FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 5 — FAIR VALUE MEASUREMENTS

The Company accounts for fair value measurements in accordance with ASC 820, Fair Value Measurements, as it relates to financial assets and financial liabilities. ASC 820 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America and expands disclosures about fair value measurements. ASC 820 applies under other previously issued accounting pronouncements that require or permit fair value measurements, but does not require any new fair value measurements.

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. ASC 820 establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs).

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under ASC 820 are described as follows:

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

· Level 2- Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include 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; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

· Level 3- Inputs that are unobservable for the asset or liability.

The following section describes the valuation methodologies that we used to measure financial instruments at fair value.

The Company considers the valuation of its warrant liability as a Level 3 liability based on unobservable inputs. The Company uses the Black-Scholes pricing model to measure the fair value of the warrant liability. The model required the input of highly subjective assumptions including volatility of 64%, expected term of 4 years, risk-free interest rate of 1.4% and a dividend yield of 0%.

The following table presents the liabilities that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of June 30, 2012 (amounts in thousands):

	Level 1		Level 2		Level 3		Total
Liabilities:
Warrant liability	$	-	$	-	$	1,692	$	1,692

Rollforward of Level 3 liabilities is as follows (amounts in thousands):

Balance at December 31, 2011	$	430
Issuance of warrants		564
Change in fair value of warrant liability		698
Balance at June 30, 2012	$	1,692

The carrying amounts of cash equivalents, receivables, accounts payable and accrued expenses approximate fair value due to the immediate or short-term maturity of these financial instruments. The fair value of short-term and long-term debt is determined using current applicable rates for similar instruments as of the balance sheet date and approximates the carrying value of such debt.