11. Fair value measurements:

Under applicable accounting standards, fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

At March 31, 2020 and December 31, 2019, only the Company’s warrants were measured on a recurring basis.

Such fair value adjustments utilized the following methodology:

Warrants (recurring)

Warrants owned by the Company are not registered for public sale, but are considered derivatives and are carried on the balance sheet at an estimated fair value at the end of the period. The valuation of the warrants are determined using a Black-Scholes formulation of value based upon the stock price(s), the exercise price(s), the volatility of comparable venture companies, the time to maturity, and a risk free interest rate for the term(s) of the warrant exercise(s). As of March 31, 2020 and December 31, 2019, the calculated fair value of the Fund’s warrant portfolio approximated $702 thousand and $731 thousand, respectively. Such valuations are classified within Level 3 of the valuation hierarchy.

The following table reconciles the beginning and ending balances of the Company’s Level 3 recurring assets (in thousands):


	Three Months Ended
	March 31,
	2020		2019
Fair value of warrants at beginning of period	$	731	$	302
Unrealized gain on fair valuation of warrants		(29)		(4)
Fair value of warrants at end of period	$	702	$	298

The following table summarizes the valuation techniques and significant unobservable inputs used for the Company’s recurring and non-recurring fair value calculation/adjustments categorized as Level 3 in the fair value hierarchy at March 31, 2020 and December 31, 2019:


March 31, 2020
	Valuation	Valuation	Unobservable	Range of Input Values
Name	Frequency	Technique	Inputs	(Weighted Average)
Warrants	Recurring	Black-Scholes formulation	Stock price	$0.11 - $16.95 ($0.24)
			Exercise price	$0.02 - $9.00 ($0.08)
			Time to maturity (in years)	6.38 - 11.70 (7.80)
			Risk-free interest rate	0.51% - 1.58% (0.60%)
			Annualized volatility	32.00% - 115.04% (46.32%)


December 31, 2019
	Valuation	Valuation	Unobservable	Range of Input Values
Name	Frequency	Technique	Inputs	(Weighted Average)
Warrants	Recurring	Black-Scholes formulation	Stock price	$0.10 - $16.07 ($0.23)
			Exercise price	$0.02 - $9.00 ($0.08)
			Time to maturity (in years)	6.63 - 11.95 (8.05)
			Risk-free interest rate	1.80% - 1.99% (1.87%)
			Annualized volatility	32.21% - 111.44% (46.75%)

The following disclosure of the estimated fair value of financial instruments is made in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification. Fair value estimates, methods and assumptions, set forth below for the Company’s financial instruments, are made solely to comply with the requirements of the Financial Instruments Topic and should be read in conjunction with the Company’s financial statements and related notes.

The Company determines the estimated fair value amounts by using market information and valuation methodologies that it considers appropriate and consistent with the fair value accounting guidance. Considerable judgment is required to interpret market data to develop the estimates of fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts.

Cash and cash equivalents

The recorded amounts of the Company’s cash and cash equivalents approximate fair value because of the liquidity and short-term maturity of these instruments.

Notes receivable

The fair value of the Company’s notes receivable is generally estimated based upon various methodologies deployed by financial and credit management including, but not limited to, credit analysis, third party appraisal and/or discounted cash flow analysis based upon current market valuation techniques and market rates for similar types of lending arrangements, which may consider adjustments for impaired loans as deemed necessary.

Commitments and Contingencies

Management has determined that no recognition for the fair value of the Company’s loan commitments is necessary because their terms are made on a market rate basis and require borrowers to be in compliance with the Company’s credit requirements at the time of funding.

The fair value of contingent liabilities (or guarantees) is not considered material because management believes there has been no event that has occurred wherein a guarantee liability has been incurred or will likely be incurred.

The following tables present estimated fair values of the Company’s financial instruments in accordance with the guidance provided by the Financial Instruments Topic of the FASB Accounting Standards Codification at March 31, 2020 and December 31, 2019 (in thousands):


	March 31, 2020
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	6,151	$	6,151	$	—	$	—	$	6,151
Notes receivable, net		805		—		—		824		824
Warrants, fair value		702		—		—		702		702
Financial liabilities:
Non-recourse debt		3,180		—		—		3,198		3,198


	December 31, 2019
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	6,410	$	6,410	$	—	$	—	$	6,410
Notes receivable, net		1,078		—		—		1,086		1,086
Warrants, fair value		731		—		—		731		731
Financial liabilities:
Non-recourse debt		3,508		—		—		3,516		3,516