leases that qualify.

To determine the present value of minimum future lease payments for operating leases at November 3, 2019, the Company was required to estimate a rate of interest that it would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment (the “incremental borrowing rate” or “IBR”). The Company determined the appropriate IBR by identifying a reference rate and making adjustments that take into consideration financing options and certain lease-specific circumstances. For the reference rate, the Company used mortgage interest rates for similar terms.

Right of use assets are included as a non-current asset in the amount of $715,368, net of amortization in the consolidated Balance Sheet as of October 31, 2020.

Based on the terms of the lease agreements, all of the Company’s leases are classified as operating leases. The weighted average remaining lease term and weighted average discount rate of the operating leases is 9.16 years and 3.0%, respectively.

Minimum rental payments under operating leases are recognized on a straight-line basis over the term of the lease. Individual components of the total lease cost incurred by the Company in the amount of $209,273 for the twelve months ended October 31, 2020.

The amount of future minimum lease payments under operating are as follows:

	Operating Lease
Undiscounted future minimum lease payments:
2021	$	63,117
2022		68,401
2023		74,322
2024		80,955
Thereafter		543,361
Total		830,156
Amount representing imputed interest		(27,445	)
Total operating lease liability		802,711
Current portion of operating lease liability		(24,192	)
Operating lease liability, non-current	$	778,519

Majestic 21 – On May 20, 2009, the Company became a 50% guarantor on a $5 million note payable entered into by Majestic 21, a joint venture in which the Company owns a 50% interest. The outstanding principal balance of $94,694 on the note was repaid in February 2019.

Other Contingent Liabilities – Certain claims and suits arising in the ordinary course of business have been filed or are pending against the Company. In the opinion of management, the ultimate outcome of these matters will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. Accordingly, the Company has not made any accrual provisions for litigation in the accompanying consolidated financial statements.

The Company does not maintain casualty insurance on some of its property, including the inventory at our retail centers, our plant machinery and plant equipment and is at risk for those types of losses.