Note 12 - Leases

12 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Lessee, Operating Leases [Text Block]

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 $42. The Company’s leases do not contain any residual value guarantees or material restrictive covenants.

During the year ended September 30, 2023, the Company added an additional operating ROU asset of $79 and operating lease liabilities of $79 for office space. During the year ended September 30, 2022, the Company added an additional operating ROU asset of $466 and operating lease liabilities of $466 for office space and equipment. The tables below show the operating ROU assets and liabilities as of September 30, 2022, and the balances as of September 30, 2023, including the changes during the periods.

	Operating lease ROU assets
Operating lease ROU assets as of September 30, 2022	$	4,541
Additional operating lease ROU assets		79
Less amortization of operating lease ROU assets		(772	)
Effect of exchange rate on operating lease ROU assets		38
Operating lease ROU assets as of September 30, 2023	$	3,886

	Operating lease liabilities
Operating lease liabilities as of September 30, 2022	$	6,137
Additional operating lease liabilities		79
Less lease principal payments on operating lease liabilities		(964	)
Effect of exchange rate on operating lease liabilities		39
Operating lease liabilities as of September 30, 2023		5,291
Less non-current portion		(4,283	)
Current portion as of September 30, 2023	$	1,008

As of September 30, 2023, the Company’s operating leases have a weighted-average remaining lease term of 4.8 years and a weighted-average discount rate of 4.2%. The maturities of the operating lease liabilities are as follows:

Fiscal year ending September 30,
2024	$	1,205
2025		1,181
2026		1,195
2027		1,217
2028		1,047
Thereafter		-
Total undiscounted operating lease payments		5,845
Less imputed interest		(554	)
Present value of operating lease liabilities	$	5,291

For the years ended September 30, 2023 and 2022, total lease expense under operating leases was approximately $1,003 and $1,002, respectively. The Company recorded short-term lease expense of $19 for the year ended September 30, 2023. The Company did not have any short-term lease expense during the year ended September 30, 2022.