| Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect amounts in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Principles of Consolidation and Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Certain prior period amounts have been reclassified to conform to the current year's presentation. All intercompany balances and transactions have been eliminated in consolidation. The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. In addition, in the opinion of management, all adjustments (consisting of normal, recurring accruals) considered necessary for a fair presentation of the results for the periods presented have been included. Business Combinations The Company recognizes all of the assets acquired, liabilities assumed, contractual contingencies, and contingent consideration at their fair value on the acquisition date. Acquisition-related costs are recognized separately from the acquisition and expensed as incurred. Restructuring costs incurred in periods subsequent to the acquisition date are expensed when incurred. Subsequent changes to the purchase price ( i.e. , working capital adjustments) or other fair value adjustments determined during the measurement period are recorded as an adjustment to goodwill, with the exception of contingent consideration, which is recognized in the statement of operations in the period it is modified. All subsequent changes to a valuation allowance or uncertain tax position that relate to the acquired company and existed at the acquisition date that occur both within the measurement period and as a result of facts and circumstances that existed at the acquisition date are recognized as an adjustment to goodwill. All other changes in valuation allowances are recognized as a reduction or increase to income tax expense or as a direct adjustment to additional paid-in capital as required. Cash and Cash Equivalents The Company considers all highly liquid securities purchased with an initial maturity of three months or less to be cash equivalents. Short-term Investments The Company's short-term investments at September 30, 2018 consisted of various certificates of deposit with maturities of six months or less, and interest rates between 2% and 2.5% . Accounts Receivable Accounts receivable are recorded at the invoiced amount and are non-interest bearing. The Company maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. Allowances are based on management’s judgment, which considers historical experience and specific knowledge of accounts where collectability may not be probable. The Company makes provisions based on historical bad debt experience, a specific review of all significant outstanding invoices and an assessment of general economic conditions. Inventory Inventory consists of property obtained for resale, generally through the online auction process, and is stated at the lower of cost or net realizable value. Cost is generally determined using the specific identification method. Costs associated with our warehouse operations are expensed as incurred and included within technology and operations expenses in the Statements of Operations. Charges for unsellable inventory, as well as for inventory written down to expected market price, are included in Cost of goods sold in the period in which they have been determined to occur. During 2017, the Company recorded a $3.1 million inventory write-down within its IronDirect operating segment, as the carrying value of this inventory was written down to its expected market value. As of September 30, 2018 , and 2017 , the Company's inventory reflects write-downs of approximately $0.5 million and $4.6 million , respectively. Prepaid expenses and other current assets Prepaid expenses and other current assets includes prepaid income tax, financial assets, the short-term portion of a promissory note (described in "Other Assets"), as well as other miscellaneous prepaid expenses. Financial assets are related to participation agreements for principal transactions in the Company's commercial business. Changes in the fair value of the Company's financial assets are recorded in Other operating expense. See Note 12 for further information. Other Assets On September 30, 2015, the Company sold certain assets related to its Jacobs Trading business to Tanager Acquisitions, LLC (the ‘‘Buyer’’). In connection with the disposition, the Buyer assumed certain liabilities related to the Jacobs Trading business. The Buyer issued a $12.3 million 5 -year interest bearing promissory note to the Company. Of the $12.3 million , $4.0 million has been repaid as of September 30, 2018. Of the $8.3 million outstanding at September 30, 2018, $6.3 million was recorded in Other assets, and $2.0 million in Prepaid expenses and other current assets as of September 30, 2018 . Property and Equipment Property and equipment are recorded at cost, and depreciated or amortized on a straight-line basis over the following estimated useful lives: Computers and purchased software One to five years Office equipment Three to five years Furniture and fixtures Five to seven years Internally developed software for internal-use Seven years Leasehold improvements Shorter of lease term or useful life Buildings Thirty-nine years Land Not depreciated Intangible Assets Intangible assets primarily consist of contract intangibles, brand and technology, and patent and trademarks. Intangible assets are amortized using the straight-line method over their estimated useful lives, ranging from three to ten years. Impairment of Long-Lived Assets Long-lived assets, including definite lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by comparing the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the estimated fair value of the assets. No impairment was recorded during the year ended September 30, 2018. During the year ended September 30, 2017, the Company recorded a $1.2 million impairment of a contract intangible associated with its