Note 6 - Fair Value Measurements

3 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Fair Value Disclosures [Text Block]

6. 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 Company’s cash equivalents and marketable securities were determined based on Level 1 and Level 2 inputs. The valuation techniques used to measure the fair value of the “Level 2” instruments were based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. The Company believes that the recorded values of its other financial instruments approximate their current fair values because of their nature and respective relatively short maturity dates or durations. The Company did not have any marketable securities in the Level 3 category as of December 31, 2023 or September 30, 2023. 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 periods ended December 31, 2023 and September 30, 2023.

Instruments measured at fair value on a recurring basis

Cash equivalents and marketable securities: 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 December 31, 2023 and September 30, 2023. Unrealized gains and losses from the remeasurement of marketable securities are recorded in accumulated other comprehensive income (loss) until recognized in earnings upon the sale or maturity of the security.

	December 31, 2023
	Cost Basis		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Cash Equivalents		Short-term Securities		Long-term Securities
Level 1:
Money market funds	$	1,060	$	-	$	-		$	1,060	$	1,060	$	-	$	-
Level 2:
Certificates of deposit		302		-		-			302		-		302		-
U.S. government agency bonds		1,161		-		-			1,161		-		1,161		-
Municipal securities		3,707		4		(3	)		3,708		-		3,708		-
Corporate bonds		3,607		1		(2	)		3,606		-		3,606		-
Subtotal		8,777		5		(5	)		8,777		-		8,777		-
Total	$	9,837	$	5	$	(5	)	$	9,837	$	1,060	$	8,777	$	-

	September 30, 2023
	Cost Basis		Gross Unrealized Gain		Gross Unrealized Loss			Fair Value		Cash Equivalents		Short-term Securities		Long-term Securities
Level 1:
Money market funds	$	2,307	$	-	$	-		$	2,307	$	2,307	$	-	$	-
Level 2:
Certificates of deposit		301		-		-			301		-		301		-
Municipal securities		926		-		(7	)		919		-		919		-
Corporate bonds		264		-		(3	)		261		-		261		-
Subtotal		1,491		-		(10	)		1,481		-		1,481		-
Total	$	3,798	$	-	$	(10	)	$	3,788	$	2,307	$	1,481	$	-

The Company manages debt investments as a single portfolio of highly marketable securities that is intended to be available to meet current cash requirements. Historically, the gross unrealized losses related to the Company’s portfolio of available-for-sale debt securities were immaterial, and primarily due to normal market fluctuations and not due to increased credit risk or other valuation concerns. Gross unrealized losses on available-for-sale debt securities was $5 as of December 31, 2023, and historically, such gross unrealized losses have been temporary in nature. The Company believes that it is probable the principal and interest will be collected in accordance with the contractual terms. The debt investment portfolio is reviewed at least quarterly, or when there are changes in credit risks or other potential valuation concerns, to identify and evaluate whether an allowance for credit losses or impairment would be necessary. Factors considered in determining whether a loss is temporary include the magnitude of the decline in market value, the length of time the market value has been below cost (or adjusted cost), credit quality, and the Company’s ability and intent to hold the securities for a period of time sufficient to allow for any anticipated recovery in market value.

The following table summarizes the fair value and gross unrealized losses related to available-for-sale debt securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position as of December 31, 2023 and September 30, 2023:

	As of December 31, 2023
	In loss position < 12 months					In loss position > 12 months					Total in loss position
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
Certificates of deposit	$	-	$	-		$	-	$	-		$	-	$	-
U.S. government agency bonds		-		-			-		-			-		-
Municipal securities		628		(1	)		132		(2	)		760		(3	)
Corporate bonds		2,882		(2	)		-		-			2,882		(2	)
	$	3,510	$	(3	)	$	132	$	(2	)	$	3,642	$	(5	)

	As of September 30, 2023
	In loss position < 12 months					In loss position > 12 months					Total in loss position
	Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss			Fair Value		Gross Unrealized Loss
Certificates of deposit	$	-	$	-		$	-	$	-		$	-	$	-
U.S. government agency bonds		-		-			-		-			-		-
Municipal securities		684		(2	)		235		(5	)		919		(7	)
Corporate bonds		-		-			261		(3	)		261		(3	)
	$	684	$	(2	)	$	496	$	(8	)	$	1,180	$	(10	)

Instruments measured at fair value on a non-recurring basis

Nonfinancial assets: Nonfinancial assets such as goodwill, other intangible assets, long-lived assets held and used, and right-of-use (“ROU”) assets are measured at fair value when there is an indicator of impairment and recorded at fair value only when impairment is recognized or for a business combination.

Goodwill and intangible assets are recognized at fair value during the period in which an acquisition is completed, from updated estimates 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 inputs. The Company estimates the fair value of these long-lived assets on a non-recurring basis based on a market valuation approach, engaging independent valuation experts to assist in the determination of fair value.

The following table presents nonfinancial assets that were subject to fair value measurement during the three months December 31, 2023. There were no business combinations or indicators of impairment during the twelve months ended September 30, 2023.

			Fair Value Measurements at December 31, 2023
	Carrying Value		(Level 1)		(Level 2)		(Level 3)		Gain/(Loss)
Intangible assets from Evertel acquisition	$	2,550	$	-	$	-	$	2,550	$	-
Goodwill from Evertel acquisition	$	2,772	$	-	$	-	$	2,772	$	-

Contingent consideration liability: In connection with the Evertel acquisition, the Company recorded a liability related to future performance criteria, A payment of up to $1,050 is payable based on future performance. The contingent consideration liability was recorded at the fair value of $890 as of the acquisition date. The Company engaged independent valuation experts to assist in determining the fair value of the contingent consideration. During each reporting period, the Company will adjust the contingent consideration liability as performance criteria are achieved. The change in fair value is recorded in the accompanying consolidated statement of operations. The changes in the carrying amount of the contingent consideration liability were as follows:

Value at acquisition date	$	890
Remeasurement estimate		46
Balance as of December 31, 2023	$	936

Acquisition holdback liability: In connection with the Evertel acquisition, the Company recorded a holdback liability related to potential future misrepresentations and indemnifications against third-party claims. The holdback liability will be released twelve months from the closing date, subject to amounts withheld for actual, pending or potential claims. The holdback liability was recorded at the present value which was the fair value at the acquisition date. The Company engaged independent valuation experts to assist in determining the present value of the holdback liability. The expected future payment was discounted using a rate representative of the Company’s payment risk and credit rating. Accretion is recorded in each subsequent reporting period based on the discount factor used to arrive at the original fair value. This change in fair value is recorded in the accompanying consolidated statement of operations. The changes in the carrying amount of the holdback liability is as follows:

Balance at acquisition date	$	230
Accretion		5
Balance as of December 31, 2023	$	235