Leases

6 Months Ended

Aug. 31, 2022

Leases [Abstract]

Leases

Note 7. – Leases

Operating Leases

The Company leases its office space and manufacturing facilities under operating lease agreements. The base lease terms expire at various dates from 2022 to 2025. While each of the leases include renewal options, the Company has only included the base lease term in its calculation of lease assets and liabilities.

Balance sheet information related to operating leases is as follows (in thousands):

	August 31, 2022
Assets
Operating lease right-of-use assets	$	722
Liabilities
Current portion of operating lease liabilities	$	469
Noncurrent portion of operating lease liabilities		253
Total operating lease liabilities	$	722

Operating lease costs are included in Cost of goods sold in the Company’s condensed consolidated statements of operations and totaled approximately $90 thousand for the three months ended August 31, 2022, and $204 thousand for the six months ended August 31, 2022. Operating lease costs were $146 thousand for the three months ended August 31, 2021 and $293 thousand for the six months ended August 31, 2021.

Cash paid for amounts included in the measurement of operating lease liabilities was approximately $90 thousand and $204 for the three months and six months ended August 31, 2022. The Company paid $143 thousand and $286 thousand for the three months and six months ended August 31, 2021. The Company executed a new one-year lease on the facility in Lexington, KY in July 2022 with a new building owner unrelated to the Company. The annual rent on the lease is $311 thousand.

Weighted average information associated with the measurement of the Company’s remaining operating lease obligations is as follows:

	August 31, 2022
Weighted average remaining lease term		2.5 years
Weighted average discount rate		6	%

The following table summarizes the maturity of the Company’s operating lease liabilities as of August 31, 2022 (in thousands):

FY2023	$	250
FY2024		319
FY2025		190
Total operating lease payments		759
Less imputed interest		(37	)
Total operating lease liabilities	$	722

Included above are leases for manufacturing and warehouse facilities leased from Southeast Metro Savings, LLC and Honeyhill Properties, LLC (entities which are controlled by the Company’s chief executive officer) under operating leases expiring at various dates through 2025. Lease costs under these leases totaled approximately $64 thousand for the three months and $161 thousand for the six months ended August 31, 2022. Lease costs under these leases totaled approximately $97 thousand for the three months and $194 thousand for the six months ended August 31, 2021.

The Company subleases certain of its warehousing space at its Kentucky location. The Tucker sublease expired concurrently with the head lease in March 2022 and the Kentucky lease was month to month until May 2022. The Tucker lessee did not pay any rent for March and we do not expect them to pay, therefore it is not included in Other Income.

Sublease income and lease income are included in Other, net in the Company’s condensed consolidated statements of operations and totaled approximately $3 thousand for the three months and $18 thousand for the six months ended August 31, 2022 and totaled approximately $56 thousand for the three months and $107 thousand for the six months ended August 31, 2021.

Financing Leases

The Company has one financing lease entered into on November 23, 2020 for Tempest testing equipment for $277,000 and is included in machinery and equipment on the condensed consolidated balance sheets as of August 31, 2022 and February 28, 2022. The lease expires on December 1, 2023 and the incremental borrowing rate on the lease is 12.5%.

Balance sheet information related to financing lease is as follows (in thousands):

	August 31, 2022
Financing lease right-of-use assets	$	119
Current portion of financing lease liabilities	$	98
Noncurrent portion of financing lease liabilities		21
Total financing lease liabilities	$	119

The following table summarizes the maturity of the Company’s finance lease liabilities as of August 31, 2022 (in thousands):

 

Fiscal Year	Amount
2023	$	52
2024		78
Total finance lease payments	$	130
Less imputed interest		(11	)
Total finance lease liabilities	$	119