Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

6. 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 stock is valued at closing price reported on the active market on which the individual securities are traded.

The fair value of the warrant liabilities at September 30, 2012 was valued using the Black-Scholes Merton model which incorporated the following assumptions: risk-free rate of interest .66%, expected volatility of 75%, expected life of 4 years and expected dividend yield of 0%.

The fair value of the option portion of our contingent purchase consideration liabilities at September 30, 2012 was valued using the Black-Scholes Merton model and at December 31, 2011 it 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 December 31, 2011 valuation. In addition, our valuation incorporates the following assumptions:

	September 30,			December 31,
	2012			2011
	(Black-Scholes)			(Monte Carlo)
Risk-free interest rate		0.337	%		0.410	%
Expected volatility		75	%		75	%
Expected life	4 years			4 years
Expected dividend yield		0	%		0	%

The following tables present the fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis at September 30, 2012 and December 31, 2011:

	September 30, 2012
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total Fair Value
Assets
Available-for-sale securities	$	3,430	$	-	$	-	$	3,430
Property and equipment, net (Jinan)		-		427,801		-		427,801
Investment in unconsolidated entities (Shandong Media)		-		-		-		-
Liabilities
Warrant liabilities	$	-	$	-	$	2,161,990	$	2,161,990
Contingent purchase price consideration, current (see Note 3)		-		-		988,174		988,174
Contingent purchase price consideration, noncurrent (see Note 3)		-		-		988,174		988,174

Long lived assets in our Jinan subsidiary held and used with a carrying amount of $2,352,809 were written down to their fair value of $427,801 resulting in an impairment charge of $1,925,008 of which $420,000 was included in earnings for the year.

In accordance with our deconsolidation of Shandong Media we recorded the fair value of our 30% equity investment.  Utilizing forecasts based on recent historical performance we computed a discounted cash flow valuation of $0.00.