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FAIR VALUE MEASUREMENTS
 9 Months Ended
Sep. 24, 2022
Fair Value Disclosures [Abstract]  
FAIR VALUE MEASUREMENTS

4. 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:

 

   Total   Level 1   Level 2   Level 3 
       Fair Value Measurement at September 24, 2022 Using: 
   Total   Level 1   Level 2   Level 3 
Cash and cash equivalents  $9,625,414   $9,625,414   $—   $— 
U.S. government securities   2,384,300    —    2,384,300    — 
Corporate debt   1,501,160    —    1,501,160    — 
Certificates of deposit   1,492,135    1,492,135    —    — 
Equity investments   7,612,065    212,616    —    7,399,449 
Financial instruments, owned, at fair value  $22,615,074   $11,330,165   $3,885,460   $7,399,449 

 

   Total   Level 1   Level 2   Level 3 
       Fair Value Measurement at December 25, 2021 Using: 
   Total   Level 1   Level 2   Level 3 
Cash and cash equivalents  $26,787,931   $26,787,931   $—   $— 
U.S. government securities   1,000,650    —    1,000,650    — 
Corporate debt   1,506,885    —    1,506,885    — 
Equity investments   4,912,022    296,173    —    4,615,849 
Financial instruments, owned, at fair value  $34,207,488   $27,084,104   $2,507,535   $4,615,849 

 

 

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 were as follows:

 

   December 25,
2021		   Unrealized gains  

Unrealized losses

  

Purchases, issuances and settlements

   September 24,
2022		 
Equity investments  $4,615,849   $4,700,000   $(2,416,398)  $499,998   $7,399,449 

 

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

 

Corporate debt consists of floating rate notes with a maturity that is over multiple years but has interest rates that 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 that 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.

 

Equity Investments

 

From 2017 through 2019, the Company made several equity investments in a customer. In the fourth quarter of 2019, the Company reviewed the financial condition and other factors of the customer and, as a result, recorded an impairment charge of $5.2 million to reduce its investment in the customer to zero as of December 28, 2019. In the first quarter of 2022, the customer raised additional equity capital and based on an observable price change of the customer’s share prices and terms of the equity sale, the Company remeasured the fair market value of its investment and recorded a gain of $4.7 million. As of September 24, 2022, the Company owned an approximate 2.3% interest in this investment.

 

In the third quarter of 2022, the Company reviewed the financial condition of an equity interest in a company and, as a result, recorded an impairment charge of $2.0 million to reduce its investment. Additionally, during the three and nine months ended September 24, 2022, the Company recorded approximately $0.2 million and $0.4 million, respectively, of unrealized losses on its equity interest in this company due to a fluctuation in the foreign exchange rate.