Leases

3 Months Ended

Aug. 31, 2024

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, 2024		May 31, 2024
Assets
Operating lease ROU asset	Other assets	$	5,313	$	5,804
Liabilities
Current operating lease liabilities	Other current liabilities	1,931		1,975
Non-current operating lease liabilities	Other long-term liabilities	3,490		3,939
Total lease liabilities		$	5,421	$	5,914

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, 2024
Weighted average remaining term (in years)	3.24
Weighted average discount rate	4.7	%

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


(in thousands)	Aug 31, 2024
Remainder of 2025	$	1,642
2026	1,978
2027	984
2028	729
2029 and thereafter	515

Total lease payments	$	5,848
Less: imputed interest	427
Total lease obligations	$	5,421
Less: Current portion of lease obligations	1,931
Long-term lease obligations	$	3,490

During the three months ended August 31, 2024 and 2023, the Company recognized $0.7 million and $0.6 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, 2024		Aug 31, 2023
Cost of sales	$	230	$	197
Research and development	109		58
Sales and marketing	40		40
General and administrative	300		332
	$	679	$	627

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


	Three Months Ended
(in thousands)	Aug 31, 2024		Aug 31, 2023
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	562	$	532
ROU assets obtained in exchange for lease liabilities
Operating leases	$	—	$	381