DERIVATIVE LIABILITIES

9 Months Ended

Sep. 30, 2012

DERIVATIVE LIABILITIES

DERIVATIVE LIABILITIES

NOTE 7 – DERIVATIVE LIABILITIES

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, 2012		December 31, 2011
Put option		Expired – 3/30/12	$	25,193
Conversion option	$	188,560	$	230,714

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, 2012 and December 31, 2011:

	Number of Shares	Volatility	Risk-Free Rate	Expected Life (in years)		Stock price
September 30, 2012
Conversion option	414,589	80.91%	.10%	.13	$	1.15
December 31, 2011
Put option	60,824	116.41%	.06%	.164	$	1.15
Conversion option	407,435	91.72%	.90%	.77	$	1.15