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Fair Value Measurements | 6 Months Ended
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Jun. 30, 2018
Fair Value Disclosures [Abstract] |
Fair Value Measurements |
3. | Fair Value Measurements
The fair value framework under the FASB’s guidance requires the categorization of assets and liabilities into three levels based upon the assumptions used to measure the assets or liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3, if applicable, would generally require significant management judgment. The three levels for categorizing assets and liabilities under the fair value measurement requirements are as follows:
● | Level 1: Fair value measurement of the asset or liability using observable inputs such as quoted prices in active markets for identical assets or liabilities;
● | Level 2: Fair value measurement of the asset or liability using inputs other than quoted prices that are observable for the applicable asset or liability, either directly or indirectly, such as quoted prices for similar (as opposed to identical) assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active; and
● | Level 3: Fair value measurement of the asset or liability using unobservable inputs that reflect the Company’s own assumptions regarding the applicable asset or liability.
The Company reviews the appropriateness of fair value measurements including validation processes, and the reconciliation of period-over-period fluctuations based on changes in key market inputs. All fair value measurements are subject to the Company’s analysis. Review and approval by management is required as part of the validation process. The following tables show the Company’s cash and investments by significant investment category as of June 30, 2018:
|  | Adjusted Cost |  |  | Change in Fair Value |  |  | Fair Value |  |  | Cash and Cash Equivalents |  |  | Digital Tokens |
Cash |  | $ | 1,073,436 |  |  | $ | - |  |  | $ | 1,073,436 |  |  | $ | 1,073,436 |  |  | $ | - |
Certificates of deposit |  |  | 250,015 |  |  |  | - |  |  |  | 250,015 |  |  |  | 250,015 |  |  |  | - |
Level 1: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Money market funds |  |  | 701,243 |  |  |  | - |  |  |  | 701,243 |  |  |  | 701,243 |  |  |  | - |
U.S. Treasury securities |  |  | 5,714,143 |  |  |  | - |  |  |  | 5,714,143 |  |  |  | 5,714,143 |  |  |  | - |
Digital tokens |  |  | 3,368,127 |  |  |  | (1,959,404 | ) |  |  | 1,408,723 |  |  |  | - |  |  |  | 1,408,723 |
Subtotal |  |  | 9,783,513 |  |  |  | (1,959,404 | ) |  |  | 7,824,109 |  |  |  | 6,415,386 |  |  |  | 1,408,723 |
Total |  | $ | 11,106,964 |  |  | $ | (1,959,404 | ) |  | $ | 9,147,560 |  |  | $ | 7,738,837 |  |  | $ | 1,408,723 |
Fair Value Methods The accounting guidance for financial instruments requires disclosures of the estimated fair value of certain financial instruments and the methods and significant assumptions used to estimate their fair value. Cash equivalents consist primarily of money market instruments and U.S. Treasury bills, and represent highly liquid investments with maturities of three months or less at purchase. The carrying value of cash equivalents is assumed to approximate fair value due to its short duration and generally negligible credit risk. We validate this assumption using quoted market prices where available. Digital tokens consist of XPX tokens received on June 2, 2018 as part of the Company’s technology services agreement with ProximaX. The quoted market price from the Kryptono Exchange is used to determine the fair value of tokens and the quoted market price of $0.01559 was used to determine the initial fair value of tokens of $3,368,127. As of June 30, 2018 at approximately 5:00 PM, Eastern Time, XPX tokens were trading at a price equal to $0.00652 per token, and our 216.0 million XPX tokens had a fair value of 1,408,723. Changes in fair value of digital tokens At June 30, 2018, we did not own any investments that have been in a continuous unrealized loss position for 12 consecutive months or more. The Company’s investments are carried at fair value, with unrealized gains and losses, reported as change in fair value of digital tokens in the condensed consolidated statements of operations. At June 30, 2018 the XPX tokens’ change in fair value was $1,959,404.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -URI http://asc.fasb.org/topic&trid=2155941 + Details
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