FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

3 Months Ended

Mar. 31, 2012

FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

Note 4. FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

Our short-term investments in commercial paper and bonds represent available-for-sale securities that are valued primarily using quoted market prices utilizing market observable inputs in active markets for identical assets.

The following table presents information about our assets measured at fair value on a recurring basis at March 31, 2012 and December 31, 2011, and indicates the fair value hierarchy of the valuation techniques utilized to determine such fair value.

			FAIR VALUE MEASUREMENTS AT  REPORTING DATE
	AMOUNT RECORDED ON BALANCE SHEET		QUOTED PRICES IN ACTIVE MARKETS FOR IDENTICAL ASSETS (LEVEL 1)		SIGNIFICANT OTHER OBSERVABLE INPUTS (LEVEL 2)		SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)
Assets as of March 31, 2012:
Cash and cash equivalents	$	756,000	$	756,000		—		—
Short-term investments	$	2,224,000	$	2,224,000		—		—
Assets as of December 31, 2011:
Cash and cash equivalents	$	804,000	$	804,000		—		—
Short-term investments	$	2,703,000	$	2,703,000		—		—

In addition to the assets listed in the table, other short-term financial assets and liabilities of the Company consist of accounts receivable, accounts payable and certain accrued liabilities. These financial assets and liabilities generally approximate fair market value based on their short-term nature.