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FAIR VALUE MEASUREMENTS (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Measurements Tables

Financial instruments measured at fair value

The following table summarizes our financial instruments measured at fair value as of September 30, 2013 (in thousands):

		September 30, 2013 Fair Value Measurements
		Total				Level 1				Level 2				Level 3
Assets:
Cash and equivalents – United States		$	2,501			$	2,501			$	-			$	--

Liabilities:
Warrant liability (1)		$	68			$	–			$	–			$	68

The following table summarizes our financial instruments measured at fair value as of December 31, 2012 (in thousands):

		December 31, 2012 Fair Value Measurements
		Total				Level 1				Level 2				Level 3
Assets:
Cash and equivalents – United States		$	4,162			$	4,162			$	–			$	–

Liabilities:
Warrant liability (1)		$	85			$	–			$	–			$	85

(1)

The warrants are valued using a binomial lattice valuation methodology because that model embodies all of the relevant assumptions that address the features underlying these instruments. Significant assumptions used in this model at inception and as of September 30, 2013 included an expected remaining life of 2 years, an expected dividend yield of zero, estimated volatility range between 40% - 43%, and risk-free rates of return range between 0.31% - 0.40%. For the risk-free rates of return, we use the published yields on zero-coupon Treasury Securities with maturities consistent with the remaining term of the warrants and volatility is based on a weighted average of the historical volatility of our stock price and peer company stock price volatility. We also take into consideration a probability assumption for anti-dilution.

Activity in Level 3 assets

Activity in our Level 3 liabilities was as follows (in thousands):

Description		September 30, 2013				December 31, 2012

Beginning balance		$	85			$	105
Total loss (gain) included in earnings (2)			(17)				(20	)

Ending Balance		$	68			$	85

(2)

Gains and losses for the periods related to the revaluation of equity based liabilities. These gains or losses are included in our consolidated statements of operations.

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

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Tabular disclosure of the fair value measurement of assets using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets) and gains or losses recognized in other comprehensive income (loss), and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs), by class of asset.

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