Quarterly report pursuant to Section 13 or 15(d)

14. FAIR VALUE MEASUREMENTS

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14. FAIR VALUE MEASUREMENTS
 9 Months Ended
Sep. 30, 2012
Fair Value Measurements  
NOTE N - FAIR VALUE MEASUREMENTS

The financial assets of the Company measured at fair value on a recurring basis are cash equivalents and long-term marketable securities. When applicable, the Company’s long term marketable securities are generally classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices, broker or dealer quotations, or alternative pricing sources with reasonable levels of price transparency. The Company’s long-term investments are classified within Level 3 of the fair value hierarchy because they are valued using unobservable inputs, due to the fact that observable inputs are not available, or situations in which there is little, if any, market activity for the asset or liability at the measurement date.  The Company’s derivative liabilities and convertible debentures are classified within Level 3 of the fair value hierarchy because they are valued 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 table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (derivative liability) for the nine months ended September 30, 2011.

  

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

 

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