Fair Value Measurements

12 Months Ended

Dec. 31, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

7.            Fair Value Measurements

Accounting standards require the categorization of financial assets and liabilities, based on the inputs to the valuation technique, into a three-level fair value hierarchy. The various levels of the fair value hierarchy are described as follows:

· Level 1 - Financial assets and liabilities whose values are based on unadjusted quoted market prices for identical assets and liabilities in an active market that we have the ability to access.

· Level 2 - Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable for substantially the full term of the asset or liability.

· Level 3 - Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

Accounting standards require the use of observable market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement.

Common stocks are valued at closing price reported on the active market on which the individual securities are traded.

The fair value of the contingent purchase consideration liabilities at December 31, 2011 was valued using the Monte Carlo simulation method, which is based on valuation theories underlying the Black-Scholes Merton model.  Estimated probabilities related to achieving the earn-out milestones were incorporated into our valuation.  In addition, our valuation incorporates the following assumptions: risk-free interest rate of 0.41%, expected volatility of 75% based on the (High – Low) / (High + Low) method, expected life of 4 years and expected dividend yield of 0%.

The fair value of the contingent purchase liabilities at December 31, 2010 was valued using the Black-Scholes Merton model which incorporates the following assumptions: risk-free interest rate of 0.6% to 1.7%, expected volatility of 60% based on the (High – Low) / (High + Low) method, expected life of 2.0 to 4.5 years and expected dividend yield of 0%.

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis at December 31, 2011 and December 31, 2010:

	December 31, 2011
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total Fair Value
Assets
Available-for-sale securities	$	2,229	$	-	$	-	$	2,229
Liabilities
Contingent purchase consideration	$	-	$	-	$	3,359,089	$	3,359,089

	December 31, 2010
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total Fair Value
Assets
Available-for-sale securities	$	9,433	$	-	$	-	$	9,433
Liabilities
Contingent purchase consideration	$	-	$	-	$	3,362,105	$	3,362,105

The following table summarizes the activity for financial liabilities utilizing Level 3 fair value measurements:

 

	December 31, 2011			December 31, 2010
	Contingent			Contingent
	Purchase			Purchase
	Consideration			Consideration		Warrants
Fair value at January 1,	$	3,362,105		$	-	$	819,150
Purchases, sales and issuances and settlements		-			2,860,978		-
Realized losses		-			-		(669,133	)
Unrealized (gains) losses		(3,016	)		501,127		-
Transfers to equity		-			-		(150,017	)
	$	3,359,089		$	3,362,105	$	-