XML 27 R12.htm IDEA: XBRL DOCUMENT
v3.20.4

6. FAIR VALUE MEASUREMENTS | 12 Months Ended
--- | ---
Sep. 30, 2020
Fair Value Disclosures [Abstract] |
FAIR VALUE MEASUREMENTS | NOTE 6 FAIR VALUE MEASUREMENTS The deferred consideration of $90,000 at September 30, 2020 represents the fair value of the contingent earnout consideration related to the acquisition of Kablooe. The current and non-current portions of this liability of $45,000 each are shown in the corresponding categories on the consolidated balance sheet at September 30, 2020. The deferred consideration of $834,000 on our consolidated balance sheet at September 30, 2019 was the $484,000 present value of the deferred cash consideration related to the acquisition of IPS and the $350,000 estimated fair value of the contingent earnout consideration related to the acquisition of IPS. The IPS earnout consideration was adjusted down to $0 in Fiscal 2020 due to the low likelihood of IPS reaching the earnings targets outlined in the Stock Purchase Agreement. The following table presents the placement in the fair value hierarchy and summarizes the change in fair value of the earn-out consideration for Fiscal 2020 and Fiscal 2019:
|  |  |  |  | Fair value measurement at reporting date using |
|  |  |  |  | Quoted prices in active markets for identical assets |  |  | Significant other observable inputs |  |  | Significant unobservable inputs |
|  | Balance |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
September 30, 2018 |  | $ | 538,000 |  |  | $ | – |  |  | $ | – |  |  | $ | 538,000 |
Increase in fair value of IPS deferred cash consideration |  |  | 36,000 |  |  |  | – |  |  |  | – |  |  |  | 36,000 |
Increase in fair value of IPS earn-out consideration |  |  | 260,000 |  |  |  | – |  |  |  | – |  |  |  | 260,000 |
September 30, 2019 |  |  | 834,000 |  |  |  | – |  |  |  | – |  |  |  | 834,000 |
Increase in fair value of IPS deferred cash consideration |  |  | 16,000 |  |  |  | – |  |  |  | – |  |  |  | 16,000 |
Decrease in the fair value of IPS earnout consideration |  |  | (350,000 | ) |  |  | – |  |  |  | – |  |  |  | (350,000 | )
Payout of IPS deferred cash consideration |  |  | (500,000 | ) |  |  | – |  |  |  | – |  |  |  | (500,000 | )
Fair value of Kablooe contingent earnout consideration |  |  | 90,000 |  |  |  | – |  |  |  | – |  |  |  | 90,000 |
September 30, 2020 |  | $ | 90,000 |  |  | $ | – |  |  | $ | – |  |  | $ | 90,000 |
The fair value of the Kablooe contingent earn-out consideration will be measured on a recurring basis at each reporting date. The following inputs and assumptions were used in the Black-Scholes valuation model to estimate the fair value of the Kablooe earn-out consideration at September 30, 2020:
Volatility |  | 40%
Risk free interest rate |  | 1%
Expected term, in years | 0.5 - 4.5
Dividend yield |  | 0%
During Fiscal 2019, the Company and a customer entered into an agreement, whereby the Company received common stock in the customer as compensation for product design services provided by the Company. The shares represent less than a 2% ownership interest in the customer. Pursuant to ASC 820, management estimated the initial fair value of the investment to be $327,000, based on a private placement round of common stock issued to third party private investors of the customer at a time close to the valuation date. Based on this valuation, the Company recognized revenue and a cost method investment for that amount in Fiscal 2019. Management determined that the inputs used to value the investment are observable, either directly or indirectly, and therefore classified as a Level 2 valuation. Pursuant to ASC 820, the transaction price of the cash financing round establishes the fair value of the common stock issued as consideration unless one of the following conditions exists:
| a. | The transaction is between related parties,
| b. | The transaction takes place under duress or the seller is forced to accept the price in the transaction,
| c. | The unit of account represented by the transaction price is different from the unit of account for the asset or liability measured at fair value, or
| d. | The market in which the transaction takes place is different from the principal market (or most advantageous market).
On January 21, 2020, the Company executed a non-negotiable promissory note with a principal amount of $1,626,000 with the same design segment customer in which we are invested to recover accounts receivable which had been reserved as bad debt in Fiscal 2019. Beginning on April 1, 2020, monthly interest and principal payments, based on a one-year amortization schedule, were due and payable in arrears on the first day of the month until March 1, 2021. Interest accrues at a rate of 8% per annum. Since no payments were received through June 30, 2020, the note receivable is fully reserved on the Company’s consolidated balance sheets. In the fourth quarter of Fiscal 2020, the Company received $134,000 from this customer, of which $61,000 was applied to past due interest and penalties and recorded as interest income, and $73,000 was applied to principal and recorded as a recovery of bad debt expense as a reduction of general and administrative expense. During Fiscal 2020, as a result of the customer’s default on the promissory note, the impact of COVID-19, and performance of the business in which the Company is invested, including its inability to generate revenue, management concluded the investment was also impaired and it recorded an impairment charge of $327,000 to fully reserve the investment on the Company’s consolidated balance sheet at September 30, 2020. The impairment charge is included in the general and administrative expenses of the consolidated statement of operations. The following table presents the placement in the fair value hierarchy and summarizes the change in fair value of the cost method investment during Fiscal 2020 and Fiscal 2019:
|  |  |  |  | Fair value measurement at reporting date using |
|  |  |  |  | Quoted prices in active markets for identical assets |  |  | Significant other observable inputs |  |  | Significant unobservable inputs |
|  | Balance |  |  | (Level 1) |  |  | (Level 2) |  |  | (Level 3) |
September 30, 2019 |  | $ | 327,000 |  |  | $ | – |  |  | $ | 327,000 |  |  | $ | – |
Impairment of cost method investment |  |  | (327,000 | ) |  |  | – |  |  |  | (327,000 | ) |  |  | – |
September 30, 2020 |  | $ | – |  |  | $ | – |  |  | $ | – |  |  | $ | – |

X
- References No definition available. + Details
Name: | us-gaap_FairValueDisclosuresAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
Name: | us-gaap_FairValueDisclosuresTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration