Fair value

9 Months Ended

Sep. 30, 2022

Fair value

Fair value

7. Fair value

As of September 30, 2022 and December 31, 2021, the carrying amounts of cash equivalents, accounts receivable, accounts payable, accrued expenses, accrued compensation, dividends payable and other current liabilities approximate their fair values due to the short-term maturities of these instruments.

Under US GAAP, fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. US GAAP guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s

assumptions about the factors market participants would use in valuing the asset or liability. The guidance establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurements. The Company reviews its fair value hierarchy classifications on a quarterly basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.

The following table presents the Company’s fair value hierarchy for assets and liabilities measured at fair value as of September 30, 2022 and December 31, 2021:

	September 30, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Recurring
Certificate of deposit	$	—	$	—	$	—	$	—
Net asset arising from put/call options		—		—		157,000		157,000

	December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Recurring
Certificate of deposit	$	—	$	2,500,000	$	—	$	2,500,000
Net asset arising from put/call options		—		—		128,000		128,000

The activity for the Level 3 asset for the nine months ended September 30, 2022:

Net asset arising from put/call options
Balance as of December 31, 2021	$	128,000
Unrealized gain		29,000
Balance as of September 30, 2022	$	157,000

The put/call options are reported at fair value at their net asset or liability balance in the condensed consolidated balance sheets. The underlying asset and liability fair values are calculated using discounted cash flow analysis valuation techniques that incorporate unobservable inputs, such as future cash flows, weighted-average cost of capital, and expected future volatility. The inputs to these valuations are considered Level 3 inputs.