LEASES

9 Months Ended

Jul. 31, 2025

The Company leased rail cars for its facility to transport dried distillers grains to its end customers. We classified those identified assets as operating leases after assessing the terms under lease classification guidance. The rail car lease terminated on June 30, 2024.

The Company has a contract for use of a natural gas pipeline which transports natural gas from the Northern Natural Gas pipeline to the Company’s facility. This natural gas line has no alternate use and is specifically for the benefit of the Company. The contract has minimum volume requirements as well as a fixed monthly fee. This contract meets the definition of a lease and is classified as a finance lease.

The discount rate used in determining the lease liability for the lease is the Company's estimated incremental borrowing rate. An incremental borrowing rate of 5.5% was utilized for the Company's lease.

The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s finance lease has a remaining lease term of approximately 5 years. This lease includes an option to extend the lease. When it is reasonably certain the Company will exercise this option, the Company will update the remaining term of the lease. The Company does not have lease arrangements with residual value guarantees, sale leaseback terms or material restrictive covenants.

The following table summarizes the remaining maturities of the Company’s finance lease liabilities as of July 31, 2025:


For the Period Ending April 30,	Finance Leases
2026	$	178,800
2027	178,800
2028	178,800
2029	178,800
2030	44,700
Thereafter	—
Totals	759,900
Amount representing interest	(83,654)
Lease liability	$	676,246


Lease Cost	Three Months ended July 31, 2025		Three Months ended July 31, 2024		Nine Months ended July 31, 2025		Nine Months ended July 31, 2024

Operating lease cost	$	—	$	22,080	$	—	$	112,320
Short term lease cost	13,236		9,295		46,904		43,994
Finance lease cost
Amortization of leased assets	34,323		34,323		102,970		102,970
Interest on lease liabilities	9,620		11,494		30,288		35,832

Net lease cost	$	57,179	$	77,192	$	180,162	$	295,116

LEASES

The following table summarizes the remaining maturities of the Company’s finance lease liabilities as of July 31, 2025:


For the Period Ending April 30,	Finance Leases
2026	$	178,800
2027	178,800
2028	178,800
2029	178,800
2030	44,700
Thereafter	—
Totals	759,900
Amount representing interest	(83,654)
Lease liability	$	676,246


Lease Cost	Three Months ended July 31, 2025		Three Months ended July 31, 2024		Nine Months ended July 31, 2025		Nine Months ended July 31, 2024

Operating lease cost	$	—	$	22,080	$	—	$	112,320
Short term lease cost	13,236		9,295		46,904		43,994
Finance lease cost
Amortization of leased assets	34,323		34,323		102,970		102,970
Interest on lease liabilities	9,620		11,494		30,288		35,832

Net lease cost	$	57,179	$	77,192	$	180,162	$	295,116

HIGHWATER ETHANOL LLC 10-Q