Quarterly report pursuant to Section 13 or 15(d)

Investments and Fair Value of Financial Instruments

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Investments and Fair Value of Financial Instruments
6 Months Ended
Jun. 30, 2018
Fair Value Disclosures [Abstract]  
Investments and Fair Value of Financial Instruments

6. INVESTMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS

 

The Company holds certain affiliate warrants earned by the broker-dealer subsidiary prior to its discontinuation of operations, which are marked to market at each reporting date using the Black-Scholes option pricing model. The Company recorded unrealized losses on the affiliate warrants of $14,824 and $16,451 during the three and six months ended June 30, 2018, respectively, and $5,137 and $8,168 recorded during the three and six months ended June 30, 2017, respectively, which are included in revenue on the accompanying condensed consolidated statements of operations.

 

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or developed by the Company. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

 

Level 1 - Valued based on quoted prices at the measurement date for identical assets or liabilities trading in active markets. Financial instruments in this category generally include actively traded equity securities.

 

Level 2 - Valued based on (a) quoted prices for similar assets or liabilities in active markets; (b) quoted prices for identical or similar assets or liabilities in markets that are not active; (c) inputs other than quoted prices that are observable for the asset or liability; or (d) from market corroborated inputs. Financial instruments in this category include certain corporate equities that are not actively traded or are otherwise restricted.

 

Level 3 - Valued based on valuation techniques in which one or more significant inputs is not readily observable. Included in this category are certain corporate debt instruments, certain private equity investments, and certain commitments and guarantees

 

Investments – Related Parties at Fair Value

 

As of June 30, 2018   Level 1     Level 2     Level 3     Total  
                         
Warrants- Affiliates   $ -     $ -     $ 9,950     $ 9,950  
                                 

 

As of December 31, 2017     Level 1       Level 2       Level 3       Total  
                                 
Warrants- Affiliates   $ -     $ -     $ 26,401     $ 26,401  

  

A reconciliation of Level 3 assets is as follows:

 

    Warrants  
       
Balance - December 31, 2017   $ 26,401  
Unrealized loss     (16,451 )
Balance - June 30, 2018   $ 9,950  

 

    June 30, 2018     December 31, 2017  
                 
Accumulated unrealized (losses) gains related to investments at fair value   $ (56,898 )   $ (40,447 )