FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2012

Notes to Financial Statements

NOTE 9 - 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.

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 year ended December 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. Beginning with the quarter ended June 30, 2012, the Company has no warrant liability after the amendment to warrant agreement 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 December 31, 2012 and 2011, respectively.

	Carrying Amount In Balance Sheet December 31,		Fair Value December 31,		Fair Value Measurement Using
	2012		2012		Level 1		Level 2		Level 3
Assets:
Money Market Funds	$	1,338,000	$	1,338,000	$	1,338,000	$	—	$	—
Liabilities:
Warrant liability	$	—	$	—	$	—	$	—	$	—

	Carrying Amount In Balance Sheet December 31		Fair Value December 31		Fair Value Measurement Using
	2011		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 Year Ended December 31, 2012

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
$	71,000		-	$	60,000		-		-	$	10,000		-	$	1,000		-

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