Annual report pursuant to Section 13 and 15(d)

NOTE S - FAIR VALUE MEASUREMENTS

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NOTE S - FAIR VALUE MEASUREMENTS
 12 Months Ended
Dec. 31, 2011
Fair Value Disclosures [Text Block]
NOTE S – FAIR VALUE MEASUREMENTS

The Company’s derivative liabilities are measured at fair value on a recurring basis and are classified in level 3 of the fair value hierarchy using inputs which are not actively observable either directly or indirectly.  The Company also carries certain intangible assets that are measured at fair value on a non-recurring basis, which are classified in level 3 of the fair value hierarchy using inputs which are not actively observable either directly or indirectly.

 
●
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; or
     
 
●
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and are unobservable.

The following table sets forth certain Company assets as of December 31, 2011 which are measured at fair value on a non-recurring basis by level within the fair value hierarchy. These are classified based on the lowest level of input that is significant to the fair value measurement:

   
Level 1
   
Level 2
   
Level 3
   
Total
 
Goodwill-SSI
 
$
-
   
$
-
   
$
2,774,016
   
$
2,774,016
 
Total
 
$
-
   
$
-
   
$
2,774,016
   
$
2,774,016
 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 assets (Goodwill-SSI) measured on a non-recurring basis as of December 31, 2011.

   
2011
 
Balance at beginning of year
 
$
5,874,016
 
Impairment of carried value
   
(3,100,000
) 
Balance at December 31, 2011
 
$
2,774,016
 

The following table sets forth the Company’s derivative liabilities as of December 31, 2010 which are measured at fair value on a recurring basis by level within the fair value hierarchy. These are classified based on the lowest level of input that is significant to the fair value measurement:

   
Level 1
   
Level 2
   
Level 3
   
Total
 
Derivative liabilities
 
$
-
   
$
-
   
$
1,901,775
   
$
1,901,775
 
Total
 
$
-
   
$
-
   
$
1,901,775
   
$
1,901,775
 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (derivative liability) for the years ended December 31, 2011 and 2010.

   
2011
   
2010
 
Balance at beginning of year
 
$
1,901,775
   
$
1,881,299
 
Repayment of debt, cancellation of warrants and related derivative liability
   
(1,158,730
) 
   
-
 
Change in fair value of derivative liability
   
(172,476
) 
   
20,476
 
Retirement of derivative liability related to warrant obligation
   
(570,569
)
   
-
 
Balance at end of period
 
$
-
   
$
1,901,775