Note 10 – Royalty Obligation

In fiscal 2018, we entered into an Asset Purchase and License Agreement with Honeywell International, Inc. (“Honeywell”) to acquire an exclusive, perpetual, world-wide license to manufacture Honeywell’s narrow-format flight deck printers for two aircraft families along with certain inventory used in the manufacturing of the licensed printers. The purchase price included a guaranteed minimum royalty payment of $15.0 million, based on gross revenues from the sales of the printers, paper and repair services of the licensed products to be paid over a ten-year period which ends in September 2026. The royalty rates vary based on the year in which they are paid or earned, and on the product sold or service provided. Royalty rates can range from single-digit to mid-double-digit percentages of gross revenue.

The guaranteed minimum royalty payment obligation was initially recorded at the present value of the minimum annual royalty payments. As of April 30, 2026, we had paid an aggregate of $14.0 million toward this obligation, with $0.3 million having been paid in the current quarter. The remaining balance of $1.0 million is payable in full by September 2026 and is classified as a current liability on our condensed consolidated balance sheet.

For the three months ended April 30, 2026, we incurred $0.2 million of excess royalty expense, which is included in cost of revenue in our consolidated statements of income (loss). As of April 30, 2026, excess royalty payables totaling $0.2 million were outstanding under this agreement.

In fiscal 2023, we entered into an Asset Purchase and License Agreement with Honeywell International Inc. (the “New HW Agreement”) to acquire an exclusive, perpetual, world-wide license to manufacture Honeywell’s flight deck printers for the Boeing 787 aircraft. The New HW Agreement provides for royalty payments to Honeywell based on gross revenues from the sales of the printers, paper and repair services of the licensed products in perpetuity. The royalty rates vary based on the year in which they are paid or earned and as products are sold or as services are provided. The rates range from single-digit to mid-double-digit percentages of gross revenue. The New HW Agreement includes a provision for guaranteed minimum royalty payments to be paid in the event that the royalties earned by Honeywell do not meet the minimum for the preceding calendar year as follows: $100,000 in 2024, $200,000 in 2025, $233,000 in each of 2026 and 2027, and $234,000 in 2028.

As of April 30, 2026, the total outstanding royalty obligation under the New HW Agreement was $0.4 million, including $0.2 million recorded as a current liability in the accompanying condensed consolidated balance sheet.