Note 13 - Leases

3 Months Ended

Feb. 28, 2023

Notes to Financial Statements

Leases [Text Block]

13) Leases

The Company determines if an arrangement is a lease at inception of a contract. The nature of the Company’s leases at this time is shop machinery and office equipment, mainly copiers, with terms of 12 to 60 months. Operating and finance leases are included in other assets as lease right-of-use (“ROU”) assets on the Consolidated Balance Sheets while current operating lease liabilities are included in accrued expenses. The short-term portion of finance leases along with long-term portions of operating and finance lease liabilities are presented on the face of the Consolidated Balance Sheets.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value payments over the lease term. As most of the Company’s leases do not provide an implicit rate, the Company generally uses its incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Operating lease expense for lease payments is recognized on a straight-line basis over the lease term while finance lease ROU assets are amortized on a straight-line basis and interest expense is recorded over the lease term.

The Company has copier lease agreements with lease and non-lease components and has elected the practical expedient not to separate lease and non-lease components for this asset class. The Company has also elected not to recognize lease liabilities and ROU assets for leases with an initial term of twelve months or less. The Company recognizes variable costs that depend on usage in profit or loss as they are incurred.

The components of operating leases on the Condensed Consolidated Balance Sheets on February 28, 2023 and November 30, 2022 were as follows:

	February 28, 2023		November 30, 2022
Operating lease right-of-use assets (other assets)	$	31,612		34,931
Current portion of operating lease liabilities (accrued expenses)	$	10,190		10,915
Long-term portion of operating lease liabilities		21,422		24,016
Total operating lease liabilities	$	31,612		34,931

The Company recorded $5,192 of operating lease costs in the three months ended February 28, 2023, which included variable costs tied to usage, compared to $4,843 for the three months ended February 28, 2022. The Company’s operating leases carry a weighted average lease term of 37 months and have a weighted average discount rate of 4.82%

Future maturities of operating lease liabilities are as follows:

Year Ending November 30,
2023	8,616
2024	11,162
2025	9,532
2026	4,765
Total lease payments	34,075
Less imputed interest	(2,463	)
Total operating lease liabilities	31,612

The components of finance leases on the Consolidated Balance Sheets on February 28, 2023 and November 30, 2022 were as follows:

	February 28, 2023		November 30, 2022
Finance lease right-of-use assets (net of amortization in other assets)	$	503,080	$	540,052
	$	503,080	$	540,052
Current portion of finance lease liabilities (accrued expenses)	$	172,619	$	170,835
Long-term portion of finance lease liabilities		558,293		602,131
Total finance lease liabilities	$	730,912	$	772,966

Future maturities of finance lease liabilities as of February 28, 2023 are as follows:

Year Ending November 30,
2023	$	149,877
2024		211,219
2025		157,393
2026		155,809
2027		122,823
Total lease payments		797,121
Less imputed interest		(66,209	)
Total finance lease liabilities	$	730,912

The weighted average lease term of the Company’s finance leases is 48 months while the weighted average rate of finance leases is 4.18%. The Company incurred $36,971 of amortization expense from ROU assets related to finance leases in the first three months ending February 28, 2023 compared to $16,142 for the same period in 2022.