Fair Value of Financial Assets and Liabilities

12 Months Ended

Dec. 31, 2021

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets and Liabilities

Note 9. 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)

Observable inputs are based on market data obtained from independent sources, while unobservable inputs are based on the Company’s market assumptions. Unobservable inputs require significant management judgment or estimation. In some cases, the inputs used to measure an asset or liability may fall into different levels of the fair value hierarchy. In those instances, the fair value measurement is required to be classified using the lowest level of input that is significant to the fair value measurement. Such determination requires significant management judgment.

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

	Fair value measured at December 31, 2021
	Total at December 31,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2021		(Level 1)		(Level 2)		(Level 3)
Assets
Marketable securities:
Equities	$	11,427	$	11,427	$	-	$	-
Total marketable securities	$	11,427	$	11,427	$	-	$	-
Short-term investment	$	2,273	$	1,854	$	-	$	418
Notes receivable at fair value	$	6,984	$	-	$	-	$	6,984
Convertible note receivable at fair value	$	2,147	$	-	$	-	$	2,147

	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:
Equities	$	24,274	$	24,274	$	-	$	-
Mutual fund securities	$	527	$	527	$	-	$	-
	$	24,801	$	24,801	$	-	$	-
Investments	$	2,764	$	2,764	$	-	$	-

Level 3 Measurement 

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 ($ in thousands):

	Fair Value of Level 3 short-term investment
	December 31, 2021		December 31, 2020
Beginning balance	$	-	$	-
Change in fair value of investment		418		-
Ending balance	$	418	$	-

	Fair Value of Level 3 Notes receivable at fair value
	December 31, 2021		December 31, 2020
Beginning balance	$	-	$	-
Purchase of notes receivable		6,880		-
Accrued interest receivable		105		-
Ending balance	$	6,984	$	-

	Fair Value of Level 3 Convertible note receivable
	December 31, 2021		December 31, 2020
Beginning balance	$	-	$	-
Purchase of notes receivable		2,000		-
Accrued interest receivable		147		-
Ending balance	$	2,147	$	-

Short-term Note Receivable and Convertible Notes Receivable

The Company has elected to measure the purchases of the notes 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 consolidated statements of operations.

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.

Interest accrues on the unpaid principal balance on a quarterly basis and is recognized in interest income in the consolidated statements of operations.

Convergent Investment

As of December 31, 2021, the fair value of the Convergent Convertible Note was measured at $2.1 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021.

Raefan Group LLC Investment

As of December 31, 2021, the fair value of the Raefan Group Promissory Note was measured at approximately $2.8 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021.

Raefan Industries LLC Investment

As of December 31, 2021, the fair value of the Raefan Industries Promissory Note was measured at approximately $2.0 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021.

Slinger Bag Inc Investment

As of December 31, 2021, the fair value of the Slinger Bag Convertible Note was measured at $1.4 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021.

The Company believes that the fair value of the warrant of Slinger Bag is immaterial.

Nano Innovations Inc Investment

As of December 31, 2021, the fair value of the Nano Convertible Note was measured at approximately $0.8 million, taking into consideration cost of the investment, market participant inputs, market conditions, liquidity, operating results and other qualitative and quantitative factors. No change in fair value was recorded during the year ended December 31, 2021.

The Company believes that the fair value of the warrant of Nano is immaterial.