Financial Instruments

Fair Value Measurements

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



			Fair Value Measurement at December 30, 2017 Using:
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	24,848,227	$	24,848,227	$	—	$	—
U.S. government and agency backed securities	34,725,811		6,927,323		27,798,488		—
Corporate debt	8,980,906		—		8,980,906		—
Certificates of deposit	200,740		—		200,740		—
GCS Holdings	478,546		478,546		—		—
Warrant	2,000,000		—		—		2,000,000
	$	71,234,230	$	32,254,096	$	36,980,134	$	2,000,000



			Fair Value Measurement at December 31, 2016 Using:
	Total		Level 1		Level 2		Level 3
Cash and cash equivalents	$	15,822,495	$	15,822,495	$	—	$	—
U.S. government and agency backed securities	36,091,261		7,144,767		28,946,494		—
Corporate debt	7,557,029		—		7,557,029		—
Certificates of deposit	17,727,111		—		17,727,111		—
GCS Holdings	331,454		331,454		—		—
	$	77,529,350	$	23,298,716	$	54,230,634	$	—

Transfers between levels of the fair value hierarchy are reported at the beginning of the reporting period in which they occur.

Changes in Level 3 investments are as follows:



	December 31, 2016		Net unrealized gains/(losses)		Purchases, issuances and settlements		Transfers in and or out of Level 3		December 30, 2017
Warrant	$	—	$	2,000,000	$	—	$	—	$	2,000,000
	$	—	$	2,000,000	$	—	$	—	$	2,000,000

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 (three month Libor). The Company validates the fair market values of the financial instruments above by using discounted cash flow models, obtaining independent pricing of the securities or through the use of a model which incorporates the three month Libor, the credit default swap rate of the issuer and the bid and ask price spread of the same or similar investments which are traded on several markets. The Company has a warrant to acquire up to 15% of the next round of equity offered by a customer as part of the licensing of technology to the customer. The Company used the pricing and terms of the qualified financing round by the customer in determining the value of its warrant. Subsequent to year-end, the customer closed the qualified financing round and the Company expects to exercise the warrant in the first quarter of 2018.

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term nature. If accrued liabilities were carried at fair value, these would be 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 30, 2017 and December 31, 2016:



	Amortized Cost				Unrealized Gains				Unrealized Losses						Fair Value
	2017		2016		2017		2016		2017			2016			2017		2016
U.S. government and agency backed securities	$	35,014,593	$	36,343,817	$	—	$	—	$	(288,782	)	$	(252,556	)	$	34,725,811	$	36,091,261
Corporate debt	8,988,608		7,596,755		—		—		(7,702		)	(39,727		)	8,980,906		7,557,028
Certificates of deposits	201,000		17,726,673		—		439		(260		)	—			200,740		17,727,112
Total	$	44,204,201	$	61,667,245	$	—	$	439	$	(296,744	)	$	(292,283	)	$	43,907,457	$	61,375,401

The contractual maturity of the Company’s marketable debt securities is as follows at December 30, 2017:



	Less than One year		One to Five years		Greater than Five years		Total
U.S. government and agency backed securities	$	20,390,246	$	12,411,125	$	1,924,440	$	34,725,811
Corporate debt	1,715,720		7,265,186		—		8,980,906
Certificates of deposits	200,740		—		—		200,740
Total	$	22,306,706	$	19,676,311	$	1,924,440	$	43,907,457