Leases

6 Months Ended

Nov. 30, 2022

LEASES

The Company determines if an arrangement is a lease at inception of the contract. The Company has operating leases for buildings, primarily for office space, R&D, manufacturing and warehousing.

Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. Many of the lease agreements contain renewal or termination clauses that are factored into the determination of the lease term if it is reasonably certain that these options would be exercised. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

The following table presents supplemental balance sheet information related to leases:


(in thousands)	Balance Sheet Location	Nov 30, 2022		May 31, 2022
Assets
Operating lease ROU asset	Other assets	$	5,748	$	6,974
Liabilities
Current operating lease liabilities	Other current liabilities	2,491		2,560
Non-current operating lease liabilities	Other long-term liabilities	3,490		4,703
Total lease liabilities		$	5,981	$	7,263

The interest rate implicit in lease agreements is typically not readily determinable, and as such the Company used the incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The incremental borrowing rate is defined as the interest the Company would pay to borrow on a collateralized basis, considering factors such as length of lease term. The following table presents the weighted average remaining lease term and discount rate:


	Nov 30, 2022
Weighted average remaining term (in years)	2.88
Weighted average discount rate	3.8	%

The maturities of the lease liabilities for each of the following fiscal years is:


(in thousands)	Nov 30, 2022
Remainder of 2023	$	1,392
2024	2,189
2025	1,425
2026	1,129
2027 and thereafter	171

Total lease payments	$	6,306
Less: Imputed Interest	325
Total lease obligations	$	5,981
Less: Current portion of lease obligations	2,491
Long-term lease obligations	$	3,490

During the three months ended November 30, 2022 and 2021, the Company recognized $0.7 million and $0.7 million of operating lease expense, respectively, which includes immaterial short-term leases. During the six months ended November 20, 2022 and 2021, the Company recognized $1.4 million and $1.4 million of operating leases expense, respectively, which includes immaterial short-term leases. The expenses on the Consolidated Statement of Operations were classified as follows:


	Three Months Ended				Six Months Ended
(in thousands)	Nov 30, 2022		Nov 30, 2021		Nov 30, 2022		Nov 30, 2021
Cost of sales	$	221	$	218	$	440	$	437
Research and development	53		52		104		150
Sales and marketing	41		39		81		79
General and administrative	365		434		725		764
	$	680	$	743	$	1,350	$	1,430

The following table presents supplemental cash flow and other information related to leases for the six months ended:


(in thousands)	Nov 30, 2022		Nov 30, 2021
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,384	$	1,359
ROU assets obtained in exchange for lease liabilities
Operating leases	$	—	$	—