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FAIR VALUE MEASUREMENTS
 6 Months Ended
Jun. 30, 2011
FAIR VALUE MEASUREMENTS  
FAIR VALUE MEASUREMENTS
NOTE 5.  FAIR VALUE MEASUREMENTS

Certain assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2011 are measured in accordance with FASB ASC Topic 820-10-05, Fair Value Measurements.  FASB ASC Topic 820-10-05 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements for financial assets and liabilities as well as for non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the financial statements.
 
The statement requires fair value measurement be classified and disclosed in one of the following three categories:
 
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
 
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
 
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
 
The following table summarizes our financial instruments measured at fair value as of June 30, 2011 (in thousands):
 
   
June 30, 2011
Fair Value Measurements
 
   
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:
                   
Cash and equivalents – United States
 
$
5,676
   
$
5,676
   
$
–
   
$
–
 
Cash and equivalents - Foreign currency
   
38
     
38
     
–
     
–
 
                                 
Total assets
 
$
5,714
   
$
5,714
   
$
–
   
$
–
 
                                 
Liabilities:
                               
Warrant liability (1)
 
$
119
   
$
–
   
$
–
   
$
119
 
Derivative interest rate swap (Note 7)
   
176
     
–
     
176
     
–
 
Due to Lican (2)
   
137
     
–
     
–
     
137
 
                                 
Total liabilities
 
$
432
   
$
–
   
$
176
   
$
256
 

The following table summarizes our financial instruments measured at fair value as of December 31, 2010 (in thousands):
 
   
December 31, 2010
Fair Value Measurements
 
   
Total
 
Level 1
 
Level 2
 
Level 3
 
Assets:
             
Cash and equivalents – United States
 
$
3,788
 
$
3,788
 
$
–
 
$
–
 
Cash and equivalents - Foreign currency
   
39
   
39
   
–
   
–
 
                           
Total assets
 
$
3,827
 
$
3,827
 
$
–
 
$
–
 
                           
Liabilities:
                         
Warrant liability (1)
 
$
332
 
$
–
 
$
–
 
$
332
 
Due to Lican (2)
   
172
   
–
   
–
   
172
 
                           
Total liabilities
 
$
504
 
$
–
 
$
–
 
$
504
 

 
(1)
Refer to Warrants and Stockholders' Equity (Note 6) for valuation assumptions.
 
 
(2)
This amount is based upon the probable realization of 75,000 out of a possible 150,000 contingent shares related to the Lican Developments Ltd. Asset Purchase Agreement, which was valued at the adjusted current fair value market share price.
 
Activity in our Level 3 Assets was as follows (in thousands):
 
Description
 
June 30,
2011
   
December  31,
 2010
 
           
Beginning balance
 
$
504
   
$
218
 
Purchases, issuances, and settlements (Note 6)
   
-
     
799
 
Total gain included in earnings (3)
   
(248)
)
   
(513
)
                 
Ending Balance
 
$
256
   
$
504
 
 
 
(3)
Gains for the periods related to the revaluation of equity based liabilities. These gains are included in our consolidated statements of operations.