IronDirect business, and a $0.6 million impairment to leasehold improvements, also associated with its IronDirect business. Goodwill The Company reviews goodwill for impairment annually or more frequently if events or circumstances indicate impairment may exist. Examples of such events or circumstances could include a significant change in business climate or the loss of a significant buyer. In evaluating goodwill for impairment, the Company first assesses qualitative factors to determine whether it is more than likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If the Company concludes that it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further testing of goodwill assigned to the reporting unit is required. However, if the Company concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company applies a two-step fair value-based test to assess goodwill for impairment. The first step compares the fair value of a reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, the second step is then performed. The second step compares the carrying amount of the reporting unit's goodwill to the implied fair value of the goodwill. If the implied fair value of the goodwill is less than the carrying amount, an impairment loss would be recorded in the statement of operations. The annual goodwill impairment assessment was performed as of July 1, 2018, for the year ended September 30, 2018 . Deferred Revenue Deferred revenue is primarily derived from subscription fees charged to customers for promotional placement on Machinio's search engine over periods ranging from one to fifteen months. Subscription fees are recognized ratably over the term of the agreements. Revenue Recognition The Company recognizes revenue when all of the following criteria are met: • a buyer submits the winning bid in an auction and, as a result, evidence of an arrangement exists, and the sale price has been determined; • the buyer has assumed the risks and rewards of ownership; and • collection is reasonably assured. The Company evaluates revenue to determine whether the Company should report the gross proceeds as revenue (when the Company acts as the principal in the arrangement) or the Company should report its net commissions and related fees as revenue (when the Company acts as an agent). In arrangements in which the Company is deemed to be the primary obligor, bears physical and general inventory risk, and credit risk, the Company recognizes as revenue the gross proceeds from the sale, including buyer's premiums. The Company has evaluated its revenue recognition policy related to sales under its purchase transaction model and determined it is appropriate to account for these sales on a gross basis. In the Company's evaluation, the Company relied most heavily upon its status as primary obligor in the sales relationship and the fact that the Company has general inventory risk. In arrangements in which the Company acts as an agent or broker on a consignment basis, without taking physical or general inventory risk, the Company recognizes revenue based on the sales commissions that are paid to the Company by the sellers for utilizing the Company's services; in this situation, sales commissions represent a percentage of the gross proceeds from the sale that the seller pays to the Company upon completion of the transaction. Such revenue as well as other fee revenue is presented as Fee Revenue in the Consolidated Statements of Operations. The Company collects and remits sales taxes on merchandise that it purchases and sells and reports such amounts under the net method in its Consolidated Statements of Operations. The Company records revenue for subscriptions to Machinio's search engine on a straight-line basis over the term of the agreement. Cost of Goods Sold Cost of goods sold includes the costs of purchasing and transporting property for auction as well as credit card transaction fees. The Company purchases the majority of its inventory at a percentage of the vendor's original acquisition cost under the Surplus Contract and certain commercial contracts, and at a percentage of the vendor's last retail price under certain commercial contracts. Title for the inventory passes to the Company at the time of purchase and the Company bears the risks and rewards of ownership. The Company does not have title to assets sold on behalf of its commercial or government sellers when it receives only sales commission revenue and, as such, recognizes no inventory and related cost of goods sold associated with those sales. Cost of goods sold also includes shipping and handling costs. Risk Associated with Certain Concentrations For the majority of buyers that receive goods before payment to the Company is made, credit evaluations are performed. However, for the remaining buyers, goods are not shipped before payment is made, and as a result the Company is not subject to significant collection risk from those buyers. For consignment sales transactions, funds are typically collected from buyers and are held by the Company on the sellers' behalf. The funds are included in cash and cash equivalents in the consolidated financial statements. The Company releases the funds to the seller, less the Company's commission and other fees due, after the buyer has accepted the goods or within 30 days, depending on the state where the buyer and seller conduct business. The amount of cash held on behalf of the sellers is recorded as Payables to sellers in the accompanying Consolidated Balance Sheets. Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents in banks over FDIC limits, and accounts receivable. The Company deposits its cash with financial institutions that the Company considers to be of high credit quality. During the years ended September 30, 2018, 2017, and 2016, the Company had two material vendor contracts with the Department of Defense (DoD) under which it acquired, managed and sold government property. Revenue from the sale of property acquired, as well as provision of services, under the Surplus Contract accounted for 12.4% , 27.6% , and 31.0% , of the Company's consolidated revenue for the years ended September 30, 2018, 2017, and 2016, respectively. Revenue from the sale of property acquired under the Scrap Contract accounted for approximately 10.2% , 11.1% and 10.2% of the Company's total revenue for the years ended September 30, 2018, 2017, and 2016, respectively. These contracts are included within the Company's CAG segment. See Note 3, Significant Contracts, for further information related to the wind-down of the Surplus Contract. Additionally, the Company has multiple vendor contracts with Amazon.com, Inc. under which it acquires and sells commercial merchandise. The property purchased under this contract represented approximately 33.7% , 21.8% , and 12.1% of cost of goods sold for the years ended September 30, 2018, 2017, and 2016, respectively. This contract is included within the RSCG segment. Income Taxes The Company accounts for income taxes using an asset and liability approach for measuring deferred taxes based on temporary differences between the financial statement and income tax bases of assets and liabilities existing at each balance sheet date using enacted tax rates for the years in which the taxes are expected to be paid or recovered. The Company recognizes deferred tax assets to the extent that it believes that these assets are more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence to estimate whether future taxable income will be generated to permit use of the existing deferred tax asset. The resulting net tax asset reflects management's estimate of the amount that will be realized. The Company applies the authoritative guidance related to uncertainty in income taxes. Accounting Standards Codification (ASC) 740 states that a benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of technical merits. The Company records unrecognized tax benefits as a reduction to its deferred tax asset for its net operating loss carryforward. During the year ended September 30, 2018, the Company did not record any unrecognized tax benefits. The Company’s policy is to recognize interest and penalties in the period in which they occur in the income tax provision. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions and in foreign jurisdictions including, among others, Canada and the U.K. Stock-Based Compensation The Company estimates the fair value of share-based awards on the date of grant. The Company issues stock options and stock appreciation rights with restrictions that lapse upon either the passage of time (service vesting conditions), the achievement of performance targets (performance vesting conditions), or some combination thereof. In addition, the Company issues stock options that vest upon the achievement of certain Company stock price targets (market vesting conditions). The fair value of stock options and stock appreciation rights with service and/or performance vesting conditions is determined using the Black-Scholes option-pricing model. For those stock options with only service vesting conditions, the Company recognizes compensation cost on a straight-line basis over the explicit service period. For stock options with both performance and service vesting conditions, the Company starts recognizing compensation cost over the remaining service period, when it is probable the performance condition will be met. The stock appreciation rights that include only service conditions generally vest over a period of one to four years conditioned on continued employment for the incentive period. The Company issues restricted stock units with service vesting conditions, performance vesting conditions, and market vesting conditions, or some combination thereof. For those restricted stock units with only service vesting conditions, the Company recognizes compensation cost on a straight-line basis over the explicit service period. The Company also issues restricted stock awards with service and performance vesting conditions. For restricted stock awards and units with both performance and service vesting conditions, the Company starts recognizing compensation cost over the remaining service period when it is probable the performance condition will be met. The fair value of restricted stock awards and units with service vesting and/or performance vesting conditions is based on the closing price of the Company’s common stock on the date of grant. For the Company's stock options and restricted stock units with market vesting conditions, the ultimate number of shares to be earned depends on the Company's total shareholder return during the performance period. The fair value of these stock options and restricted stock units is estimated on the grant date using a Monte Carlo simulation model. The Company recognizes compensation cost for stock options and restricted stock units with market vesting conditions over the derived service period. The determination of the fair value of the Company’s stock options and stock appreciation rights with service and performance vesting conditions is based on a variety of factors including, but not limited to, the Company’s common stock price on the date of grant, expected stock price volatility over the expected life of units, expected term, risk-free rate, and dividend yield. The determination of the fair value of the Company’s stock options and restricted stock units with service and market vesting conditions is based on a variety of factors including, but not limited to, the Company’s common stock price on the grant date, expected stock price volatility, risk free interest rate, dividend yield, and projected exercise behavior. Upon adoption of ASU 2016-09, Compensation - Stock Compensation (Topic 718), in the first quarter of 2018, the Company recognized forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. The change