Note 9 - Fair Value Of Financial Instruments

12 Months Ended

Dec. 31, 2011

Notes To Financial Statements

Fair Value Disclosures [Text Block]

Note 9.    Fair Value of Financial Instruments

The inputs used to measure fair value are summarized in the three broad levels listed below:

• Level 1 — Quoted prices in active markets for identical securities;

• Level 2 — Other significant observable inputs (including quoted prices in active markets for similar securities); and

• Level 3 — Significant unobservable inputs (including the Company’s own assumptions in determining fair value of investments).

The following tables set forth by level, within the fair value hierarchy, financial assets and liabilities accounted for at fair value as of December 31, 2011 and 2010. As required by Accounting Standard Codification (ASC) 820-10, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

	December 31, 2011		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	1,484,101	$	1,484,101	$	—	$	—
Option to purchase interest in affiliated company		12,362		—		—		12,362

	December 31, 2010		Quoted Prices in Active Market for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Money market funds	$	3,680,348	$	3,680,348	$	—	$	—
Option to purchase interest in affiliated company		20,657		—		—		20,657

Option to purchase interest in affiliated company. The Company estimated the fair value of this asset to be $12,362 and $20,657 at December 31, 2011 and 2010, respectively, using the multiple of earnings method based on a number of factors and assumptions regarding the affiliated company’s potential future revenue and projected earnings before interest, tax, depreciation and amortization (EBITDA). A decrease of $8,295 and an increase $3,199 in fair value was recorded in the statement of operations for the years ended December 31, 2011 and 2010, respectively.

Financial Instruments. The carrying amount of the Company’s cash, accounts receivable, accounts payable, accrued compensation and benefits, and accrued expenses approximated their estimated fair values at December 31, 2011 and December 31, 2010 because of the short-term nature of these instruments.

Preferred Stock

The Company’s board of directors (the Board) may authorize the issuance of preferred stock from time to time in one or more series and each series shall have such voting, redemption, liquidation and dividend rights as the Board may deem advisable. As of December 31, 2011, no preferred series shares had been designated by the Board.

Stockholder Rights Agreement

On August 15, 2003, the Board approved the adoption of a Stockholder Rights Agreement pursuant to which all of the Company’s stockholders as of September 15, 2003 (the Record Date) received rights to purchase shares of a new series of preferred stock. The rights will be distributed as a non-taxable dividend and will expire ten years from the Record Date. The rights will be exercisable only if a person or group acquires 15 percent or more of the Company’s common stock or announces a tender offer for 15 percent or more of the common stock. If a person acquires 15 percent or more of common stock, all rights holders, except the buyer, will be entitled to acquire the Company’s common stock at a discount. The effect will be to discourage acquisitions of more than 15 percent of the Company’s common stock without negotiations with the Board.

Common Stock Purchase Warrants

Information concerning outstanding common stock purchase warrants is set forth below:

	December 31,
	2011						2010
	Number		Price range		Weighted Average		Number		Price range		Weighted Average
Warrants issued to employees and non-employees for services		701,169	$	0.25 – $1.50	$	1.00		1,707,419	$	0.25 – $6.00	$	1.56
Warrants issued in connection with 2001 convertible debt financing		124,000	$	1.00	$	1.00		308,000	$	1.00	$	1.00
Warrants issued in connection with 2002 and 2003 equity financings		258,600	$	1.00	$	1.00		258,600	$	1.00	$	1.00
Warrants issued in connection with 2006 equity financing		—	$	—	$	—		109,800	$	1.00	$	1.00
Warrants issued in connection with 2009 convertible debt financing		142,500	$	1.00	$	1.00		142,500	$	1.00	$	1.00
Total outstanding warrants		1,226,269	$	0.25 – $1.50	$	1.00		2,526,319	$	0.25 – $6.00	$	1.38

During the year ended December 31, 2011, warrants to purchase an aggregate of 1,300,050 shares of the Company’s common stock expired and were therefore cancelled.

On March 9, 2012, in connection with the establishment of a letter of credit (see Note 18), the Company issued to its largest stockholder and guarantor of the letter of credit a five-year fully vested warrant to purchase 2,000,000 shares of the Company’s common stock at an exercise price of $0.25 per share.