Fair Value of Financial Assets and Liabilities

6 Months Ended

Jun. 30, 2021

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets and Liabilities

Note 7. Fair Value of Financial Assets and Liabilities

Financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities are carried at cost, which management believes approximates fair value due to the short-term nature of these instruments. The Company measures the fair value of financial assets and liabilities based on 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 Company maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.

The Company uses three levels of inputs that may be used to measure fair value:

Level 1 - quoted prices in active markets for identical assets or liabilities

Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable

Level 3 - inputs that are unobservable (for example, cash flow modeling inputs based on assumptions)

The following table presents the Company’s assets and liabilities that are measured at fair value at June 30, 2021 and December 31, 2020 ($ in thousands):  

	Fair value measured at June 30, 2021
	Total at June 30,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities:
Equities	$	62,306	$	62,306	$	—	$	—
Mutual fund securities	$	25,013	$	25,013	$	—	$	—
Unit Investments Trust	$	513	$	513	$	—	$	—
	$	87,832	$	87,832	$	—	$	—
Short-term investment	$	1,866	$	1,866	$	—	$	—
Convertible note receivable	$	2,067	$	—	$	—	$	2,067

	Fair value measured at December 31, 2020
	Total at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2020		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities	$	24,801	$	24,801	$	-	$	-
Investments	$	2,764	$	2,764	$	-	$	-

Level 3 Valuation Techniques

The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial assets that are measured at fair value on a recurring basis:

	Fair Value of Level 3 investment
	June 30, 2021		December 31, 2020
Beginning balance	$	-	$	-
Purchase of convertible note		2,000		-
Accrued interest receivable		67		-
Ending balance	$	2,067	$	-

Convergent Investment

On January 29, 2021, the Company purchased an 8% convertible promissory note (“Convertible Note”) issued by Convergent Therapeutics, Inc. (“Convergent”) with a principal amount of $2 million pursuant to a Note Purchase Agreement with Convergent. The Company paid a purchase price for the Convertible Note of $2 million. The Company will receive interest on the Convertible Note at the rate of 8% per annum payable upon conversion or maturity of the Convertible Note. The Convertible Note shall mature on January 29, 2023.

The Company has elected to measure the purchase of the Convertible Note from Convergent using the fair value option at each reporting date. Under the fair value option, bifurcation of an embedded derivative is not necessary, and all related gains and losses on the host contract and derivative due to change in the fair value will be reflected in interest income and other, net in the condensed consolidated statements of operations.

The Convertible Note is disclosed as a noncurrent Convertible Note investment in the condensed consolidated balance sheets. As of June 30, 2021, the fair value of the Convertible Note was measured at $2.0 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. The value at which the Company’s Convertible Note is carried on its books is adjusted to estimated fair value at the end of each quarter, taking into account general economic and stock market conditions and those characteristics specific to the underlying investments. No change in fair value was recorded during the six months ended June 30, 2021.

Interest accrues on the unpaid principal balance on a quarterly basis and is recognized in interest income in the condensed consolidated statements of operations. The Company recorded an interest income receivable of approximately $67,000 on the

Convertible Note as of June 30, 2021.