Note 3 - Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value Disclosures [Text Block]

3. FAIR VALUE MEASUREMENTS

The following are the methods and assumptions we use to estimate the fair value of our financial instruments.

Cash and cash equivalents

Due to their short term nature, carrying amount approximates fair value.

Accounts receivable

Due to their short term nature, carrying amount approximates fair value.

Trade accounts payable

Due to their short term nature, carrying amount approximates fair value.

Warrant liabilities

Fair values are determined using the Black-Scholes-Merton option-pricing model, a Level 3 input.

Long-term debt

Due to the short term nature of the current portion of long-term debt, the carrying amount approximates fair value.  The non current portion of long-term debt is not material and the carrying amount approximates fair value.

Our financial instruments are accounted for at fair value on a recurring basis.  We have no financial instruments accounted for on a non-recurring basis as of December 31, 2011 or 2010. Fair value is determined based on the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.  A market or observable inputs is the preferred source of values, followed by assumptions based on hypothetical transactions in the absence of market inputs.

The valuation techniques are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect our market assumptions. These two types of inputs create the following fair value hierarchy:

Level 1  -   Unadjusted quoted prices in active markets that are accessible at the measurement date   for identical, unrestricted assets or liabilities.

Level 2  -   Inputs other than quoted prices included within Level 1 that are observable for the   asset or liability, either directly or indirectly, including quoted prices for similar assets   or liabilities in active markets; quoted prices for identical or similar assets or liabilities   in markets that are not active; inputs other than quoted prices that are observable for   the asset or liability (e.g., interest rates); and inputs that are derived principally from or   corroborated by observable market data by correlation or other means.

Level 3  -   Inputs that are both significant to the fair value measurement and unobservable.

No assets were recorded at fair value on a recurring basis at December 31, 2011.

In arriving at fair-value estimates, we utilize the most observable inputs available for the valuation technique employed. If a fair-value measurement reflects inputs at multiple levels within the hierarchy, the fair-value measurement characterized based upon the lowest level of input that is significant to the fair-value measurement. For us, recurring fair-value measurements are performed for warrant liabilities.

All warrant liability financial instruments are recognized in the balance sheet at their fair value. Changes in the fair values of warrant liability financial instruments are reported in earnings. We do not hold any derivative liability financial instruments that reduce risk associated with hedging exposure and we have not designated any of our warrant liability financial instruments as hedge instruments.

The Company has no items valued using Level 1 and Level 2 inputs. The following table sets forth the fair value hierarchy of the Company’s financial liabilities that were accounted for at fair value, on a recurring bases, as of December 31, 2011.

There were no financial liabilities outstanding at December 31, 2010. The following table summarizes the valuation of our financial liabilities by the fair value hierarchy at December 31, 2011.

	Total		Level 1	Level 2	Level 3
Warrants	$	654			$	654
Total	$	654			$	654

The Company utilizes inputs that are not observable from objective sources, such as the Company’s internally developed assumptions used in pricing an asset or liability and Company market data or assumptions that market participants would use in pricing the liability. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy. The Company uses an income approach to value its warrant liability financial instruments. These instruments are valued using a Black-Scholes-Merton option-pricing model using market information as of the reporting date such as prevailing interest rates, the Company’s stock price volatility, and expected term.

There have been no transfers between Level 1, Level 2, or Level 3 categories.

The following table summarizes current warrant liability financial instruments.

Current Liabilities at Fair Value:	2011 Cost		Fair Value		Carrying Value
Warrant liability	$	1,928		654		654
Total current	$	1,928		654		654

The activity relating to assets valued on a recurring basis utilizing Level 3 inputs for the twelve months ended December 31, 2010 is summarized below:

In thousands of dollars

	Auction rate
	corporate notes
	2010
Beginning Balance, January 1	$	2,587
Purchases, sales, issuances, and settlements*		(1,950	)
Realized losses		(1,950	)
Unrealized gains/(losses)		-
Other adjustments		-
Reclassification adjustment for realized loss on securities		-
included in net loss		1,313
Transfers into and (or) out of Level 3**		-
Ending Balance, December 31	$	-

*In 2010, there was a sale of a Level 3 financial instrument related to auction rate corporate notes. There were no purchases, issuances or settlements of Level 3 financial instruments in 2010.

**In 2010, there were no transfers of financial instruments into or out of Level 3.

The activity relating to liabilities valued on a recurring basis utilizing Level 3 inputs for the twelve months ended December 31, 2011 is summarized below:

In thousands of dollars

	Warrant
	Liabilities
	2011
Beginning Balance, January 1	$	-
Purchases, sales, issuances, and settlements*		1,928
Realized gains		(1,274	)
Unrealized gains/(losses)		-
Other adjustments		-
Transfers into and (or) out of Level 3**		-
Ending Balance, December 31	$	654

*In 2011, there was an issuance of a Level 3 financial instrument related to warrant liabilities. There were no purchases, sales or settlements of Level 3 financial instruments in 2011.

**In 2011, there were no transfers of financial instruments into or out of Level 3.