Fair Value Measurements

3 Months Ended

Mar. 31, 2012

NOTE 8 - FAIR VALUE MEASUREMENTS:

ASC 820, "Fair Value Measurements and Disclosure," ("ASC 820") defines fair value as 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, not adjusted for transaction costs. ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

The three levels are described below:

Level 1 Inputs — Unadjusted quoted prices in active markets for identical assets or liabilities that is accessible by the Company;

Level 2 Inputs — Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly;

Level 3 Inputs — Unobservable inputs for the asset or liability including significant assumptions of the Company and other market participants.

There were no transfers in or out of any level during the three months ended March 31, 2012 and the year ended December 31, 2011.

Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value in the Company's balance sheets, the Company has elected not to record any other assets or liabilities at fair value, as permitted by ASC 820. No events occurred during the quarter ended March 31, 2012 which would require adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis.

The Company determines fair values for its investment assets as follows:

Cash equivalents at fair value — the Company's cash equivalents, at fair value, consist of money market funds — marked to market. The Company's money market funds are classified within Level 1 of the fair value hierarchy since they are valued using quoted market prices from an exchange.

Warrant liability — the Company's warrant liability is classified within Level 3 of the fair value hierarchy and the value of the warrants are re-measured every quarter and each year using the Binomial Lattice valuation model with the assumptions as stated in note 5.

The following tables provide information on those assets and liabilities measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011, respectively:

	Carrying Amount In Balance Sheet March 31, 2012			Fair Value March 31, 2012		Fair Value Measurement Using
				Fair Value March 31, 2012		Level 1			Level 2				Level 3
Assets:
Money Market Funds		$	1,472,000	$	1,472,000		$	1,472,000		$	—	$		—

Liabilities:
Warrant Liability		$	37,000	$	37,000		$	—		$	—	$		37,000

	Carrying Amount In Balance Sheet December 31 2011			Fair Value December 31 2011		Fair Value Measurement Using
				Fair Value December 31 2011		Level 1			Level 2				Level 3
Assets:
Money Market Funds		$	645,000	$	645,000		$	645,000		$	—	$		—
Treasury Bills		$	840,000	$	840,000		$	840,000		$	—	$		—
Total Assets:		$	1,485,000	$	1,485,000		$	1,485,000		$	—	$		—

Liabilities:
Warrant liability		$	71,000	$	71,000		$	—		$	—	$		71,000

Level 3 Derivative Assets and Liabilities at Fair Value for the Quarter Ended March 31, 2012

Balance,

beginning

of period

Net

realized

gains/

(losses)

Net unrealized

gains/(losses)

relating to

instruments

still held at

period-end

Purchases

Sales

Modification on warrants to change to equity

Transfers

into

level 3

Transfers

out of

level 3

Balance,

end of

period

$71,000

$34,000

$37,000

Level 3 Derivative Assets and Liabilities at Fair Value for the Year Ended December 31, 2011

Balance,

beginning

of year

Net

realized

gains/

(losses)

Net unrealized

gains/(losses)

relating to

instruments

still held at

year-end

Purchases

Sales

Modification on warrants to change to equity

Transfers

into

level 3

Transfers

out of

level 3

Balance,

end of

year

$87,000

$16,000

$71,000

- 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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