v3.26.1
Note 13 - Fair Value Measurements
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

NOTE 13 – FAIR VALUE MEASUREMENTS

 

Fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities. The Company considers a security that trades at least weekly to have an active market. Fair values determined by Level 2 inputs utilize data points that are observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability.

 

In 2022, the Company recorded a contingent consideration liability in the amount of $1.45 million related to the purchase price of the ATEC acquisition for amounts payable upon the sale of a requisite number of water filtration units under an asset purchase agreement. $250 thousand of this liability was paid during 2024 and $1.2 million of this liability was paid during the second quarter of 2025 constituting payment in full of the remaining balance of this contingent consideration liability.

 

On October 27, 2025, the Company recorded a derivative liability in the amount of $7 million related to funding fee shares to be issued under the Lytton Credit Agreement (see Note 7 – Long-Term Debt, above).  $1.9 million of the derivative liability was reclassified to additional paid-in capital for the settlement of funding fee shares upon an initial borrowing of $15 million under the Lytton Credit Agreement.  The fair value of the derivative liability was estimated using the equity spot price approach, which involves remeasuring the liability at each reporting date based on the Company's closing common stock price. The number of shares expected to be issued is determined in accordance with the funding fee formula specified in the debt agreement (i.e., 25,000 shares per $1 million of principal funded at each funding date).The change in fair value is recorded as an adjustment to the recorded derivative liability with the unrealized gains and losses reflected on the income statement.   

 

 

(in thousands)

 

Level 3 Liabilities

 
     

Balance at December 31, 2024

 $(1,200)
     

Payment of contingent consideration liabilities

  1,200 

Derivative liabilities

  (7,000)
Reclassification of derivative liabilities to additional paid-in capital  1,912 
Unrealized gain on derivative liability  38 
     

Balance at December 31, 2025

 $(5,050)

 

 

  

Investments at Fair Value as of December 31, 2025

 

(in thousands)

 

Level 1

  

Level 2

  

Level 3

  

Total

 
                 

Liabilities

                
                 

Derivative Liabilities

 $-  $-  $5,050  $5,050 
                 

Total Liabilities

 $-  $-  $5,050  $5,050