in accounting policy resulted in an adjustment to retained earnings of $0.2 million as of October 1, 2017. Stock options and restricted stock units that contain performance vesting or market vesting conditions are excluded from, diluted earnings per share computations until the applicable contingency is met as of the end of that reporting period. The Company presents the cash flows from the tax benefits resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) as an operating activity in the Consolidated Statements of Cash Flows. Advertising Costs Advertising expenditures are expensed as incurred. Advertising costs charged to expense were $3.6 million , $5.2 million and $6.0 million for the years ended September 30, 2018, 2017 and 2016, respectively. Fair Value of Financial Instruments Cash and cash equivalents, accounts receivable, accounts payable, profit-sharing distributions payable, and payables to sellers reported in the Consolidated Balance Sheets approximate their fair values. During the year ended September 30, 2018, the Company held financial assets that were related to participation agreements for principal transactions in the Company's commercial business. At September 30, 2018, the Company no longer held such financial assets. Lastly, at September 30, 2018 the Company held short-term investments which consisted of various certificates of deposit with maturities of six months or less, and interest rates between 2% and 2.5% . In addition, as a result of the Machinio acquisition, the sellers are eligible to receive earn-out consideration up to $5.0 million . The earn-out consideration was valued at approximately $1.2 million at the acquisition date. Changes in the fair value of the Company's financial instruments are recorded in Other operating expense. Foreign Currency Translation The functional currency of the Company's foreign subsidiaries is primarily the local currency. The translation of the subsidiary's financial statements into U.S. dollars is performed for balance sheet accounts using exchange rates in effect at the balance sheet date and for revenue and expense accounts using an average exchange rate during the period. The resulting translation adjustments are recognized in accumulated other comprehensive (loss) income, a separate component of stockholders' equity. Realized foreign currency transaction gains and losses for 2018, 2017 and 2016 are included in interest and other income (expense), net in the Consolidated Statements of Operations. Accumulated Other Comprehensive Income (loss) The following table shows the changes in accumulated other comprehensive income (loss), net of taxes (in thousands): Foreign Currency Translation Adjustments Net Change Pension and Other Postretirement Benefit Plans Accumulated Deficit Balance at September 30, 2015 $ (6,947 ) $ 1,321 $ (5,626 ) Current-period other comprehensive (loss) income (398 ) (2,547 ) (2,945 ) Balance at September 30, 2016 (7,345 ) (1,226 ) (8,571 ) Current-period other comprehensive (loss) income 551 1,589 2,140 Balance at September 30, 2017 (6,794 ) 363 (6,431 ) Current-period other comprehensive (loss) income (791 ) 773 (18 ) Balance at September 30, 2018 $ (7,585 ) $ 1,136 $ (6,449 ) Earnings per Share The Company calculates net income (loss) per share in accordance with Financial Accounting Standards Board (FASB) Topic 260 Earnings Per Share (“ASC 260”). Under ASC 260, basic net income (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding during the reporting period. The weighted average number of shares of common stock outstanding includes vested restricted stock units. Diluted net income (loss) per share (“EPS”) reflects the potential dilution that could occur assuming conversion or exercise of all dilutive unexercised stock options and unvested restricted stock units. The dilutive effect of unexercised stock options and unvested restricted stock units was determined using the treasury stock method. Under the treasury stock method, the proceeds received from the exercise of stock options, the amount of compensation cost for future service not yet recognized by the Company and the amount of tax benefits that would be recorded in additional paid-in capital when stock options become deductible for income tax purposes are all assumed to be used to repurchase shares of the Company’s common stock. Stock options and restricted stock units are not included in the computation of diluted net income (loss) per share when they are antidilutive. The Company has not included the following stock options in the calculation of diluted income per share because the option exercise prices were greater than the average market prices for the applicable periods: (a) for the year ended September 30, 2018 1,170,125 options; (b) for the year ended September 30, 2017 1,023,072 options; and (c) for the year ended September 30, 2016 1,284,689 options. For the years ended September 30, 2018 , 2017 and 2016 , the basic and diluted weighted average common shares were the same because the inclusion of dilutive securities would have been anti-dilutive. Diluted net income attributable to common stockholders per share includes the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. See Note 11 for outstanding stock options and unvested restricted stock, all of which are anti-dilutive as of September 30, 2018 . Recent Accounting Pronouncements Accounting Standards Adopted In March 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-09, Compensation - Stock Compensation (Topic 718). This update was issued as part of the FASB’s simplification initiative and affects all entities that issue share-based awards to their employees. The amendments in this update cover such areas as the recognition of excess tax benefits and deficiencies and an accounting policy election for forfeitures. As part of the new guidance: • Excess tax benefits and deficiencies arising from share-based awards are reflected in the condensed