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Fair Value of Financial Instruments

3 Months Ended

Dec. 31, 2020

4. Fair Value of Financial Instruments

The Company’s financial instruments generally include cash and cash equivalents, trade accounts, notes receivables and accounts payable. Due to their short-term maturities, the carrying amounts of these financial instruments are deemed to approximate their fair value on the respective balance sheet dates. The valuation technique used to measure the fair value of the contingent consideration was derived from models utilizing market observable inputs.

The Company measures its contingent consideration at fair value on a recurring basis.

The following tables present the fair value of the Company’s contingent consideration by valuation hierarchy and input (in thousands):

	As of December 31, 2020
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable (Level 2)		Significant Unobservable (Level 3)			Totals
Contingent consideration - current portion	$	—	$	—	$	(7,955	)	$	(7,955	)
Non-current contingent consideration		—		—		(2,310	)		(2,310	)
Total	$	—	$	—	$	(10,265	)	$	(10,265	)

As of September 30, 2020

Quoted Prices in

Active Markets for

Identical Assets

(Level 1)

Significant

Other

Observable

(Level 2)

Significant

Unobservable

(Level 3)

Totals

Non-current contingent consideration

—

(10,962

)

(10,962

)

Assets and Liabilities Measured on a Nonrecurring Basis

The following table summarizes changes in the fair value of the Company’s Level 3 financial instruments for the three months ended December 31, 2020:

Balance at October 1, 2020	$	10,962
Fair value adjustments		(697	)
Balance at December 31, 2020	$	10,265

Adjustments to the fair value of the contingent consideration are based on Monte Carlo simulations utilizing inputs which include market comparable information and management assessments regarding potential future scenarios. The Company believes its estimates and assumptions are reasonable, however, there is significant judgement involved.

- 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.

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