Quarterly report pursuant to Section 13 or 15(d)

Note 5 - Fair Value Measurements

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Note 5 - Fair Value Measurements
 6 Months Ended
Jun. 30, 2024
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 presents the fair value hierarchy for the Company’s financial instruments measured at fair value on a recurring basis as of  June 30, 2024 and December 31, 2023:

 

   

June 30, 2024

  
   

Level 1

    

Level 2

    

Level 3

    

Total

  

Cash equivalents:

                                

Money market funds

   $ 196,313     $ -     $ -     $ 196,313  

 

   

December 31, 2023

  
   

Level 1

    

Level 2

    

Level 3

    

Total

  

Cash equivalents:

                                

Money market funds

   $ 631,258     $ -     $ -     $ 631,258  

 

Money market funds are highly liquid investments and are included in cash and cash equivalents on the consolidated balance sheets. The pricing information on these investment instruments is 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.

 

As discussed in Note 2 above, in connection with its sale of GMI, the Company received contingent consideration that required GMDC to make annual payments equal to five percent (5%) of the purchaser’s GAAP based revenue through December 31, 2029, up to a cumulative maximum of $4,000,000, attributable to the purchaser’s blockchain-enabled digital supply chain management platform and associated technologies. The fair value of the contingent consideration was estimated based on GMDC’s forecast of revenue, the estimated after-tax payments to the Company, and the present value of the after-tax payments based on discount rate that reflects the risk of achieving the timing and amounts of forecasted payments. The significant inputs utilized in estimating the fair value of contingent consideration include the forecast of revenues, the income tax rate of 27.0 percent, and the discount rate of 40.75 percent. On August 9, 2023, the Company and GMDC agreed to terminate all rights and obligations with respect to the calculation and payment of future contingent payments from GMDC to the Company in exchange for the payment of $1,000,000 cash by GMDC to the Company, resulting in a gain of $318,000.

 

There were no assets requiring Level 3 fair value measurements as of  June 30, 2024 and December 31, 2023.

 

There were no unrealized gains or losses recognized in income for the three- or six-month periods ended  June 30, 2024 and 2023.