Note 4 - Leasing Arrangements

Lessee Arrangements

We have operating leases for our office, integration and warehouse facilities in both Round Rock, Texas and Georgetown, Texas as well as for certain equipment. Our leases have remaining lease terms of 33 to 107 months. We have no remaining renewal options on our Round Rock facility.  We have several renewal options available on our Georgetown, Texas facility, which were evaluated at lease commencement and determined not to be reasonably certain to be renewed, as the initial term is 10 years and we cannot accurately predict whether we would be likely or unlikely to exercise such an option that far into the future. As such, it was excluded from the measurement of the right-of-use asset and lease liability.

We determine if an arrangement is a lease at its inception. Operating leases are included in the lease right-of-use assets, current lease liabilities and lease liabilities, non-current, on our condensed consolidated balance sheets. We have elected an accounting policy to not recognize short-term leases (one year or less) on the balance sheet. We also selected a package of practical expedients which applies to leases that commenced before the adoption date. By electing the package of practical expedients, we did not need to reassess whether any existing contracts are or contain leases, the lease classification for any existing leases and initial direct costs for any existing leases. Additionally, as an ongoing accounting policy election, we elected the practical expedient to not separate lease components from non‑lease components for our facility and equipment lease asset classes. As a result, each lease component and its related non‑lease components are accounted for together as a single lease component. 

Right-of-use assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. When the implicit rate of the lease is not provided or cannot be determined, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term, with variable lease expense recognized in the period in which the costs are incurred. Variable lease expense is comprised of common area maintenance (CAM), property taxes and property insurance. Components of lease expense and other information for leases in which we are the lessee is as follows (unaudited, in $000’s):

 The following presents information regarding the Company's operating leases as of June 30 (unaudited): 

Future minimum lease payments under non-cancellable leases as of June 30, 2026 were as follows (unaudited, in ‘000’s):

Lessor Arrangements

In applying ASC 842, the Company exercises judgment in determining whether customer arrangements contain embedded leases. This assessment considers whether a contract conveys the right to control the use of an identified asset for a period of time, including whether the customer obtains substantially all of the economic benefits from use of the asset and has the right to direct its use.

Effective May 1, 2026, the Company entered into an arrangement with its largest customer whereby the Company uses substantially all of the capacity of the Company's Round Rock, Texas warehouse facility to provide warehousing services for the customer. The term of the agreement runs through the expiration of our lease at that facility on March 31, 2029, and includes the potential of extensions beyond that date if both parties agree. While not legally structured as a sublease, management concluded that the arrangement contains an embedded operating lease under ASC 842. In reaching this conclusion, management considered, among other factors, the customer’s exclusive right to utilize the warehouse capacity and decision‑making authority over how and for what purpose the warehouse is used, as well as the Company’s lack of substantive rights to redirect the asset during the contract term. The Company is the lessee under the underlying property lease and has therefore accounted for the arrangement as a sublease.

Changes in contractual terms or operational practices could impact the Company’s assessment of whether future arrangements contain embedded leases.

Lease income relates solely to the lease component identified within the Round Rock warehousing arrangement. Non-lease components, including warehousing, logistics, transportation, and related services, are accounted for separately under ASC 606 and are not included in the amounts presented below.

The following table presents our lease income (in ’000’s):

Future lease income under noncancelable operating subleases as of June 30, 2026 were as follows (unaudited, in ‘000’s):