FAIR VALUE MEASUREMENTS

9 Months Ended

Sep. 30, 2011

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

NOTE 10 - FAIR VALUE MEASUREMENTS

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. To measure fair value, a hierarchy has been established which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs. This hierarchy uses three levels of inputs to measure the fair value of assets and liabilities as follows: Level 1 - Quoted prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 including quoted prices for similar assets or liabilities, quoted prices in less active markets, or other observable inputs that can be corroborated by observable market data. Level 3 - Unobservable inputs supported by little or no market activity for financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

The Company uses fair value to measure the derivative warrant liability on a recurring basis because fair value is the primary measure for accounting. The Company also uses fair value to measure the value of the banker's acceptance notes it holds.  The Company values its derivative warrants using a valuation method explained above.  The banker's acceptance notes are recorded at cost which approximates fair value.  The Company held the following assets and liabilities recorded at fair value as of September 30, 2011 and December 31, 2010:

			Fair Value Measurements at
			Reporting Date Using
Description	September 30, 2011		Level 1		Level 2		Level 3
Banker's acceptance notes	$	132,170	$	-	$	132,170	$	-
Total	$	132,170	$	-	$	132,170	$	-

			Fair Value Measurements at
			Reporting Date Using
Description	December 31, 2010		Level 1		Level 2		Level 3
Derivatives	$	934,260	$	-	$	-	$	934,260
Total	$	934,260	$	-	$	-	$	934,260

Changes to the derivative warrant liability included in the Level 3 fair value measurement for the nine months ended September 30, 2011 and 2010 were as follows:

	2011			2010
Balance, Beginning of Period	$	934,260		$	2,523,148
Derivative gain		(934,260	)		(1,795,196	)
Balance, End of Period	$	-		$	727,952