Leases

3 Months Ended

Aug. 31, 2023

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	Aug 31, 2023		May 31, 2023
Assets
Operating lease ROU asset	Other assets	$	4,584	$	5,113
Liabilities
Current operating lease liabilities	Other current liabilities	1,758		1,922
Non-current operating lease liabilities	Other long-term liabilities	2,942		3,316
Total lease liabilities		$	4,700	$	5,238

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:


	Aug 31, 2023
Weighted average remaining term (in years)	2.91
Weighted average discount rate	4.6	%

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


(in thousands)	Aug 31, 2023
Remainder of 2024	$	1,523
2025	1,583
2026	1,355
2027	400
2028 and thereafter	174

Total lease payments	$	5,035
Less: Imputed Interest	335
Total lease obligations	$	4,700
Less: Current portion of lease obligations	1,758
Long-term lease obligations	$	2,942

During the three months ended August 31, 2023 and 2022, the Company recognized $0.6 million and $0.7 million of operating lease expense, respectively, which includes immaterial short-term leases. The expenses on the Consolidated Statement of Operations were classified as follows:


	Three Months Ended
(in thousands)	Aug 31, 2023		Aug 31, 2022
Cost of sales	$	197	$	219
Research and development	58		51
Sales and marketing	40		39
General and administrative	332		360
	$	627	$	669

The following table presents supplemental cash flow and other information related to leases:


	Three Months Ended
(in thousands)	Aug 31, 2023		Aug 31, 2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	532	$	691
ROU assets obtained in exchange for lease liabilities
Operating leases	$	381	$	—