Annual report pursuant to Section 13 and 15(d)

Note 5 - Fair Value Measurements

v3.22.1
Note 5 - Fair Value Measurements
 12 Months Ended
Dec. 31, 2021
Notes to Financial Statements  
Fair Value Disclosures [Text Block]

Note 5.

Fair Value Measurements

 

The Company defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the following:

 

 

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Level 1—Quoted prices in active markets for identical assets or liabilities;

 

 

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Level 2—Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

 

 

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Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

 

The following table represents the fair value hierarchy for the Company’s financial instruments measured at fair value on a recurring basis as of December 31, 2021 and 2020:

 

   

Level 1

    

Level 2

    

Level 3

  

December 31, 2021

                        

Money market funds

   $ 1,600,663     $ -     $ -  
Fair value of contingent consideration     -       -       930,000  

Total

   $ 1,600,663     $ -     $ 930,000  
                         

December 31, 2020

                        

Money market funds

   $ 1,343,370     $ -     $ -  

Total

   $ 1,343,370     $ -     $ -  

 

Money market funds are highly liquid investments and are included in cash and cash equivalents on the consolidated balance sheet. The pricing information on these investment instruments are readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy. See Note 7 for a discussion of the fair value of contingent consideration which is included in other liabilities on the consolidated balance sheet.

 

The carrying amounts of financial instruments such as accounts receivable and accounts payable approximate the related fair value due to the short-term maturities of these instruments.