Forward Industries, Inc. Fair Value Disclosure
NOTE 6 FAIR VALUE MEASUREMENTS - EARNOUT
The acquisition of Kablooe provides annual contingent earnout payments based on results of operations through August 2025. The fair value of this earnout liability is measured on a recurring basis at each reporting date using a Black-Scholes valuation model with the following inputs and assumptions, which are categorized within level 3 of the fair value hierarchy:
| September 30, | ||||
| 2024 | 2023 | |||
| Volatility | 40% | 40% | ||
| Risk-free interest rate | 3.6% | 4.9%-5.3% | ||
| Expected term in years | 0.5 | 0.4 - 1.4 | ||
| Dividend yield | ||||
In Fiscal 2023, the Company reduced this liability from $70,000 to $0 based on changes in the expected likelihood of Kablooe reaching the specified earnings targets. In Fiscal 2024, there were no changes to the total fair value of this earnout liability.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Dec 27, 2024 | Showing above |
| 2023 | Dec 21, 2023 | |
| 2022 | Dec 16, 2022 | |
| 2021 | Dec 16, 2021 | |
| 2020 | Dec 17, 2020 | |
| 2019 | Dec 27, 2019 | |
| 2018 | Dec 20, 2018 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.