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Note 4 - Fair Value Measurements | 9 Months Ended
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Sep. 30, 2023
Notes to Financial Statements |
Fair Value Disclosures [Text Block] |
(4) | FAIR VALUE MEASUREMENTS
ASC Topic 820 (Fair Value Measurement) establishes a fair value hierarchy for instruments measured at fair value that distinguishes between assumptions based on market data (observable inputs) and our own assumptions (unobservable inputs). Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes among the following: Level 1 Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that we have the ability to access. Level 2 Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly. Level 3 Valuations based on inputs that are unobservable and significant to the overall fair value measurement. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level 3. A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Recurring Fair Value Measurements The interest rate swap agreement we entered into in connection with our Term Note, as discussed further in Notes 2 and 10 is measured at fair value on a recurring basis using Level 2 inputs. The contingent consideration liability on our balance sheets is measured at fair value on a recurring basis using Level 3 inputs. Our contingent consideration liability is a result of our acquisition of Acculogic on December 21, 2021, and represents the estimated fair value of the additional cash consideration payable that is contingent upon sales to Electric Vehicle (“EV”) or battery customers. Our acquisition of Acculogic and this liability are both discussed further in Note 3 to our consolidated financial statements in our 2022 Form 10-K. As of September 30, 2023, this liability was classified as long-term. As of December 31, 2022, $324 of this liability was classified as current and was included in Other Current Liabilities on our balance sheet. During the quarter ended September 30, 2023, the total amount of this liability was adjusted down by $358 as a result of a reduction in our forecast for sales to EV and battery customers in the five-year period following the acquisition. The decrease in the amount of the liability during the third quarter of 2023 was included in General and Administrative Expenses on our statement of operations. The following fair value hierarchy table presents information about assets and (liabilities) measured at fair value on a recurring basis:
|  | Amounts at |  |  | Fair Value Measurement Using |
|  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
As of September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration liability – Acculogic |  | $ | (1,002 | ) |  | $ | - |  |  | $ | - |  |  | $ | (1,002 | )
Interest rate swap |  | $ | 413 |  |  | $ | - |  |  | $ | 413 |  |  | $ | - |
|  | Amounts at |  |  | Fair Value Measurement Using |
|  | Fair Value |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
As of December 31, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Contingent consideration liability – Acculogic |  | $ | (1,363 | ) |  | $ | - |  |  | $ | - |  |  | $ | (1,363 | )
Interest rate swap |  | $ | 528 |  |  | $ | - |  |  | $ | 528 |  |  | $ | - |
Changes in the fair value of our Level 3 contingent consideration liabilities for the nine months ended September 30, 2023 were as follows:
|  | Nine Months Ended September 30, 2023 |
Balance at beginning of period |  | $ | 1,363 |
Impact of foreign currency translation adjustments |  |  | (3 | )
Adjustment to contingent consideration liability as a result of reduction in expected payout |  |  | (358 | )
Balance at end of period |  | $ | 1,002 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 820 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482106/820-10-50-2 + Details
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