Quarterly report pursuant to sections 13 or 15(d)

FAIR VALUE MEASUREMENTS

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FAIR VALUE MEASUREMENTS
3 Months Ended
Mar. 31, 2012
Notes to Financial Statements  
FAIR VALUE MEASUREMENTS

 

Assets and liabilities recorded at fair value in the financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity, associated with the inputs to the valuation of these assets or liabilities are as follows:

 

Level 1 — Inputs that are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2 — Inputs (other than quoted prices included in Level 1) that are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

 

The Company’s financial assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2012 and December 31, 2011, by level within the fair value hierarchy, are as follows:

 

Fair Value Measurements at March 31, 2012
      Level 1       Level 2       Level 3       Total  
Warrant Liability                   $ 269,077     $ 269,077  
Derivative Liability                     73,007       73,007  
Total   $     $     $ 342,084     $ 342,084  

 

Fair Value Measurements at December 31, 2011
      Level 1       Level 2       Level 3       Total  
Warrant Liability                   $ 283,931     $ 283,931  
Derivative Liability                     140,706       140,706  
Total   $     $     $ 424,637     $ 424,637  

 

The following table provides a summary of changes in the fair value of the Company’s Level 3 financial liability mentioned above for the year ended December 31, 2011, for the period ended March 31, 2012 and for the period from January 14, 2008 (date of inception) to March 31, 2012:

 

 

  Warrant   Derivative    
  Liability   Liability   Total
January 14, 2008 (date of inception) $ -     $ -     $ -  
Issuance of warrants   52,665               52,665  
Issuance of convertible notes           9,377       9,377  
Changes in fair value   (15,960 )     (4,402 )     (20,362 )
                       
December 31, 2008   36,705       4,975       41,680  
Changes in fair value   (1,692 )     (4,975 )     (6,667 )
                       
December 31, 2009   35,013       0       35,013  
Issuance of warrants   3,680               3,680  
Issuance of convertibles notes           281,466       281,466  
Reclassification of warrants to equity   (37,110 )             (37,110 )
Cancellation of warrants   (65,082 )             (65,082 )
Changes in fair value   67,915       6,081       73,996  
                       
December 31, 2010 $ 4,416     $ 287,547     $ 291,963  
Issuance of warrants   314,835               314,835  
Issuance of convertible notes           257,210       257,210  
Changes in fair value   (35,320)       (404,051)       (439,371)  
                       
December 31, 2011 $ 283,931     $ 140,706     $ 424,637  
Issuance of warrants                      
Issuance of convertible notes                      
Changes in fair value   (12,822 )     (67,698 )     (80,520 )
Reclassification of warrants to equity   (2,032 )             (2,032 )
                       
March 31, 2012 $ 269,077     $ 73,008     $ 342,085  

 

 

The valuation of the convertible stock warrant liability is discussed in Note 8.