Note 13 - Leases

12 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

13. LEASES

The Company determines if an arrangement is a lease at inception. The guidance in Topic 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 Topic 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 Topic 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 Topic 842. The adoption of Topic 842 did not have a material impact on the Company’s consolidated statement of operations.

During the year ended September 30, 2021, the Company added an additional operating ROU asset of $259 and operating lease liabilities of $259 for office space. The tables below show the operating ROU assets and liabilities as of September 30, 2020, and the balances as of September 30, 2021, including the changes during the periods.

	Operating ROU assets
Operating lease ROU asset at September 30, 2020	$	5,285
Additional operating lease ROU assets		259
Less amortization of operating lease ROU assets		(694	)
Effect of exchange rate on operating lease ROU assets		12
Operating lease ROU assets at September 30, 2021	$	4,862

	Operating lease liabilities
Operating lease liabilities at September 30, 2020	$	7,166
Additional operating lease liabilities		259
Less lease principal payments on operating lease liabilities		(829	)
Effect of exchange rate on operating lease liabilities		12
Operating lease liabilities at September 30, 2021		6,608
Less non-current portion		(5,709	)
Current portion at September 30, 2021	$	899

As of September 30, 2021, the Company’s operating leases have a weighted-average remaining lease term of 6.7 years and a weighted-average discount rate of 4.1%. The maturities of the operating lease liabilities are as follows:

Fiscal year ending September 30,
2022	$	1,151
2023		1,089
2024		1,084
2025		1,057
2026		1,069
Thereafter		2,139
Total undiscounted operating lease payments		7,589
Less imputed interest		(981	)
Present value of operating lease liabilities	$	6,608

For the years ended September 30, 2021 and 2020, total lease expense under operating leases was approximately $991 and $902, respectively. For the year ended September 30, 2021, short-term lease expense was $3. The Company did not have any short-term lease expense during the year ended September 30, 2020.