Note 11 - Commitments

6 Months Ended

Apr. 30, 2024

Notes to Financial Statements

Commitments Disclosure [Text Block]

Note 11 – Commitments

We adopted ASU 2016-02 on November 1, 2019, and elected the practical expedient modified retrospective method whereby the lease qualification and classification was carried over from the accounting for leases under ASC 840. The lease contracts for the corporate headquarters, RF Connector division manufacturing facilities, Cables Unlimited, Rel-Tech, and C Enterprises commenced prior to the effective date of November 1, 2019, and were determined to be operating leases. All other new contracts have been assessed for the existence of a lease and for the proper classification into operating leases. The rate implicit in the leases was undeterminable and, therefore, the discount rate used in all lease contracts is our incremental borrowing rate.

We have operating leases for corporate offices, manufacturing facilities, and certain storage units. Our leases have remaining lease terms of one year to ten years. A portion of our operating leases are leased from K&K Unlimited, a company controlled by Darren Clark, the former owner and current President of Cables Unlimited, to whom we make rent payments totaling $16,000 per month.

We also have other operating leases for certain equipment. The components of our facilities and equipment operating lease expenses for the periods ending April 30, 2024 and 2023 were as follows (in thousands):

	Three Months Ended April 30,				Six Months Ended April 30,
	2024		2023		2024		2023
Operating lease cost	$	731	$	703	$	1,468	$	1,467
Short-term lease cost		-		-		-		-

Other information related to leases was as follows (in thousands):

	April 30, 2024			October 31, 2023
Supplemental Cash Flows Information
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	53		$	6,479
Weighted Average Remaining Lease Term
Operating leases (in months)		109.43			114.26
Weighted Average Discount Rate
Operating leases		6.97	%		6.96	%

Future minimum lease payments under non-cancellable leases as of April 30, 2024 were as follows:

Year ending October 31,	Operating Leases
2024 (excluding three months ended April 30, 2024)	$	1,268
2025		2,840
2026		2,877
2027		2,929
2028		2,997
Thereafter		14,878
Total future minimum lease payments		27,789
Less imputed interest		(7,591	)
Total	$	20,198

Reported as of April 30, 2024	Operating Leases
Current portion of operating lease liabilities	$	1,424
Operating lease liabilities		18,774
Total	$	20,198

As of April 30, 2024, operating lease right-of-use asset was $15.0 million and operating lease liability totaled $20.2 million, of which $1.4 million is classified as current. There were no finance leases as of April 30, 2024.

One of the two buildings consisting of the Cables Unlimited facilities, for a total of 7,500 square feet, is leased by RF Industries, Ltd. under a lease that was renewed effective May 1, 2024, for one year expiring April 30, 2025. The aggregate monthly rental payment under the new lease currently is $7,725 per month.