Note 5 - Fair Value Measurements

12 Months Ended

Sep. 30, 2019

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:

Level1: 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, 2019

and

2018.

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, 2019

and

2018.

	September 30, 2019
	Cost Basis		Unrealized Gain		Fair Value		Cash Equivalents		Short-term Securities		Long-term Securities
Level 1:
Money market funds	$	275,538	$	-	$	275,538	$	275,538	$	-	$	-
Level 2:
Certificates of deposit		971,592		-		971,592		-		499,000		472,592
Municipal securities		240,463		205		240,668		-		80,336		160,332
Corporate bonds		3,856,766		11,157		3,867,923		-		3,116,028		751,895
Subtotal		5,068,821		11,362		5,080,183		-		3,695,364		1,384,819
Total	$	5,344,359	$	11,362	$	5,355,721	$	275,538	$	3,695,364	$	1,384,819

	September 30, 2018
	Cost Basis		Unrealized Gain			Fair Value		Cash Equivalents		Short-term Securities		Long-term Securities
Level 1:
Money market funds	$	410,393	$	-		$	410,393	$	410,393	$	-	$	-
Level 2:
Certificates of deposit		499,000		-			499,000		-		-		499,000
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

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, 2019:

	Fair Value Measurements at September 30, 2019
	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	$	1,142,814	$	-	$	-	$	1,142,814	$	-
Goodwill	$	2,305,750	$	-	$	-	$	2,305,750	$	-
Patents	$	32,820	$	-	$	-	$	32,820	$	-

The Company did

not

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

September 30, 2019.

The

$140,240

change in fair value of Goodwill from

September 30, 2018

to

September 30, 2019

is due to the change in foreign currency rates.

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 Spain. There was no impairment related to these assets. Refer to Note 8, Goodwill and Intangible Assets, for more information.

(b) Represents acquired goodwill from the acquisition of Genasys Spain. There was no impairment related to these assets. Refer to 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.