Fair Value Measurements

9 Months Ended

Sep. 30, 2014

Notes to Financial Statements

Fair Value Measurements

The Company’s assets and liabilities recorded at fair value have been categorized based upon a fair value hierarchy.

The following table presents information about the Company’s liabilities measured at fair value on a recurring basis and the Company’s estimated level within the fair value hierarchy of those assets and liabilities as of September 30, 2014:

	Fair value measured at September 30, 2014
	Total carrying value at September 30,		Quoted prices in active markets		Significant other observable inputs		Significant unobservable inputs
	2014		(Level 1)		(Level 2)		(Level 3)
Digital Currencies	$	209,418		209,418		-	$	-

There were no transfers between Level 1, 2 or 3 during the nine months ended September 30, 2014.

The following table presents additional information about Level 3 assets and liabilities measured at fair value. Both observable and unobservable inputs may be used to determine the fair value of positions that the Company has classified within the Level 3 category. As a result, the unrealized gains and losses for assets and liabilities within the Level 3 category may include changes in fair value that were attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long-dated volatilities) inputs.

Changes in Level 3 liabilities measured at fair value for the nine months ended September 30, 2014:

Balance - January 1, 2014	$	-
Fair value of warrant liability on date of issuance (February 6, 2014)		227,239
Change in fair value of warrant liability immediately before reclassification		(204,957	)
Reclassification of derivative liability warrant		(22,282	)
Balance - September 30, 2014	$	-

A summary of quantitative information with respect to valuation methodology, estimated using a probability-weighted Black-Scholes option pricing model, which is comparable to a Binomial option pricing model, and significant unobservable inputs used for the Company’s warrant liabilities that are categorized within Level 3 of the fair value hierarchy for the nine months ended September 30, 2014 is as follows:

Date of valuation	February 6, 2014			March 31, 2014			June 30, 2014
Fair value of common stock	$	0.44		$	0.32			0.17
Dividend yield (per share)		0.00	%		0.00	%		0.00	%
Strike price	$	1.00		$	1.00			1.00
Volatility (annual)		74	%		74	%		71	%
Risk-free rate		0.66	%		0.93	%		0.88	%
Expected life (years)		3.0			2.9			2.7

The development and determination of the unobservable inputs for Level 3 fair value measurements and fair value calculations are the responsibility of the Company’s Management.