Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

4 –   Fair Value Measurements

The FASB has established a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on management's own assumptions used to measure assets and liabilities at fair value. Classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

As of December 31, 2010, we did not have any assets or liabilities measured at fair value which were in the scope of this guidance.  As of September 30, 2011, we did not have any financial or nonfinancial instruments carried at fair value measured on a nonrecurring basis. The following table provides financial and nonfinancial assets and liabilities carried at fair value measured on a recurring basis as of September 30, 2011 (in thousands):

			Fair Value Measurements at September 30, 2011
	September 30, 2011		Quoted prices in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
Derivative liability	$	3,949	$	-	$	-	$	3,949

The fair value of our derivative liabilities was determined using the Black-Scholes-Merton formula – a Level 3 input.  As of September 30, 2011, unobservable inputs included an exercise price of $0.80, expected life of 4.53 years, volatility of 67.30%, a 4.53-year interpolated risk-free rate of 0.83%, and 0% dividend rate.  The only observable input was our current stock price of $0.65.

The following tables set forth a summary of changes in the fair value of Level 3 liabilities for the three and nine months ended September 30, 2011 (in thousands).  We did not have any instruments measured at fair value with Level 3 inputs for the three and nine months ended September 30, 2010:

	December 31, 2010		Warrant Issuance		Change in fair value			September 30, 2011
Derivative liability	$	-	$	4,512	$	(563	)	$	3,949

	June 30, 2011		Warrant Issuance		Change in fair value			September 30, 2011
Derivative liability	$	5,212	$	-	$	(1,263	)	$	3,949