Annual report pursuant to Section 13 and 15(d)

Fair Value Measurements

v2.4.0.6
Fair Value Measurements
12 Months Ended
Dec. 31, 2012
Fair Value Measurements [Abstract]  
Fair Value Measurements

16.  Fair Value Measurements

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, not adjusted for transaction costs.  ASC 820 also establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels giving the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). 

 

The three levels are described below:

 

Level 1 Inputs

 

 

Unadjusted quoted prices in active markets for identical assets or liabilities that is accessible by the Company;

Level 2 Inputs

 

 

Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly;

Level 3 Inputs

 

 

Unobservable inputs for the asset or liability including significant assumptions of the Company and other market participants.

The following tables present assets and liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy.  The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2012

 

  Total  

Level 1

Level 2

Level 3

Assets:

 

 

 

 

 

 

 

 

    Restricted Cash equivalents

$

1,091,801 

$

1,054,301 

$

37,500 

$

 -

    Marketable Securities

 

100,000 

 

100,000 

 

 -

 

-

Total Assets:

$

1,191,801 

$

1,154,301 

$

37,500 

$

 -

 

 

 

 

 

 

 

 

 

Liabilities: 

 

 

 

 

 

 

 

 

    Warrant Liabilities

$

2,842,065 

 

-

 

-

$

2,842,065 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at December 31, 2011

 

  Total  

Level 1

Level 2

Level 3

Assets:

 

 

 

 

 

 

 

 

    Restricted Cash equivalents

$

1,431,765 

$

1,394,265 

$

37,500 

$

 -

    Marketable Securities

 

1,950,000 

 

1,950,000 

 

-

 

-

Total Assets:

$

3,381,765 

$

3,344,265 

$

37,500 

$

 -

 

 

 

 

 

 

 

 

 

Liabilities: 

 

 

 

 

 

 

 

 

    Warrant Liabilities

$

868,725 

 

-

 

-

$

868,725 

 

 

 

As of December 31, 2012 and 2011, the Company’s restricted cash equivalents are comprised of the following:

 

a)

Money market funds valued at the net asset value of shares held by the Company and is classified within level 1 of the fair value hierarchy;

 

b)

Certificate of deposit valued based upon the underlying terms of a letter of credit, as disclosed in Note 15, and classified within level 2 of the fair value hierarchy.

 

Marketable securities consist of state authority and municipal security fund bonds which are valued at fair value and classified within level 1 of the fair value hierarchy.

 

The fair value methodology for the warrant liabilities is disclosed in Note 12.

 

The carrying amounts reported in the financial statements for cash and cash equivalents (Level 1), note receivable (Level 2), prepaid expenses, and other current assets and accounts payable and accrued expenses approximate fair value because of the short term maturity of these financial instruments.

 

The following table sets forth a reconciliation of changes in the years ended December 31, 2012 and 2011 in the fair value of the liabilities classified as level 3 in the fair value hierarchy:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant Liabilities

Total Level 3 Liabilities

Balance at January 1, 2012

 

$

868,725 

$

868,725 

Additions

 

 

2,637,216 

 

2,637,216 

Unrealized gains, net

 

 

(663,876)

 

(663,876)

Unrealized gains on expiration

 

 

-

 

-

Transfers out of level 3

 

 

-

 

-

Balance at December 31, 2012

 

$

2,842,065 

$

2,842,065 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrant Liabilities

Total Level 3 Liabilities

Balance at January 1, 2011

 

$

2,966,710 

$

2,966,710 

Additions

 

 

2,924,333 

 

2,924,333 

Unrealized gains, net

 

 

(4,739,881)

 

(4,739,881)

Unrealized gains on expiration

 

 

(38,569)

 

(38,569)

Transfers out of level 3

 

 

(243,868)

 

(243,868)

Balance at December 31, 2011

 

$

868,725 

$

868,725 

 

Additions consist of the fair value of warrant liabilities upon issuance.  Transfers out of Level 3 for warrant liabilities consist of warrant exercises.  The Companys policy is to recognize transfers in and transfers out as of the actual date of the event or change in circumstance that caused the transfer.     There were no significant transfers in and out of Levels 1 and 2 for the years ended December 31, 2012 and 2011.