Financial Instruments

Fair Value Measurements

Under accounting guidance, financial instruments are categorized as Level 1, Level 2 or Level 3 based upon the method by which their fair value is computed. An investment is categorized as Level 1 when its fair value is based on unadjusted quoted prices in active markets for identical assets that the Company has the ability to access at the measurement date. An investment is categorized as Level 2 if its fair market value is based on quoted market prices for similar assets in active markets, quoted prices for identical or similar assets in markets that are not active, based on observable inputs such as interest rates, yield curves, or derived from or corroborated by observable market data by correlation or other means. An investment is categorized as Level 3 if its fair value is based on assumptions developed by the Company about what a market participant would use in pricing the assets.

The Company’s investments are either held by brokers or in the case of publicly-held corporation, by the Company. The brokers who hold the Company’s investments provide periodic reporting on both the cost and fair value of the securities. The Company performs various procedures to corroborate the fair value provided by the brokers. Debt securities reflected in the table below include investments such as certificates of deposit, commercial paper, corporate bonds, government bonds, and money market fund deposits. When the Company uses observable market prices for identical securities that are traded in less active markets, its debt investments are classified as Level 2. When observable market prices for identical securities are not available, the Company prices the debt investments it owns using non-binding market consensus prices that are corroborated with observable market data; quoted market prices for similar instruments; or pricing models, such as a discounted cash flow model, with all significant inputs derived from or corroborated with observable market data. Non-binding market consensus prices are based on quotes from brokers. The discounted cash flow model uses observable market inputs, such as US treasury-based yield curves.

The following table details the fair value measurements within the fair value hierarchy of the Company’s financial assets:



			Fair Value Measurement at December 26, 2015 Using:
	Total		Level 1		Level 2		Level 3
Money Markets and Cash Equivalents	$	19,767,889	$	19,767,889	$	—	$	—
U.S. Government Securities	46,464,663		16,381,152		30,083,511		—
Corporate Debt	6,886,495		—		6,886,495		—
Certificates of Deposit	7,591,733		—		7,591,733		—
GCS Holdings	232,037		232,037		—		—
	$	80,942,817	$	36,381,078	$	44,561,739	$	—



			Fair Value Measurement at December 27, 2014 Using:
	Total		Level 1		Level 2		Level 3
Money Markets and Cash Equivalents	$	14,635,802	$	14,635,802	$	—	$	—
U.S. Government Securities	57,697,142		21,218,340		36,478,802		—
Corporate Debt	5,970,983		—		5,970,983		—
Certificates of Deposit	12,555,010		—		12,555,010		—
Vuzix Corporation	1,500,777		1,500,777		—		—
GCS Holdings	180,347		180,347		—		—
	$	92,540,061	$	37,535,266	$	55,004,795	$	—

The corporate debt consists of floating rate notes with a maturity that is over multiple years but has interest rates which are reset every three months based on the then current three month London Interbank Offering Rate (3 month Libor). The Company evaluates the fair market values of these corporate debt instruments through the use of a model which incorporates the 3 month Libor, the credit default swap rate of the issuer and the bid and ask price spread of same or similar investments which are traded on several markets.

The carrying amounts of cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short term nature. The carrying amount of accrued liabilities is classified as Level 2 in the fair value hierarchy.

Marketable Debt Securities

Investments in available-for-sale marketable debt securities are as follows at December 26, 2015 and December 27, 2014:



	Amortized Cost				Unrealized Gains				Unrealized Losses						Fair Value
	2015		2014		2015		2014		2015			2014			2015		2014
U.S. government and agency backed securities	$	46,586,224	$	57,897,914	$	—	$	—	$	(121,561	)	$	(200,772	)	$	46,464,663	$	57,697,142
Corporate debt and certificates of deposits	14,534,247		18,564,823		—		—		(56,019		)	(38,830		)	14,478,228		18,525,993
Total	$	61,120,471	$	76,462,737	$	—	$	—	$	(177,580	)	$	(239,602	)	$	60,942,891	$	76,223,135

The contractual maturity of the Company’s marketable debt securities is as follows at December 26, 2015:



	Less than One year		One to Five years		Greater than Five years		Total
U.S. government and agency backed securities	$	17,460,832	$	23,906,600	$	5,097,231	$	46,464,663
Corporate debt and certificates of deposits	12,086,055		2,392,173		—		14,478,228
Total	$	29,546,887	$	26,298,773	$	5,097,231	$	60,942,891

Other-than-Temporary Impairments

The Company reviews its marketable debt securities on a quarterly basis for the presence of other-than-temporary impairment (OTTI).

If the Company determines that an OTTI has occurred it further estimates the amount of OTTI resulting from a decline in the credit worthiness of the issuer (credit-related OTTI) and the amount of non credit-related OTTI. Noncredit-related OTTI can be caused by such factors as market illiquidity. Credit-related OTTI is recognized in earnings while noncredit-related OTTI on securities not expected to be sold is recognized in other comprehensive income (OCI). The Company did not record any OTTI for the fiscal years 2015, 2014 and 2013.