consolidated statements of operations as income tax expense rather than within stockholders’ equity. • Excess tax benefits will be presented as an operating activity on the statement of cash flows rather than as a financing activity. • A forfeiture election will be made to either estimate forfeitures (similar to the requirement in effect prior to adoption of the update) or recognize actual forfeitures as they occur. Entities will apply the forfeiture election provision using a modified retrospective transition approach, with a cumulative effect adjustment recorded to retained earnings as of the beginning of the period of adoption. • Methods used to satisfy statutory tax withholding requirements by employers who withhold shares upon settlement of an award on behalf of an employee to cover tax obligations are broadened to allow for a range of withholding from the minimum to the maximum statutory allowable amounts. The Company adopted the provisions of this guidance during the first quarter of 2018 as follows: • Excess tax benefits and deficiencies arising from share-based awards are reflected within the Consolidated Statements of Operations as income tax expense; adopted prospectively, with no impact to prior year amounts; • Excess tax benefits are presented as an operating activity on the statement of cash flows; adopted prospectively with no impact on prior year amounts. As part of its adoption of ASU 2016-09, the Company made an accounting policy election to change the way in which it accounts for forfeitures of share-based awards. Specifically, beginning in the first quarter of 2018, the Company recognizes forfeitures of share-based awards as they occur in the period of forfeiture rather than estimating the number of awards expected to be forfeited at the grant date and subsequently adjusting the estimate when awards are actually forfeited. The change in accounting policy resulted in an adjustment to retained earnings as of October 1, 2017 of approximately $0.2 million . Accounting Standards Not Yet Adopted In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805). ASU 2017-01 clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This guidance will become effective for the Company beginning on October 1, 2018. The amendments in this update should be applied prospectively on or after the effective date. No disclosures are required at transition. The Company does not expect the adoption of this standard to have a material effect upon the consolidated financial statements. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which supersedes most existing revenue recognition guidance under GAAP. The new standard will change the way the Company recognizes revenue and significantly expand the disclosure requirements for revenue arrangements. The guidance may be adopted either retrospectively or on a modified retrospective basis whereby the new standard would be applied to new and existing arrangements with remaining performance obligations as of the effective date, with a cumulative catch-up adjustment recorded to retained earnings at the effective date for existing arrangements with remaining performance obligations. During the year ended September 30, 2017, the Company initiated a formal project to assess the new standard, which was completed in three phases: an assessment phase, a design phase, and an implementation phase. The Company completed the assessment phase, which consisted of reviewing a representative sample of contracts, engaging in discussions with key stakeholders, and cataloging potential impacts on the Company’s accounting policies, financial statements, and systems and processes. The Company has also completed the design phase, which consisted of performing an in-depth contract review process, drafting a set of accounting policies in compliance with the new standard, and quantifying the impact of the adoption of this new standard. The Company is currently in the process of implementing the new standard during the first quarter of 2019. The Company has decided to adopt the standard on a modified retrospective basis. The expected impact on the Company's reported results of adopting the new standard is a $0.8 million increase to retained earnings, with the offset as an increase to the Company's assets at the transition date of October 1, 2018. An estimated $0.7 million of this impact results from the recognition of variable consideration at the point in time in which it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty is resolved. The remaining impact of $0.1 million relates to the recognition of sales commissions paid to certain employees for costs to obtain contracts that will benefit the Company over an estimated period of greater than twelve months. In February 2016, the FASB issued ASU 2016-2, Leases. ASU 2016-02 will change the way the Company recognizes its leased assets. ASU 2016-2 will require organizations that lease assets-referred to as "lessees"-to recognize on the balance sheet the assets and liabilities representing the rights and obligations created by those leases. ASU 2016-2 will also require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The guidance will be effective for the Company beginning on October 1, 2019. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The Company is currently evaluating the new standard and the effect that adoption of the standard is expected to have on the Company's consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350). Under ASU 2017-04 the entity is required to perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An entity is required to recognize an impairment charge for the amount by which the carrying amount of a reporting unit exceeds the reporting unit's fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Additionally, an entity is required to consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss, if applicable. This guidance will become effective for the Company |
