M-tron Industries, Inc. Fair Value Disclosure
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value guidance identifies three primary valuation techniques: the market approach, the income approach and the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount. The measurement is based on the value indicated by current market expectations about those future amounts. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset.
Fair Value Hierarchy
The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to observable inputs such as quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The maximization of observable inputs and the minimization of the use of unobservable inputs are required.
Classification within the fair value hierarchy is based upon the objectivity of the inputs that are significant to the valuation of an asset or liability as of the measurement date. The three levels within the fair value hierarchy are characterized as follows:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include: 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, inputs other than quoted prices that are observable for the asset or liability and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3 - Unobservable inputs for the asset or liability for which there is little, if any, market activity for the asset or liability at the measurement date. Unobservable inputs reflect the Company's own assumptions about what market participants would use to price the asset or liability. These inputs may include internally developed pricing models, discounted cash flow methodologies as well as instruments for which the fair value determination requires significant management judgment.
Valuation Methodologies of Financial Instruments Measured at Fair Value
Cash and cash equivalents - Money market instruments are measured at cost, which approximates fair values because of the relatively short time to maturity.
Equity Securities - Whenever available, we obtained quoted priced in active markets for identical assets as of the balance sheet date to measure equity securities. Market price data is generally obtained from exchange or dealer markets.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents information about assets measured at fair value on a recurring basis and indicates the level of the fair value measurement based on the observability of inputs used:
| December 31, 2025 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Cash and cash equivalents (a) | $ | 19,564 | $ | — | $ | — | $ | 19,564 | ||||||||
| Prepaid expenses and other current assets: | ||||||||||||||||
| Equity securities | 56 | — | — | 56 | ||||||||||||
| Total prepaid expenses and other current assets | 56 | — | — | 56 | ||||||||||||
| Total | $ | 19,620 | $ | — | $ | — | $ | 19,620 | ||||||||
| December 31, 2024 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Cash and cash equivalents (a) | $ | 10,415 | $ | — | $ | — | $ | 10,415 | ||||||||
| Prepaid expenses and other current assets: | ||||||||||||||||
| Equity securities | 21 | — | — | 21 | ||||||||||||
| Total prepaid expenses and other current assets | 21 | — | — | 21 | ||||||||||||
| Total | $ | 10,436 | $ | — | $ | — | $ | 10,436 | ||||||||
| (a) | As of December 31, 2025 and 2024, included investments in money market mutual funds managed or advised by GAMCO Investors, Inc. or one of its subsidiaries. |
There were no liabilities subject to fair value on a recurring basis as of December 31, 2025 and 2024.
Fair Value Measurements on a Non-Recurring Basis
The Company has other assets that may be subject to measurement at fair value on a non-recurring basis including goodwill and intangible assets and other long-lived assets. The Company reviews goodwill annually and the carrying value of long-lived assets whenever events and circumstances indicate that the carrying amounts of the assets may not be recoverable. If it is determined that the assets are impaired, the carrying value would be reduced to an estimated recoverable value. The Company’s Common Stock Warrants (as defined below) were measured at fair value as disclosed in Note 9 - Stockholders’ Equity.
As of December 31, 2025 and 2024, the Company did write down any assets to fair value.
Fair Value Information about Financial Instruments Not Measured at Fair Value
As of December 31, 2025 and 2024, the Company did have any assets or liabilities classified as financial instruments that are not measured at fair value.
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.