FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2011

FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS [Abstract]

FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

NOTE 6 – FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  This topic also establishes a fair value hierarchy, which requires classification based on observable and unobservable inputs when measuring fair value.  The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity's own assumptions (unobservable inputs).  The hierarchy consists of three levels: fair value of the Company's financial instruments reflects the amounts that the Company estimates to receive in connection with the sale of an asset or paid in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). For financial assets and liabilities that are periodically re-measured to fair value, the Company discloses a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:

·   Level 1 – Quoted prices in active markets for identical assets and liabilities;

·   Level 2 – Inputs other than level one inputs that are either directly or indirectly observable; and

·   Level 3 – Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

During the year ended December 31, 2010, the Company determined that its available-for-sale investment was other than temporarily impaired and recorded a loss of $5,565.

Assets and liabilities measured at fair value on a recurring basis are summarized as follows:

	Fair value measurement using inputs						Carrying amount at December 31,
Financial instruments	Level 1		Level 2		Level 3		2011		2010
Liabilities:
Stock awards payable	$	-	$	127,000	$	-	$	127,000	$	80,000
Derivative instruments - Warrants	$	-	$	3,355,000	$	-	$	3,355,000	$	-
Total	$	-	$	3,355,000	$	-	$	3,355,000	$	-

The Company estimates the fair value of the warrants using the Black-Scholes option pricing model using the following assumptions:

	Fair value measurement using inputs
	December 31, 2011			December 22, 2011
Market price and estimated fair value of stock:	$	1.27		$	1.33
Exercise price:	$	2.00		$	2.00
Expected term (years):		5			5
Dividend yield	$	-0-		$	-0-
Expected volatility:		77	%		77	%
Risk-free interest rate:		.90	%		.90	%

The risk-free rate of return reflects the interest rate for United States Treasury Note with similar time-to-maturity to that of the warrants.