NOTE F – RIGHT-OF-USE ASSETS AND LEASE LIABILITIES

The Company’s leases primarily represent offices, warehouses, vehicles, manufacturing and research and development (“R&D”) facilities, which expire at various times through fiscal year 2031 and are operating leases. Contractual arrangements are evaluated at inception to determine if the agreement contains a lease. The leases contain renewal options, early termination, rent abatement, and escalation clauses that are factored into our determination of lease payments when appropriate. We include options to extend or terminate leases in the right-of-use (“ROU”) operating lease asset and liability when it is reasonably certain we will exercise these options. As of July 31, 2026, lease options were not included in the calculation of the ROU operating lease asset and liability. ROU assets and lease liabilities are recorded based on the present value of future lease payments which will factor in certain qualifying initial direct costs incurred as well as any lease incentives that may have been received. Lease expenses for operating lease payments are recognized on a straight-line basis over the lease term.

The Company elected the practical expedient for short-term leases which allows leases with terms of twelve months or less to be recorded on a straight-line basis over the lease term without being recognized on the consolidated balance sheet. The Company has also elected the practical expedient to account for lease and non-lease components as a single component.

The table below presents ROU assets and liabilities recorded on the respective consolidated balance sheets as follows (in thousands):

Total operating lease expense was $0.6 million for both the three months ended July 31, 2026 and 2025, the majority of which is included in cost of revenues and the remaining amount in selling, general and administrative expenses on the unaudited condensed consolidated statements of operations. During the three months ended July 31, 2026 and 2025, the Company did not record any incremental ROU assets and lease liabilities as there were no leases that commenced during these periods.

The maturities of lease liabilities at July 31, 2026 are as follows:

As of July 31, 2026 and 2025, the weighted-average remaining lease term for all operating leases was 3.57 years and 4.30 years, respectively. The Company does not generally have access to the rate implicit in the leases and therefore selected a rate that is reflective of companies with similar credit ratings for secured debt as the discount rate. The weighted average discount rate for operating leases as of July 31, 2026 and 2025, was 7.09% and 6.86%, respectively.

The Company has future operating lease payments of approximately $0.8 million related to a lease that has not yet commenced and was entered into as of July 20, 2026. Such lease payments are not included in the table above or the Company’s condensed consolidated financial position as operating lease ROU assets and operating lease liabilities. The operating lease payments are anticipated to commence in the second quarter of 2027 and continue for approximately 7 years.