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Note 12 - Leases

3 Months Ended

Dec. 31, 2021

12. LEASES

The Company determines if an arrangement is a lease at inception. The guidance in ASC 842 defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant, or equipment (an identified asset) for a period of time in exchange for consideration. Operating lease ROU assets and lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. The Company’s leases do not provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of future payments. Additionally, the portfolio approach is used in determining the discount rate used to present value lease payments. The ROU asset includes any lease payments made and excludes lease incentives and initial direct costs incurred.

The Company is party to operating leases for office and production facilities and equipment under agreements that expire at various dates through 2028. The Company elected the package of practical expedients permitted under the new lease standard. In electing the practical expedient package, the Company is not required to reassess whether an existing or expired contract is or contains a lease, reassess the lease classification for expired or existing leases nor reassess the initial direct costs for leases that commenced before the adoption of ASC 842. The Company also elected the short-term lease exemption such that the new lease standard was applied to leases greater than one year in duration. Leases with an initial term of twelve months or less are not recorded on the balance sheet. The Company recognizes lease expense for these leases on a straight-line basis over the lease term.

For leases beginning on or after October 1, 2019, lease components are accounted for separately from non-lease components for all asset classes. Certain of the Company’s leases contain renewal provisions and escalating rental clauses and generally require the Company to pay utilities, insurance, taxes and other operating expenses. The renewal provisions of existing lease agreements were not included in the determination of the operating lease liabilities and the ROU assets. Variable payments such as excess usage fees on existing equipment leases were not included in the determination of the lease liabilities and the ROU assets as the achievement of the specified target that triggers the variable lease payment is not considered probable. In addition, the Company’s facility lease in Spain has an escalating lease clause based on a consumer price index which is considered a variable lease payment and is not included in the determination of the lease liability and ROU asset. A 10% increase in the index would increase the total lease liability approximately $19. The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

Upon adoption of ASC 842 as of October 1, 2019, the Company recognized on its consolidated balance sheet an initial measurement of approximately $7,815 of operating lease liabilities, and approximately $5,824 of corresponding operating ROU assets, net of tenant improvement allowances. There was no cumulative effect adjustment to retained earnings as a result of the transition to TASC 842. The adoption of ASC 842 did not have a material impact on the Company’s consolidated statement of operations.

During the three months ended December 31, 2021, the Company added an additional operating ROU asset of $7 and operating lease liabilities of $7 for office equipment. The tables below show the operating ROU assets and liabilities as of September 30, 2021, and the balances as of December 31, 2021, including the changes during the periods.

	Operating lease ROU assets
Operating lease ROU asset as of September 30, 2021	$	4,862
Additional operating lease ROU assets		7
Less amortization of operating lease ROU assets		(178	)
Effect of exchange rate on operating lease ROU assets		(2	)
Operating lease right of use asset as of December 31, 2021	$	4,689

	Operating lease liabilities
Operating lease liabilities as of September 30, 2021	$	6,608
Additional operating lease liabilities		7
Less lease principal payments on operating lease liabilities		(218	)
Effect of exchange rate on operating lease liabilities		(3	)
Operating lease liabilities as of December 31, 2021		6,394
Less non-current portion		(5,488	)
Current portion as of December 31, 2021	$	906

As of December 31, 2021, the Company’s operating leases have a weighted-average remaining lease term of 6.44 years and a weighted-average discount rate of 4.14%. The maturities of the operating lease liabilities are as follows:

Fiscal year ending September 30,
2022 (remaining nine months)	$	866
2023		1,090
2024		1,086
2025		1,058
2026		1,071
Thereafter		2,139
Total undiscounted operating lease payments		7,310
Less imputed interest		(916	)
Present value of operating lease liabilities	$	6,394

For the three months ended December 31, 2021 and 2020, total lease expense under operating leases was approximately $244 and $236, respectively. The Company did not have any short-term lease expense during the three months ended December 31, 2021 and 2020.