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FAIR VALUE MEASUREMENTS
 3 Months Ended
Apr. 01, 2023
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 April 1, 2023 Using: 
   Total   Level 1   Level 2   Level 3 
Cash and cash equivalents  $8,583,146   $8,583,146   $—   $— 
U.S. government and agency-backed securities   13,330,685    8,907,220    4,423,465    — 
Corporate debt   499,860    —    499,860    — 
Certificates of deposit   7,196,505    7,196,505    —    — 
Equity investments   7,727,789    195,755    —    7,532,034 
Financial instruments, owned, at fair value  $37,337,985   $24,882,626   $4,923,325   $7,532,034 

 

   Total   Level 1   Level 2   Level 3 
       Fair Value Measurement at
December 31, 2022 Using:		 
   Total   Level 1   Level 2   Level 3 
Cash and cash equivalents  $8,258,878   $8,258,878   $—   $— 
U.S. government and agency- backed securities   2,397,730    —    2,397,730    — 
Corporate debt   1,500,445    —    1,500,445    — 
Certificates of deposit   490,603    490,603    —    — 
Equity investments   7,721,206    213,016    —    7,508,190 
Financial instruments, owned, at fair value  $20,368,862   $8,962,497   $3,898,175   $7,508,190 

 

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 31, 2022   Net unrealized gains   Purchases, issuances and settlements   April 1, 2023 
Equity Investments  $7,508,190   $23,844   $—   $7,532,034 

 

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 may be over multiple years but has interest rates that are reset every three months. 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 interest rate, 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 April 1, 2023, the Company owned an approximate 2.3% interest in this investment.

 

During the three months ended April 1, 2023, the Company recorded a less than $0.1 million unrealized gain on an equity interest in a company due to a fluctuation in the foreign exchange rate.