Fair Value

12 Months Ended

Dec. 31, 2012

Fair Value [Abstract]

Fair Value

NOTE 6: FAIR VALUE

Fair value is the estimated price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company is required by accounting standards to provide the disclosure framework for measuring fair value and expands disclosure about fair value measurements. Fair value measurements are classified and disclosed in one of the following categories:

Level 1:	Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The Company considers active markets as those in which transactions for the assets or liabilities occur in sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2:	Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability. This category includes those derivative instruments that the Company values using observable market data. Substantially all of these inputs are observable in the marketplace throughout the term of the derivative instruments, can be derived from observable data, or supported by observable levels at which transactions are executed in the marketplace.
Level 3:	Measured based on prices or valuation models that require inputs that are both significant to the fair value measurement and less observable from objective sources (i.e. supported by little or no market activity). The Company's valuation models are primarily industry standard models. Level 3 instruments include derivative warrant instruments. The Company does not have sufficient corroborating evidence to support classifying these assets and liabilities as Level 1 or Level 2.

Financial assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurement. The Company's assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of the fair value of assets and liabilities and their placement within the fair value hierarchy levels.

The Company did not have financial assets measured at fair value on a recurring basis as of December 31, 2012.

The following table represents the Company's fair value hierarchy for its financial assets measured at fair value on a recurring basis as of December 31, 2011:

		Level 1	Level 2		Level 3			Total
			($ in thousands)
Short-term investments	$	259	$	-	$	-	$	259

Derivative liability

In connection with the Company's acquisition of substantially all of the assets and assumption of certain liabilities of Alteva, LLC, the members of Alteva, LLC were granted shares of the Company's common stock as partial consideration in the acquisition (the "Alteva Shares") and entered into a Lock-Up and Put Agreement which included a purchase price protection.

The Purchase Price Protection provision of the Lock-Up and Put Agreement was considered to be a derivative instrument and was valued and recognized at the instrument's current fair market value as of the date of issuance and adjusted each period the financial statements are presented. The Company employed a binomial pricing model to calculate the fair value of the price protection and recorded the fair value as a current liability on its consolidated balance sheet. Inputs are adjusted each period to reflect changes in the Company's estimate of value of the underlying common stock.

During 2012, the Company amended or terminated the Lock-Up and Put Agreement with the members of Alteva, LLC. (refer to Note 3). As a result of the amendments to the Lock-Up and Put Agreement, the derivative liability was derecognized as of December 31, 2012.

The fair value of the price protection was estimated utilizing the binomial pricing model with the following assumptions, for the year ended December 31, 2011:

Binomial method
Model iterations		100.5
Simulated median price	$	13.45
Exercise price per share	$	11.74
Expected volatility		12.03	%
Risk free interest rate		0.15	%
Yield rate		7.73	%

The following table represents the Company's fair value hierarchy for its financial liabilities measured at fair value on a recurring basis as of December 31, 2011:

$ in thousands)		Level 1		Level 2		Level 3		Total
Derivative liability in connection with business acquisition	$	-	$	-	$	131	$	131

The following table represents a summary of changes in the fair value of the Company's Level 3 derivative liability for the years ended December 31, 2012 and 2011.

		($ in thousands)
Derivative liability balance December 31, 2011	$	131
Decrease in fair value of price protection instrument		(75	)
Derecognition of derivative liability		(56	)
Derivative liability balance December 31, 2012	$	-