Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Fair Value Measurements [Abstract]

Fair Value Measurements

9. 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 September 30, 2022 and December 31, 2021 the Company’s warrants and investment securities were measured on a recurring basis. In addition, at December 31, 2021, the Company’s options - short position were also measured on a recurring basis. There were no assets or liabilities measured at fair value on a non-recurring basis as of September 30, 2022 and December 31, 2021.

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 September 30, 2022 and December 31, 2021, the calculated fair value of the Fund’s warrant portfolio approximated $145 thousand and $142 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 for the three and nine months ended September 30, 2022 and 2021 (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Fair value of warrants at beginning of period	$	144	$	157	$	142	$	187
Unrealized gain (loss) on fair value adjustment for warrants		1		4		3		(26)
Fair value of warrants at end of period	$	145	$	161	$	145	$	161

Investment in equity securities (recurring)

The Company’s equity securities registered for public sale with readily determinable fair values are measured at fair value with any changes in fair value recognized in the Company’s results of operations. As of September 30, 2022 and December 31, 2021, the calculated fair value of the Fund’s investment securities approximated $42 thousand and $308 thousand, respectively. Such valuations are classified within Level 1 of the valuation hierarchy.

The fair value of investment securities that were accounted for on a recurring basis for the three and nine months ended September 30, 2022 and 2021 and classified as Level 1 are as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2022		2021		2022		2021
Fair value of securities at the beginning of period	$	52	$	898	$	308	$	1,448
Securities sold		—		—		—		(619)
Unrealized (loss) gain on fair value adjustment for equity securities		(10)		(492)		(266)		(423)
Fair value of investment securities at the end of period	$	42	$	406	$	42	$	406

Options - short position (recurring)

The liability associated with the Company’s options – short position contracts were measured at fair value based on the price of the publicly traded options contracts, with any changes in fair value recognized in the Company’s results of operations. During the three and nine months ended September 30, 2021, the Company recorded $34 thousand of unrealized gains on the options, which reduced the $50 thousand initial value of the options to $16 thousand at September 30, 2021. Such value was further reduced to $1 thousand as of December 31, 2021. The options both expired on January 22, 2022, upon which the Company realized $1 thousand of gains on the transactions.

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 September  30, 2022 and December 31, 2021:

September 30, 2022
	Valuation	Valuation	Unobservable	Range of Input Values
Name	Frequency	Technique	Inputs	(Weighted Average)
Warrants	Recurring	Black-Scholes formulation	Stock price	$0.01 - $11.71 ($0.07)
			Exercise price	$0.02 - $9.00 ($0.07)
			Time to maturity (in years)	5.16 - 9.19 (5.32)
			Risk-free interest rate	3.86% - 4.05% (4.04%)
			Annualized volatility	40.26% - 115.04% (49.88%)

December 31, 2021
	Valuation	Valuation	Unobservable	Range of Input Values
Name	Frequency	Technique	Inputs	(Weighted Average)
Warrants	Recurring	Black-Scholes formulation	Stock price	$0.01 - $11.71 ($0.07)
			Exercise price	$0.02 - $9.00 ($0.07)
			Time to maturity (in years)	5.91 - 9.94 (6.06)
			Risk-free interest rate	1.35% - 1.58% (1.37%)
			Annualized volatility	37.90% - 115.04% (55.09%)

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.

Non-recourse debt

The fair value of the Company’s non-recourse debt is estimated using discounted cash flow analyses, based upon current market borrowing rates for similar types of borrowing arrangements.

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 September 30, 2022 and December 31, 2021 (in thousands):

	Fair Value Measurements at September 30, 2022
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	3,062	$	3,062	$	—	$	—	$	3,062
Investment in equity securities		42		42		—		—		42
Warrants, fair value		145		—		—		145		145
Financial liabilities:
Non-recourse debt		1,247		—		—		1,214		1,214

	Fair Value Measurements at December 31, 2021
	Carrying
	Amount		Level 1		Level 2		Level 3		Total
Financial assets:
Cash and cash equivalents	$	4,035	$	4,035	$	—	$	—	$	4,035
Investment in equity securities		308		308		—		—		308
Warrants, fair value		142		—		—		142		142
Financial liabilities:
Options - short position		1		1		—		—		1
Non-recourse debt		1,633		—		—		1,673		1,673