FAIR VALUE OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2020

4. FAIR VALUE OF FINANCIAL INSTRUMENTS

ASC 820, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value and requires additional disclosures regarding certain fair value measurements. ASC 820 establishes a three-tier hierarchy for measuring fair value, as follows:

Level 1 – quoted market prices in active markets for identical assets and liabilities

Level 2 – inputs other than quoted prices that are directly or indirectly observable

Level 3 - unobservable inputs where there is little or no market activity

The following tables summarize the values of assets designated as Investments in debt and equity securities:


	September 30, 2020
	Level 1		Level 2		Level 3		Total
Equity securities	$	2,723,410	$	—	$	—	$	2,723,410
Mutual funds and exchange traded funds		3,902,118		—		—		3,902,118
Certificates of deposit		—		77,921		—		77,921
	$	6,625,528	$	77,921	$	—	$	6,703,449


	December 31, 2019
	Level 1		Level 2		Level 3		Total
Equity securities	$	—	$	—	$	—	$	—
Mutual funds and exchange traded funds		6,708,746		—		—		6,708,746
Certificates of deposit		—		1,062,914		—		1,062,914
	$	6,708,746	$	1,062,914	$	—	$	7,771,660

The Company holds high-grade ETFs, mutual funds, individual equity stocks (predominately in the energy sector), and debt securities as investments. These assets are readily marketable and are carried at fair value as of the date of the Condensed Balance Sheets. The Company intends to hold these assets for possible future operating requirements. The following table summarizes gross unrealized gains and losses from Investments in debt and equity securities:


	September 30, 2020
			Gross Unrealized				Aggregate
	Cost		Gains		Losses		Fair Value
Equity securities	$	2,068,405	$	655,005	$	—	$	2,723,410
Mutual funds and exchange traded funds		3,871,186		30,932		—		3,902,118
Certificates of deposit		75,000		2,921		—		77,921
	$	6,014,591	$	688,858		—	$	6,703,449


	December 31, 2019
			Gross Unrealized				Aggregate
	Cost		Gains		Losses		Fair Value
Equity securities	$	—	$	—	$	—	$	—
Mutual funds and exchange traded funds		6,592,345		116,401		—		6,708,746
Certificates of deposit		1,050,000		12,914		—		1,062,914
	$	7,642,345	$	129,315		—	$	7,771,660

Unrealized gains (losses) on investments in debt and equity securities were $559,543 and $129,728 for the nine months ended September 30, 2020 and 2019, respectively.

- 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.

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