Note 12. Leases

The Company leases an 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 ten years and two months, ending on February 28, 2025 and is renewable. 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 previously leased a 46,000 square foot manufacturing facility in Tijuana, Mexico. The Company and landlord agreed to end the lease early on January 31, 2022. The Company also leased a 52,000 square foot manufacturing facility in Tijuana, Mexico. On October 28, 2021, the Company and landlord agreed to end the lease early on February 28, 2022 which included a lease termination fee of $92,000.

In July 2021, the Company entered into an indirect lease arrangement for an approximately 318,000 square foot manufacturing facility in Tijuana, Mexico. The lease term is for 7 years of which 5 years are mandatory, commencing March 2022. The lease contains written options to renew for two additional consecutive periods of 5 years each. The Company has transitioned its manufacturing operations from the above noted Tijuana, Mexico manufacturing facilities into the newly leased facility with the lease commencing in the second quarter of fiscal 2022. The lease calls for monthly rental payments of $162,000, 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.

On November 19, 2021, the Company signed a lease for a 105,000 square foot warehouse in Brooklyn Park, Minnesota. The lease term is five years commencing March 2022 and ending on February 28, 2027, with rent payments increasing annually. 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. The lease commenced in the second quarter of fiscal 2022.

          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 the Company is reasonably certain to exercise. The Company’s 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, 2022 (in thousands):

The weighted average term and weighted average discount rate for the Company’s leases as of March 31, 2022 were 4.71 years and 3.05%, respectively, compared to 3.33 years and 3.40%, respectively, as of March 31, 2021. For the three and six months ended March 31, 2022, the operating cash outflows from the Company’s leases was $238,000 and $550,000, compared to $240,000 and $480,000 for the three and six months ended March 31, 2021.