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Commitments and Contingencies
3 Months Ended
Dec. 31, 2019
Commitments And Contingencies Disclosure [Abstract]  
Commitments and Contingencies

12.   Commitments and Contingencies

Contingent Consideration

In connection with its acquisitions of Quantum Technology Sciences, Inc. (“Quantum”) and the OptoSeis® fiber optic sensing technology business, the Company recorded contingent purchase price payments, or contingent consideration, that may be owed in the future.  For both acquisitions, the contingent payments are based on future receipt of contracts awards and the resulting revenue derived from such contracts.  In prior periods, the Company utilized the services of an independent valuation consultant to assist it with the estimation of the fair value of this contingent consideration.  The determination of fair value is inherently unpredictable since it requires estimates and projections of future revenue, including the size, length, timing and, in the case of Quantum, the extent of gross profits earned under its future contracts.  As a result, the Company anticipates future fair value adjustments to these liabilities over the respective earn-out periods, and these adjustments will result in either charges or credits to the Company’s operating expenses when the fair value of the contingent consideration increases or decreases, respectively.  

The Company recorded an initial contingent earn-out liability of $7.7 million in connection with its July 2018 acquisition of Quantum.   Contingent payments, if any, may be paid in the form of cash or Company stock and will be derived from eligible revenue generated during a four-year earn-out period ending July 2022.  The maximum amount of contingent payments is $23.5 million over the four-year earn-out period.  Subsequent to the Quantum acquisition, the Company recorded a $2.9 million adjustment to decrease the initial earn-out liability to its estimated fair value.

The Company recorded an initial contingent earn-out liability of $4.3 million in connection with its November 2018 acquisition of all the intellectual property and related assets of the OptoSeis® fiber optic sensing technology.  Contingent cash payments, if any, will be derived from eligible revenue generated during a five-and-a-half year earn-out period ending in May 2024.  The maximum amount of contingent payments is $23.2 million over the five-and-a-half year earn-out period.  Subsequent to the OptoSeis® acquisition, the Company recorded a $0.8 million adjustment to increase the initial earn-out liability to fair value.   

 The Company reviews and accesses the fair value of its contingent earn-out liabilities on a quarterly basis.  At December 31, 2019, management re-accessed the Company’s projections of future eligible revenue and determined that the projections had not materially changed since September 30, 2019.  Based on the assessment, no adjustments were made to the fair value of the Company’s contingent earn-out liabilities for the first fiscal quarter of 2020.     

Operating Leases

The Company leases office space and certain equipment for terms of two years or less. For the remaining nine months of fiscal year 2020 and for fiscal year 2021, future minimum lease obligations for the Company’s operating right-of-use asset and the Company’s other short-term leases $0.2 million and $0.1 million, respectively.

Legal Proceedings

              The Company is involved in various pending legal actions in the ordinary course of its business.  Management is unable to predict the ultimate outcome of these actions, because of the inherent uncertainty such actions.  However, management believes that the most probable, ultimate resolution of these pending matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.