Fair Value Disclosure

The following table presents fair values for those assets and liabilities measured at fair value on a recurring basis and the level within the fair value hierarchy in which the measurements fall. No transfers among the levels within the fair value hierarchy occurred during the six months ended June 30, 2012.



	Fair Value
	Level	June 30, 2012		December 31, 2011
Investments	1	153,400		205,000
Royalty guarantee	2	(397,500	)	—
Stock lease payment guarantee	2	(781,200	)	(505,900	)

The fair value of the Company's investments classified as trading securities is determined based on the closing market prices of the respective common stocks as of June 30, 2012.

The fair value of the rent guarantee was calculated using the Black-Scholes Option Pricing Model with the following assumptions:



Term of guarantee		5 months
Historical volatility		0.8373
Expected dividend		None
Risk free interest rate		0.0001

In 2011 the Company recorded $442,600 in additional pre-paid rent expense due to the fair value of the guarantee, and will be amortized over the life of the lease. The fair value adjustment of the offsetting derivative liability will be recorded in the statement of operations as a component of other income.

The fair value of the royalty guarantee was calculated using the Black-Scholes Option Pricing Model with the following assumptions:



Term of guarantee		8 months
Historical volatility		116.58%
Expected dividend		None
Risk free interest rate		0.07%

In the second quarter of 2012 the Company recorded $401,100 in additional pre-paid rent expense due to the fair value of the guarantee, and will be amortized over the guarantee period. The fair value adjustment of the offsetting derivative liability will be recorded in the statement of operations as a component of other income.

- 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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+ Details