XML 32 R21.htm IDEA: XBRL DOCUMENT

Note 15 - Leases

3 Months Ended

Jun. 30, 2021

15. Leases

The Company determines whether a contract is or contains a lease at inception of a contract. The Company defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property or equipment (an identified asset) for a period of time in exchange for consideration. Control over the use of the identified asset means that the Company have both the right to obtain substantially all of the economic benefits from the use of the asset and the right to direct the use of the asset.

The discount rate was calculated using an incremental borrowing rate based on an assessment prepared by the Company through the use of Company credit ratings, consideration of its lease populations potential risk to its total capital structure, and a market rate for a collateralized loan for its risk profile, calculated by a third party. The Company elected to apply the discount rate using the remaining lease term at the date of adoption for Neeltran lease contracts.

Following the Neeltran Acquisition, the Company evaluated all open Neeltran contracts at the date of the acquisition to determine if any applied under ASC 842 as Neeltran, a private company, had deferred adopting ASC 842 prior to the Neeltran Acquisition, as permitted. The Company identified nine lease contracts with terms greater than twelve months and evaluated them under ASC 842 guidance. As part of the implementation, we identified one lease contract that classified as a financing lease. The Company does not expect a material impact to the financial statements on an ongoing basis resulting from the adoption of the ASC 842 standard for the Neeltran business and Neeltran will follow the existing policies below.

Operating Leases

All significant lease arrangements are recognized at lease commencement. Operating lease right–of-use assets and lease liabilities are recognized at commencement. The operating lease right-of-use asset includes any lease payments related to initial direct cost and prepayments and excludes any lease incentives. Lease expense is recognized on a straight-line basis over the lease term. The Company enters into a variety of operating lease agreements through the normal course of its business, but primarily real estate leases to support its operations. The real estate lease agreements generally provide for fixed minimum rental payments and the payment of real estate taxes and insurance. Many of these real estate leases have one or more renewal options that allow the Company, at its discretion, to renew the lease for varying periods up to five years or to terminate the lease. Only renewal options or termination rights that the Company believed were likely to be exercised were included in the lease calculations.

The Company also enters into leases for vehicles, IT equipment and service agreements, and other leases related to its manufacturing operations that are also included in the right-of-use assets and lease liability accounts if they are for a term of longer than twelve months. However, many of these leases are either short-term in nature or immaterial. The Company has made the policy election to exclude short-term leases from the balance sheet.

Finance Leases

As part of the adoption of ASC 842 at Neeltran, the Company identified one lease contract that is classified as a financing lease. In February 2020, Neeltran entered into a contract to lease a copy machine for an initial term of 39 months, or through May 2023. The Company concluded that the lease should be classified and accounted for as a finance lease as the total value of the lease payments are greater than fair value of the asset. Accordingly, on May 6, 2021, the Company recognized a finance lease right-of-use asset and a finance lease liability of $13.2 thousand on the Neeltran opening balance sheet. As of June 30, 2021, the right-of-use asset related to the finance lease was $12.2 thousand, net of accumulated amortization of $1.0 thousand, and is included in the property and equipment, net on the Company's consolidated balance sheet.

Finance lease right-of-use assets and lease liabilities are recognized similar to an operating lease, at the lease commencement date or the date the lessor makes the leased asset available for use. Finance lease right-of-use assets are generally amortized on a straight-line basis over the lease term, and the carrying amount of the finance lease liabilities are (1) accreted to reflect interest using the incremental borrowing rate if the rate implicit in the lease is not readily determinable, and (2) reduced to reflect lease payments made during the period. Amortization expense for finance lease right-of-use assets and interest accretion on finance lease liabilities are recorded to depreciation expense and interest expense, respectively in our consolidated statement of operations.

Supplemental balance sheet information related to leases at June 30, 2021, and March 31, 2021 are as follows (in thousands):

	*June 30, 2021*			*March 31, 2021*
Leases:
Right-of-use assets - Financing	$	12			—
Right-of-use assets - Operating		3,764			3,747
Total right-of-use assets		3,776			3,747

Lease liabilities - ST Financing	$	6			—
Lease liabilities - ST Operating		690			612
Lease liabilities - LT Financing		6			—
Lease liabilities - LT Operating		3,188			3,246
Total lease liabilities		3,890			3,858

Weighted-average remaining lease term		5.49			5.82
Weighted-average discount rate		6.55	%		6.72	%

The costs related to the Company's finance lease are not material. The costs related to the Company's operating leases for the three months ended June 30, 2021, and 2020 are as follows (in thousands):

	*Three Months Ended*
	*June 30, 2021*
Operating Leases:
Operating lease costs - fixed	$	231
Operating lease costs - variable		32
Short-term lease costs		67
Total lease costs		330

	Three Months Ended
	June 30, 2020
Operating Leases:
Operating lease costs - fixed	$	178
Operating lease costs - variable		27
Short-term lease costs		168
Total lease costs		373

The Company’s estimated minimum future lease obligations under the Company's leases are as follows (in thousands):

	*Leases*
Year ended March 31,
2022	$	695
2023		894
2024		799
2025		674
2026		673
Thereafter		934
Total minimum lease payments		4,669
Less: interest		779
Present value of lease liabilities		3,890