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Note 5 - Fair Value Measurements

12 Months Ended

Sep. 30, 2018

Notes to Financial Statements

Fair Value Disclosures [Text Block]

5.

FAIR VALUE MEASUREMENTS

The Company’s financial instruments consist principally of cash equivalents, short and long-term marketable securities, accounts receivable and accounts payable. The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants. Assets and liabilities measured at fair value are categorized based on whether or

not

the inputs are observable in the market and the degree that the inputs are observable. The categorization of financial instruments within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is prioritized into

three

levels (with Level

3

being the lowest) defined as follows:

Level 1: Inputs are based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2: Inputs include quoted prices for similar assets or liabilities in active markets and/or quoted prices for identical or similar assets or liabilities in markets that are not active near the measurement date.

Level 3: Inputs include management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The fair value of the majority of the Company’s cash equivalents and marketable securities was determined based on “Level

1”

inputs. The fair value of certain marketable securities, long-term debt, hedge fund investments, and derivative contracts were determined based on “Level

2”

inputs. The valuation techniques used to measure the fair value of the “Level

2”

instruments were valued based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. The Company does

not

have any financial instruments measured at fair value on a recurring basis in the “Level

3”

category.

There have been

no

changes in Level

1,

Level

2,

and Level

3

and

no

changes in valuation techniques for financial instruments measured at fair value on a recurring basis for the years ended

September 30, 2018

and

2017.

Instruments Measured at Fair Value

on a Recurring Basis

The following tables present the Company’s cash equivalents and marketable securities’ costs, gross unrealized gains and losses, and fair value by major security type recorded as cash equivalents or short-term or long-term marketable securities as of

September 30, 2018

and

2017.

		September 30, 2018
						Unrealized				Fair				Cash				Short-term				Long-term
		Cost Basis				Losses				Value				Equivalents				Securities				Securities
Level 1:
Money Market Funds		$	410,393			$	-			$	410,393			$	410,393			$	-			$	-
Level 2:
Certificates of deposit			499,000				-				499,000				-				-				499,000
Municipal securities			-				-				-				-				-				-
Corporate bonds			4,302,661				(8,945	)			4,293,716				-				3,592,175				701,541
Subtotal			4,801,661				(8,945	)			4,792,716				-				3,592,175				1,200,541
Total		$	5,212,054			$	(8,945	)		$	5,203,109			$	410,393			$	3,592,175			$	1,200,541

		September 30, 2017
										Fair				Cash				Short-term				Long-term
		Cost Basis				Losses				Value				Equivalents				Securities				Securities
Level 1:
Money Market Funds		$	55,257			$	-			$	55,257			$	55,257			$	-			$	-
Level 2:
Certificates of deposit			2,436,647				-				2,436,647				-				1,937,647				499,000
Municipal securities			25,315				(12	)			25,303				-				25,303				-
Corporate bonds			2,609,973				(1,257	)			2,608,716				-				2,396,592				212,124
Subtotal			5,071,935				(1,269	)			5,070,666				-				4,359,542				711,124
Total		$	5,127,192			$	(1,269	)		$	5,125,923			$	55,257			$	4,359,542			$	711,124

Instruments Measured at Fair Value

on a Non-Recurring Basis

Assets and liabilities that are measured at fair value on a non-recurring basis include intangible assets and goodwill, which are recognized at fair value during the period in which an acquisition is completed, from updated estimates and assumptions during the measurement period, or when they are considered to be impaired. These non-recurring fair value measurements, primarily for intangible assets acquired, were based on Level

3

unobservable inputs. In the event of an impairment, the Company determines the fair value of the goodwill and intangible assets using a discounted cash flow approach, which contains significant unobservable inputs and therefore is considered a Level

3

fair value measurement. The unobservable inputs in the analysis generally include future cash flow projections and a discount rate.

The following table presents categories of long-lived assets that were subject to non-recurring fair value measurements during the year ended 

September 30, 2018:

						Fair Value Measurements at September 30, 2018
		Carrying Value				Active Markets for Identifiable Assets (Level 1)				Observable Inputs (Level 2)				Unobservable Inputs (Level 3)				Non-Cash Impairment Loss
Intangible assets from Genasys acquisition (a)		$	1,520,006			$	-			$	-			$	1,520,006			$	-
Goodwill from Genasys acquisition (b)		$	2,445,990			$	-			$	-			$	2,445,990			$	-
Patents (c)		$	37,340			$	-			$	-			$	37,340			$	(11,133	)

(a) Represents acquired intangible assets from the acquisition of Genasys. There was no impairment related to these assets. (See Note 4, Acquisition and Note 8, Goodwill and Intangible Assets, for more information)

(b) Represents acquired goodwill from the acquisition of Genasys. There was no impairment related to these assets. (See Note 4, Acquisition and Note 8, Goodwill and Intangible Assets, for more information)

(c) During the year ended September 30, 2018, the Company determined that certain patents were impaired. The impaired patents related to products no longer sold by the Company.

The following table presents categories of long-lived assets that were subject to non-recurring fair value measurements during the year ended 

September 30, 2017:

						Fair Value Measurements at September 30, 2017
		Carrying Value				Active Markets for Identifiable Assets (Level 1)				Observable Inputs (Level 2)				Unobservable Inputs (Level 3)				Non-Cash Impairment Loss
Patents		$	55,689			$	-			$	-			$	55,689			$	-

The Company did

not

recognize non-recurring fair value adjustments related to the impairment of intangible assets for the year ended

September 30, 2017.

X

- References

No definition available.

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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://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 820
-URI http://asc.fasb.org/topic&trid=2155941

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