Fair Value Measurements

12 Months Ended

Dec. 31, 2025

The fair value topic of the FASB Accounting Standards Codification 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. The accounting guidance also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value:

Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities. We currently do not have any Level 1 financial assets or liabilities.

Level 2 - Observable inputs other than quoted prices included in Level 1. Level 2 inputs include quoted prices for identical assets or liabilities in non-active markets, quoted prices for similar assets or liabilities in active markets and inputs other than quoted prices that are observable for substantially the full term of the asset or liability.

Level 3 - Unobservable inputs reflecting management’s own assumptions about the input used in pricing the asset or liability.

The following table presents the asset reported in the consolidated balance sheet measured at its fair value on a recurring basis as of December 31, 2025 and 2024 by level within the fair value hierarchy:


			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Total		Level 1		Level 2		Level 3		Unrealized gain (loss)
December 31, 2025
Recurring fair value measurements
Available-for-sale equity securities
Aivita Group, Inc (formerly EuroSite Power, Inc.)	$	96,464	$	—	$	96,464	$	—	$	14,680
Total recurring fair value measurements	$	96,464	$	—	$	96,464	$	—	$	14,680


December 31, 2024
Recurring fair value measurements
Available-for-sale equity securities
Aivita Group, Inc (formerly EuroSite Power, Inc.)	$	93,744	$	—	$	93,744	$	—	$	—
Total recurring fair value measurements	$	93,744	$	—	$	93,744	$	—	$	—

We utilize a Level 2 category fair value measurement to value our investment in Aivita Group, Inc., formerly EuroSite Power Inc., as an available-for-sale security at period end. That measurement is equal to the quoted market closing price at period end. Since this security is not actively traded we are classifying as Level 2.

The following table summarizes changes in Level 2 assets which are comprised of marketable equity securities for the years ended December 31, 2025 and 2024:


Fair value at December 31, 2023	$	93,744
Unrealized gain	—
Fair value at December 31, 2024	$	93,744

Fair value at December 31, 2024	$	93,744
Unrealized gain	10,993
Realized gain	3,687
Proceeds from share liquidation	(11,960)
Fair value at December 31, 2025	$	96,464

The following table presents the liabilities reported in the consolidated balance sheet measured at their fair value on a recurring basis as of December 31, 2025 and 2024 by level within the fair value hierarchy:


			Quoted prices in active markets for identical assets		Significant other observable inputs		Significant unobservable inputs
	Total		Level 1		Level 2		Level 3		Total gains (losses)
December 31, 2025
Recurring fair value measurements
Contingent contract consideration
Current	$	349,385	$	—	$	—	$	349,385	$	—
Long-term	826,757		—		—		826,757		—
Total recurring fair value measurements	$	1,176,142	$	—	$	—	$	1,176,142	$	—

December 31, 2024
Recurring fair value measurements
Contingent contract consideration
Current	$	328,350	$	—	$	—	$	328,350	$	—
Long-term	1,008,760		—		—		1,008,760		—
Total recurring fair value measurements	$	1,337,110	$	—	$	—	$	1,337,110	$	—

We utilize a Level 3 category fair value measurement to value the contingent consideration liability at period end since there are no quoted prices for this liabilities in non-active markets, there are no quoted prices for similar liabilities in active markets and there are no inputs that are observable for substantially the full term of the the liability. The contingent consideration calculation requires management to make estimates and assumptions that affect the reported amount of the liability.The contingent consideration is payable each calendar quarter through the earlier of the expiration or termination of the relevant maintenance agreements, or the seventh (7th) anniversary of the acquisition date. The consideration is equal to the product of the revenues collected in a calendar quarter multiplied by an applicable percentage. The agreement stipulates quarterly aggregate revenue targets and an applicable percentage, and provides for a higher applicable percentage if revenues exceed the target revenues. The applicable percentage ranges from 5% to 10% over the agreement term. On the date of acquisition, the fair value of the contingent consideration was calculated using a weighted average cost of capital of 15%, discounting the future cash flows to present value.

- 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

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+ Details

TECOGEN INC. 10-K