DERIVATIVE LIABILITIES

9 Months Ended

Sep. 30, 2011

DERIVATIVE LIABILITIES [Text Block]

NOTE 7 – DERIVATIVE LIABILITIES

The Company currently does not use derivative instruments to manage its exposures to currency risk or interest rates. The Company evaluates all of its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. All derivative financial instruments are recognized in the balance sheet at fair value. Changes in fair value are recognized in earnings if they are not eligible for hedge accounting or other comprehensive income if they qualify for cash flow hedge accounting.  The fair value of outstanding derivative instruments not designed as hedging instruments on the accompanying Consolidated Balance Sheets was as follows:

Derivative Instruments	September 30, 2011		December 31, 2010
Put option	$	24,938	$	26,396
Conversion option	$	213,587	$	-

A Black-Scholes option-pricing model was used to estimate the fair value, using Level 2 inputs, of the Company’s derivatives using the following assumptions at September 30, 2011:

	Number of Shares	Volatility	Risk-Free Rate	Expected Life (in years)	Stock price
Put option	60,824	70.21%	.06%	.42	$	1.15
Conversion option	406,700	70.21%	.13%	.88	$	1.15