Note 7 - Fair Value of Financial Instruments

12 Months Ended

Dec. 31, 2019

Notes to Financial Statements

Fair Value Disclosures [Text Block]

7

.

Fair Value of Financial Instruments

The carrying amount and fair value of financial instruments at

December 31, 2019

and

2018

were approximately as follows:

	Carrying		Fair
Description	Amount		Value		Level 1		Level 2		Level 3
December 31, 2019
Revolving line of credit	$	500,000	$	500,000		-	$	500,000		-
Note receivable - distributor		1,282,072		1,400,000		-		1,400,000		-
Notes receivable - Nutracom		1,171,746		1,169,000		-		-	$	1,169,000
December 31, 2018
Note receivable - distributor	$	1,405,112	$	1,529,000		-	$	1,529,000		-
Marketable securities		339,000		339,000	$	339,000		-		-

Fair value can be measured using valuation techniques such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). Accounting standards utilize a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into

three

broad levels. The following is a brief description of those levels:

Level

1:

Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level

2:

Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets or similar assets or liabilities in markets that are

not

active.

Level

3:

Unobservable inputs that reflect the reporting entity’s own assumptions.

Long-term debt

: The fair value of our revolver loan approximated carrying value as this loan has a variable market-based interest rate that resets every

thirty

days. (Fair value is only disclosed).

Note receivable

- distributor

: The note receivable - distributor is a variable rate residential mortgage-based financial instrument. An average of published interest rate quotes for a

fifteen

-year residential jumbo mortgage, a comparable financial instrument, was used to estimate fair value of this note receivable under a discounted cash flow model. (Fair value is only disclosed).

Note

s

receivable

- Nutracom

: The notes receivable - Nutracom represent

two

fixed rate promissory notes issued by a privately-held entity (PHE). We developed an estimated market discount rate based upon the PHE’s

third

party incremental variable borrowing rate plus a risk-adjustment factor to estimate the fair value of these notes receivable under a discounted cash flow model. (Fair value is only disclosed).

Marketable securities

: The assets (trading securities) of our Supplemental Executive Retirement Plan are recorded at fair value on a recurring basis, and are presented within Other Assets in the consolidated balance sheets.

The carrying value of other financial instruments, including cash, accounts receivable and accounts payable, and accrued liabilities approximate fair value due to their short maturities or variable-rate nature of the respective balances.