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Note 9 - Fair Value Measurements | 12 Months Ended
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Jan. 02, 2022
Notes to Financial Statements |
Fair Value Disclosures [Text Block] | NOTE 9-FAIR VALUE MEASUREMENTS Pursuant to the accounting guidance for fair value measurements and its subsequent updates, fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market and it considers assumptions that market participants would use when pricing the asset or liability. The accounting guidance for fair value measurement also specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other market participants would use based upon market data obtained from independent sources (observable inputs) or reflect the Company’s own assumption of market participant valuation (unobservable inputs). The fair value hierarchy consists of the following three levels:
| • | Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities.
| • | Level 2 – Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data.
| • | Level 3 – Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable.
Our cash and cash equivalents balances of $19.6million and $22.0 million, including amounts in money market funds, as of January 2, 2022 and January 3, 2021, respectively. The carrying value of cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate their fair values due to their relatively short maturities Investment in Privately-held Non-Affiliate In the third quarter of 2021, in connection with a revenue contract with a non-affiliated customer, the Company received shares of the customer's common stock. The full transaction price under the revenue contract was cash plus a non-cash consideration consisting of a certain amount of the customers equity. The Company considers the non-cash consideration to be an investment in the customer. The full transaction price is the amount of consideration which the Company expects to receive in the contract in exchange for transferring the promised goods and services to the customer. Since the non-cash consideration are shares of common stock that are not publicly traded, their fair value is not readily determinable. The Company considered various valuation methods such as market multiples, guideline public company method, and the Black-Scholes Option Pricing model. Due to limited data for the valuation, the Company ultimately selected the Black Scholes method using back-solve techniques as that was determined to be the most suitable with the available data. The Black Scholes Option Pricing model is a valuation approach that can be used to determine the value of common shares for companies in which there are no, or infrequent, transactions involving common shares. The Company believes that its valuation method for the non-public equity under this arrangement falls under Level 3 in the fair value hierarchy because the value method relies on unobservable market inputs. The fair value of the non-cash consideration is listed below:
|  | Fair Value Measurements at Reporting Date Using |
|  |  |  |  |  | Quoted Prices in Active Markets for Identical Assets |  |  | Significant Other Observable Inputs |  |  | Significant Unobservable Inputs |
Assets: |  | Total |  |  | (Level I) |  |  | (Level 2) |  |  | (Level 3) |
Investment in privately-held non-affiliate |  | $ | 300,000 |  |  | $ | — |  |  | $ | — |  |  | $ | 300,000 |
Total assets |  | $ | 300,000 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
In arriving at the estimated value for the non-cash consideration, the Company utilized inputs relying on significant judgment in accordance with the AICPA Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation (2013). The key assumptions utilized are below: Discount for lack of marketability: 34% - 41% Expected Term: 4 - 5 Years Risk Free Interest Rate: 0.75% - 0.92% Dividend: 0.00 Volatility: 63% - 78% Volatility was estimated by utilizing a selected peer group of companies within the customers’ industry with a valuation date as of October 2021. After initial recognition fair value of the non-cash consideration, the Company elected to utilize the practical expedient under ASC 321 by which entities can elect to measure equity securities without readily determinable fair values at “cost minus impairment,” basis for periods subsequent to the acquisition date. Under the “cost minus impairment” methods, when the investment is determined to be impaired on the basis of a qualitative assessment, or there is an observable price change in an orderly transaction, entities that have made the election in ASC 321 must remeasure such equity securities at fair value in accordance with ASC 820. ASC 321 indicates that the adjustments to the carrying value of an equity security without a readily determinable fair value should reflect the fair value of the security as of the date that the observable transaction for the similar security took place. Subsequent to the valuation date and to January 2, 2021, there were no observable indicators of impairment for the investment in the privately-held, non-affiliate. The investment was not revalued and the Company did not recognize any impairments in fiscal 2021 related to the investment.

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- 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=123874694&loc=d3e19207-110258 + Details
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