Note 15. Leases

The Company leases an approximately 85,000 square foot facility at 7050 Winnetka Avenue North, Brooklyn Park, Minnesota consisting of corporate offices, manufacturing, and warehouse space. The lease term is 13 years and two months, ending on February 29, 2028. At commencement, the lease called for monthly base rental payments of approximately $37,000.

The Company indirectly leases an approximately 318,000 square foot manufacturing facility in Tijuana, Mexico that operates as a Maquiladora. The lease term commenced in April 2024 and has a term of seven years, of which five years are mandatory. The lease contains two options to extend the term of the lease for additional periods of five years each. At commencement, the lease called for monthly base rental payments of approximately $169,000, increasing 2% annually. The renewal options have not been included within the lease term because it is not reasonably certain that the Company will exercise either option.

The Company leases an approximately 105,000 square foot warehouse and manufacturing facility in Brooklyn Park, Minnesota. The lease term is five years ending on February 28, 2027, with rent payments increasing annually. At commencement, the lease called for monthly base rental payments of approximately $56,000. The lease includes an option to extend the lease for an additional five years. The renewal option has not been included within the lease term because it is not reasonably certain that the Company will exercise the option.

Nestor Cables leases an approximately 25,000 square foot manufacturing facility in Oulu, Finland, which is utilized for the operations of Nestor Cables. The original lease term ended on October 31, 2022, but auto renewed and will continue to auto renew indefinitely until terminated with two years written notice. It is not reasonably certain that the Company will exercise the termination option. At lease commencement, the lease called for monthly rental payments of approximately €40,000. Rent is increased each year on January 1st based upon the cost-of-living index published by the Finnish government.

Nestor Cables previously leased a facility in Keila, Estonia which was terminated in the first quarter of fiscal 2025, with the operations of the Keila facility being consolidated into the Nestor Cables facility in Tabasalu, Estonia.

Nestor Cables leases a manufacturing facility in Tabasalu, Estonia, which was expanded in the first quarter of fiscal 2025 from approximately 49,000 square feet to approximately 115,000 square feet and which is utilized for the operations of Nestor Cables Baltics. The lease term is 10 years ending in November 2034. The lease for the facility calls for monthly rental payments of approximately €63,000. Rent for the portion of the lease pertaining to the original 49,000 square foot facility, which at lease commencement had monthly base rental of €24,000, is increased each year on May 1st based upon the cost-of-living index published by the Estonian government and is capped at 5%.

Right-of-use lease assets and lease liabilities are recognized as of the commencement date based on the present value of the remaining lease payments over the lease term which includes renewal periods we are reasonably certain to exercise. Our leases do not contain any material residual value guarantees or material restrictive covenants.

Operating lease expense included within cost of goods sold and selling, general and administrative expense was as follows for the three and six months ended:

Future maturities of lease liabilities were as follows as of March 31, 2025 (in thousands):

The weighted average term and weighted average discount rate for the Company’s leases as of March 31, 2025, were 5.72 years and 6.43%, respectively, compared to 4.79 years and 3.80%, respectively, as of March 31, 2024.

For the three and six months ended March 31, 2025, the operating cash outflows from the Company’s leases was $1,194,000 and $2,364,000, respectively, compared to $1,049,000 and $2,093,000, respectively, for the three and six months ended March 31, 2024.