Quarterly report pursuant to Section 13 or 15(d)

FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS

v3.21.2
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS
9 Months Ended
Sep. 30, 2021
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS  
FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS

NOTE 6. – FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS

FASB ASC 820 - “Fair Value Measurements and Disclosures” establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument; and
Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.

A financial asset’s or a financial liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

The following table presents information about our assets and liabilities measured at fair value as of September 30, 2021 and December 31, 2020, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:

Fair Value

September 30, 2021

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

 

  

 

  

 

  

 

  

Short-term investment securities:

 

  

 

  

 

  

 

  

Money market funds

$

18,481

$

$

$

18,481

Corporate bonds

 

 

35,051

 

 

35,051

Total short-term investment securities

$

18,481

$

35,051

$

$

53,532

Investment - Aurora stock warrants

$

$

$

18

$

18

Investment - Exactus common shares

$

7,282

$

$

$

7,282

Fair Value

December 31, 2020

    

Level 1

    

Level 2

    

Level 3

    

Total

Assets

 

  

 

  

 

  

 

  

Short-term investment securities:

 

  

 

  

 

  

 

  

Money market funds

$

8,636

$

$

$

8,636

Corporate bonds

 

 

12,677

 

 

12,677

Total short-term investment securities

$

8,636

$

12,677

$

$

21,313

Investment - Aurora stock warrants

$

$

$

239

$

239

Investment - Panacea preferred stock

$

$

$

5,173

$

5,173

Convertible note receivable

$

$

$

5,876

$

5,876

Money market mutual funds are valued at their daily closing price as reported by the fund. Money market mutual funds held by the Company are open-end mutual funds that are registered with the SEC that generally transact at a stable $1.00 Net Asset Value (“NAV”) representing its estimated fair value. On a daily basis the fund’s NAV is determined by the fund based on the amortized cost of the funds underlying investments.

Corporate bonds are valued using pricing models maximizing the use of observable inputs for similar securities.

The investment in the Aurora (“ACB”) stock warrants is measured at fair value using the Black-Scholes pricing model and is classified within Level 3 of the valuation hierarchy. The unobservable input is an estimated volatility factor of 94% and 137% as of September 30, 2021 and December 31, 2020, respectively. Therefore, changes in market volatility will impact the fair value measurement of our ACB investment.

A 20% increase or decrease in the volatility factor used as of September 30, 2021 would have the impact of increasing or decreasing the fair value measurement of the stock warrants by approximately $22. A 20% increase or decrease in the volatility factor used at December 31, 2020 would have the impact of increasing or decreasing the fair value measurement of the stock warrants by approximately $115.

The investment in Exactus common shares is considered an equity security with a readily determinable fair value. The fair value is determined using the quotable market price as of the last trading day of the fiscal quarter.

The Panacea convertible note receivable and the preferred stock investment were considered available-for-sale debt securities with a private company not traded in active markets. Since observable price quotations were not available, fair value was estimated based on cost less an appropriate discount upon acquisition.

The following table sets forth a summary of the changes in fair value of the Company’s Level 3 investments for the nine months ended September 30, 2021:

Fair Value at December 31, 2020

$

11,288

Unrealized gain (loss) on ACB stock warrants

(220)

Accretion of interest on Panacea preferred stock

142

Panacea investment conversion

(11,192)

Fair Value at September 30, 2021

$

18

The following tables set forth a summary of the Company’s available-for-sale debt securities from amortized cost basis to fair value as of September 30, 2021 and December 31, 2020:

Available for Sale Debt Securities

September 30, 2021

Amortized

Gross

Gross

Cost

Unrealized

Unrealized

Fair

    

Basis

    

Gains

    

Losses

    

Value

Corporate bonds

$

35,078

$

7

$

(34)

$

35,051

Available for Sale Debt Securities

December 31, 2020

Amortized

Gross

Gross

Cost

Unrealized 

Unrealized 

Fair

    

Basis

    

Gains

    

Losses

    

Value

Corporate bonds

$

12,603

$

74

$

$

12,677

Convertible note receivable

 

5,876

 

 

 

5,876

Investment - Panacea preferred stock

 

5,173

 

 

 

5,173

$

23,652

$

74

$

$

23,726

The following table sets forth a summary of the Company’s available-for-sale securities at amortized cost basis and fair value by contractual maturity as of September 30, 2021 and December 31, 2020:

Available for Sale Debt Securities

September 30, 2021

December 31, 2020

Amortized

Amortized

    

Cost Basis

    

Fair Value

    

Cost Basis

    

Fair Value

Due in one year or less

$

3,581

$

3,585

$

11,692

$

11,753

Due after one year through five years

 

31,497

 

31,466

 

11,960

 

11,973

$

35,078

$

35,051

$

23,652

$

23,726