Fair Value Measurements

6 Months Ended

Jun. 30, 2021

16. Fair Value Measurements

The majority of the Company’s financial instruments (consisting of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, notes payable and bank borrowings) are carried at cost which approximates their fair values due to the short-term nature of the instruments. The Company’s investments in equity securities are carried at fair value, and investments in convertible loans are carried at fair value (see Note 4).

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

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Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

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Level 2—Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities.

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Level 3—Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and where such inputs lie within the hierarchy.

The Company has equity investments in the common stock of two publicly traded companies. The Company’s investments in these equity securities are carried at their estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4). The fair value of the common stock is based on quoted market price for the investees’ common stock, a Level 1 input.

The Company has an equity investment in the warrants of a publicly traded company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4). The fair value of the warrants was measured using observable market-based inputs other than quoted prices in active markets for identical assets or liabilities, level 2 inputs. The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of warrants. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the fair value determination of a warrant.

The Company has an investment in the convertible debt of a privately held UK Company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4) using Level 3 input.

The Company has an investment in the convertible debt of a privately held California Company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4) using Level 3 input. The Company uses the Binomial model to estimate the fair value of the convertible debt.

The following tables present the Company’s financial assets and liabilities accounted for at fair value on a recurring basis as of June 30, 2021 and December 31, 2020, by level within the fair value hierarchy:


(In thousands)	Fair Value at
Description	June 30, 2021		Level 1		Level 2		Level 3
Investments in Current and non-Current Assets
Investments in common stock	$	12,588	$	12,588	$	—	$	—
Investment in warrants - Designated as investment measured at FVTPL	$	996	$	—	$	996	$	—
Investment in convertible loan - AFS	$	169	$	—	$	—	$	169
Investment in convertible loan - Designated as investment measured at FVTPL	$	5,547	$	—	$	—	$	5,547


(In thousands)	Fair Value at
Description	December 31, 2020		Level 1		Level 2		Level 3
Investments in Current and non-Current Assets
Investments in common stock	$	9,309	$	9,309	$	—	$	—
Investment in warrants - Designated as investment measured at FVTPL	$	840	$	—	$	840	$	—
Investment in convertible loan - AFS	$	83	$	—	$	—	$	83

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company measures equity investments without readily determinable fair values at its cost, minus impairment, if any, plus or minus changes resulting from observable transactions of identical or similar securities of the same issuer. On June 30, 2021, the Company remeasured the investment in equity securities in Black Belt (see Note 4) to the fair value of $1,385,000. The Company estimated the fair value of the securities using Level 2 inputs based on the transaction price of identical securities issued by the investee.

Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has no non-financial assets and liabilities that are measured at fair value on a recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company has no non-financial assets and liabilities that are measured at fair value on a non- recurring basis.

- Definition

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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