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Fair Value of Financial Assets and Liabilities

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value of Financial Assets and Liabilities

Note 8. 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 June 30, 2022 and December 31, 2021 ($ in thousands):

		Fair value measured at June 30, 2022
		Total at June 30,				Quoted prices in active markets				Significant other observable inputs				Significant unobservable inputs
		2022				(Level 1)				(Level 2)				(Level 3)
Assets
Marketable securities:
Equities		$	9,779			$	9,779			$	-			$	-
Total marketable securities		$	9,779			$	9,779			$	-			$	-
Short-term investment		$	104			$	15			$	-			$	89
Short-term notes receivable at fair value		$	8,500			$	-			$	-			$	8,500
Long-term notes receivable at fair value		$	1,100			$	-			$	-			$	1,100

		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			$	-			$	419
Notes receivable at fair value		$	6,984			$	-			$	-			$	6,984
Convertible note receivable		$	2,147			$	-			$	-			$	2,147

Level 3 Measurement

The following tables set 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):

Short-term notes receivable at fair value at December 31, 2021		$	6,984
Accrued interest receivable			377
Reclassify from convertible note receivable to notes receivable at fair value			2,147
Purchase of notes receivable			500
Change in fair value of note receivable			280
Conversion of note receivable to marketable securities			(1,788	)
Short-term notes receivable at fair value at June 30, 2022		$	8,500

Long-term notes receivable at fair value at December 31, 2021		$	-
Purchase of notes receivable			1,100
Long-term notes receivable at fair value at June 30, 2022		$	1,100
Short-term investment at December 31, 2021		$	419
Change in fair value of investment			(330	)
Short-term investment at June 30, 2022		$	89

Long term and 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 June 30, 2022, the fair value of the Convergent Convertible Note was measured at $2.2 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 for principal was recorded during the six months ended June 30, 2022.

Mr. Jeffrey Cooper Investment

As of June 30, 2022, the fair value of the Mr. Jeffrey Cooper Promissory Note was measured at approximately $2.9 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 for principal was recorded during the six months ended June 30, 2022.

Raefan Industries LLC Investment

As of June 30, 2022, 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 for principal was recorded during the six months ended June 30, 2022.

Nano Innovations Inc Investment

As of June 30, 2022, 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 for principal was recorded during the six months ended June 30, 2022.

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

Kaya Now Investment

As of June 30, 2022, the fair value of the Kaya Now Promissory Note was measured at $0.5 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 for principal was recorded during the six months ended June 30, 2022.

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

American Innovative Robotics Investment

As of June 30, 2022, the fair value of the Slinger Bag Convertible Note was measured at $1.1 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 for principal was recorded during the six months ended June 30, 2022.

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.

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