FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2012

Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Observable Inputs (Level 2)

Assets and liabilities measured at fair value on a recurring basis using significant observable inputs (Level 2) from January 1, 2012 to June 30, 2012 are summarized as follows:

	Warrant liability (Level 2)
Balance at January 1, 2012	$	615,000
Change in fair value included in earnings		474,000
Exercise of warrants		(385,000	)
Balance at June 30, 2012	$	704,000

Fair Value of Warrants Using Black-Scholes Option Pricing Model

The Company estimates the fair value of its warrants as of June 30, 2012 using the Black-Scholes option pricing model using the following assumptions:

	June 30, 2012			December 31, 2011
Series A and B Warrants
Market price of common stock:	$	5.48		$	4.76
Exercise price:	$	3.50		$	3.50
Remaining contractual life (years):		1.33			1.83
Dividend yield:		-			-
Expected volatility:		66.29	%		39.58	%
Risk-free interest rate:		0.24	%		0.22	%
Fair value – Series A and B Warrants	$	644,000		$	586,000
Underwriter Warrants
Market price of common stock:	$	5.48		$	4.76
Exercise price:	$	4.80		$	4.80
Remaining contractual life (years):		2.18			2.68
Dividend yield:		-			-
Expected volatility:		59.56	%		36.39	%
Risk-free interest rate:		0.32	%		0.32	%
Fair value – Underwriter Warrants	$	60,000		$	29,000
Fair value – Total	$	704,000		$	615,000

Warrant Exercises

In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate gain of $73,291 was recognized.  For details, please refer to the following table.

Exercise date:	February 7
Market price of common stock:	$	6.44
Exercise warrants:		125,000
Exercise price:	$	3.50
Remaining contractual life (years):		1.73
Dividend yield:		-	%
Expected volatility:		39.43	%
Risk-free interest rate:		0.21	%
Fair values:	$	3.08
Gain on extinguishment of warrant liabilities	$	73,291