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 and warehousing. The Company has financing arrangements for manufacturing and distribution.

On December 24, 2024, the Company entered into an agreement to sell the manufacturing facilities in Queensbury, NY and Glens Falls, NY for a purchase price of $5.5 million and $1.2 million, respectively, and net proceeds of $5.2 million and $1.1 million, respectively. The Company simultaneously entered into lease agreements with future lease payments of $4.6 million over seven years for the Queensbury, NY facility and $0.4 million over three years for the Glens Falls, NY facility.

Based on certain criteria, the transaction was accounted for as a financing arrangement, as it did not meet the criteria for a sale-leaseback. As a result, the assets remain in "Property, plant and equipment, net" on the Consolidated Balance Sheets at their historical book value and are depreciated over the term of the lease agreements. A financing arrangement was recorded in the amount of the net proceeds received. The Company will recognize monthly rent as a reduction of the finance arrangement and interest expense, using the effective interest rate method. No gain or loss was recognized related to the financing arrangement for the twelve months ended May 31, 2025.

As of May 31, 2025, the carrying value of the financing arrangement was $6.2 million, of which $0.4 million was classified as "Other current liabilities" and $5.8 million was classified as "Other long-term liabilities" on the Consolidated Balance Sheets. Interest expense associated with the financing arrangement was $0.2 million for the twelve months ending May 31, 2025.

Remaining future cash payments related to the financing arrangement as of May 31, 2025 for each of the following fiscal years is:


(in thousands)	May 31, 2025
2026	$	800
2027	804
2028	745
2029	660
2030 and thereafter	1,705

Total minimum liability payments	$	4,714
Less: imputed interest	(2,028)
Total	$	2,686

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 Company elected the three practical expedients that permit an entity to (a) not reassess whether expired or existing contracts contain leases, (b) not reassess lease classification for existing or expired leases, and (c) not consider whether previously capitalized initial direct costs would be appropriate under the new standard. Further, the Company has elected to not recognize leases with terms of 12 months or less on the balance sheet, and elected to account for lease and non-lease components as a single component for certain classes of assets.


(in thousands)	Balance Sheet Location	May 31, 2025		May 31, 2024
Assets
Operating lease ROU assets	Other assets	$	3,850	$	5,804
Liabilities
Current operating lease liabilities	Other current liabilities	1,840		1,975
Non-current operating lease liabilities	Other long-term liabilities	2,106		3,939
Total lease liabilities		$	3,946	$	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:


(in thousands)	May 31, 2025
2026	$	1,982
2027	985
2028	729
2029	515
2030 and thereafter	—
Total lease payments	$	4,211
Less: Imputed Interest	265
Total lease obligations	$	3,946
Less: Current portion of lease obligations	1,840
Long-term lease obligations	$	2,106

During the years ended May 31, 2025, 2024 and 2023 the Company recognized operating lease expense, which includes immaterial short-term leases, of $2.6 million, $2.5 million and $2.7 million, respectively. The expenses on the Consolidated Statement of Operations were classified as follows:


(in thousands)	May 31, 2025		May 31, 2024		May 31, 2023
Cost of sales	$	896	$	866	$	881
Research and development	372		195		193
Sales and marketing	167		161		162
General and administrative	1,155		1,327		1,458
Acquisition, restructuring and other items, net	42		—		—
	$	2,632	$	2,549	$	2,694


(in thousands)	May 31, 2025		May 31, 2024
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	2,207	$	2,142
ROU assets obtained in exchange for lease liabilities
Operating leases	—		3,057