Quarterly report pursuant to sections 13 or 15(d)

Fair Value of Financial Instruments

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Fair Value of Financial Instruments
9 Months Ended
Sep. 30, 2012
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]

Note 8 — Fair Value of Financial Instruments

 

The Company defines fair value as the amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale. The fair value estimates presented in the table below are based on information available to the Company as of September 30, 2012.

 

The accounting standard regarding fair value measurements discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The standard utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

 

Warrant Liability

 

The fair value of the derivate warrant liability was determined by the Company using the quoted market prices for the publicly traded warrants. On reporting dates where there are no active trades the Company uses the last reported closing trade price of the warrants to determine the fair value (Level 2).

 

The following table presents the Company’s fair value hierarchy for these liabilities measured at fair value on a recurring basis as of September 30, 2012:

 

    Fair Value
September 30, 2012
    Quoted Market
Prices in Active
Markets
(Level 1)
    Significant Other
Observable Inputs
(Level 2)
    Significant
Unobservable Inputs
(Level 3)
 
Liabilities                                
Warrant Liability   $ 2,512,000     $     $ 2,512,000     $  

 

There were no transfers between Level 1, 2 or 3 during 2012 and 2011. There are no assets written down to fair value on non-recurring basis.

 

Investments Held in Trust

 

As of September 30, 2012 and December 31, 2011, $50,267,002 and $2,280, respectively, of the Company’s investment held in trust was held in cash with the remaining amount invested exclusively in obligations of the U.S. government issued or guaranteed by the U.S. Treasury. The Company accounts for these investments as held-to-maturity securities, which are recorded on the balance sheet at amortized cost and classified as either short term or long term based on the contractual maturity. The fair values of the Company’s investments in U.S. Treasury bills are determined through observable quoted active markets (Level 1). The securities matured in August 2012.