Leases

12 Months Ended

Sep. 30, 2022

The Company leases certain facilities and equipment under operating leases per ASC 842, which the Company adopted on October 1, 2019. The Company’s adoption of ASC 842 included renewal or termination options for varying periods which we deemed reasonably certain to exercise. This determination is based on our consideration of certain economic, strategic and other factors that we evaluate at lease commencement date and reevaluate throughout the lease term.

Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments and additional lease payments contingent on sales. The variable portion of lease payments is not included in our right-of-use assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expenses recorded in selling, general and administrative expenses in our consolidated statement of operations.

We have elected to apply the short-term lease exception for all underlying asset classes, which mainly includes equipment leases. That is, leases with a term of 12 months or less are not recognized on the balance sheet, but rather expensed on a straight-line basis over the lease term. We do not include significant restrictions or covenants in our lease agreements, and residual value guarantees are generally not included within our operating leases.

Included in lease expense in our consolidated statements of operations (see Note 5) were lease payments for a house that the Company’s CEO rented to the Company for corporate housing for its out-of-town Bombshells management and trainers, of which lease expense totaled $19,500 for the year ended September 30, 2020. This lease terminated on December 31, 2019 and was scoped out upon adoption of ASC 842 on October 1, 2019.

Future maturities of operating lease liabilities as of September 30, 2022 are as follows (in thousands):


	Principal Portion		Interest Portion		Total Payments
October 2022 - September 2023	$	2,795	$	2,100	$	4,895
October 2023 - September 2024	3,006		1,938		4,944
October 2024 - September 2025	3,261		1,763		5,024
October 2025 - September 2026	3,516		1,573		5,089
October 2026 - September 2027	3,522		1,373		4,895
Thereafter	22,696		5,246		27,942
	$	38,796	$	13,993	$	52,789

Total lease expense under ASC 842 was included in selling, general and administrative expenses in our consolidated statement of operations, except for sublease income which was included in other revenue, for the years ended September 30, 2022, 2021, and 2020 as follows (in thousands):


	2022			2021			2020
Operating lease expense – fixed payments	$	4,738		$	3,325		$	3,244
Variable lease expense	1,397			349			381
Short-term equipment and other lease expense (includes $258, $298 and $315 recorded in advertising and marketing for fiscal 2022, 2021 and 2020, respectively, and $435, $397 and $372 recorded in repairs and maintenance, respectively; see Note 5)	1,264			955			1,122
Sublease income	(4)			(6)			(9)
Total lease expense, net	$	7,395		$	4,623		$	4,738

Other information:
Operating cash outflows from operating leases	$	7,200		$	4,522		$	4,562
Weighted average remaining lease term	11 years			12 years			13 years
Weighted average discount rate	5.6		%	6.0		%	6.1		%

In relation to certain rent concessions that we received from certain of our lessors in view of the COVID-19 pandemic, we accounted for those rent concessions as deferral of payments as if the lease is unchanged. Any reduction in total lease expense during the period caused by either an extension of the lease term or a forgiveness of certain lease payments is accounted for as variable lease payment adjustments.

We recorded impairment charges of operating lease right-of-use assets amounting to $0, $0, and $104,000 during fiscal years 2022, 2021, and 2020, respectively.