Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements [Abstract]

FAIR VALUE MEASUREMENTS

NOTE 6 — FAIR VALUE MEASUREMENTS

The Company applies Accounting Standards Codification Topic 820 Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 applies to reported balances that are required or permitted to be measured at fair value under existing accounting pronouncements.

ASC 820 emphasizes that fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. As a basis for considering market participant assumptions in fair value measurements, ASC 820 establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs that are classified within Levels 1 and 2 of the hierarchy) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3 of the hierarchy).

Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company has the ability to access. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 inputs may include quoted prices for similar assets and liabilities in active markets, as well as inputs that are observable for the asset or liability (other than quoted prices), such as interest rates, foreign exchange rates and yield curves that are observable at commonly quoted intervals. Level 3 inputs are unobservable inputs for the asset or liability, which are typically based on an entity’s own assumptions, as there is little, if any, related market activity. In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety which requires judgment, and considers factors specific to the asset or liability.

The Company’s balances that are reported at fair value in the accompanying consolidated balance sheets as of September 30, 2011 and December 31, 2010 were as follows:

	Level of	Balance
	Hierarchy	Sept 30, 2011		Dec 31, 2010
Obligations to issue shares	Level 2	$	205,357	$	1,560,715
Derivative warrants and anti-dilution provision liabilities	Level 3		5,904,727		8,675,619

The following table reflects the change in Level 3 fair value of the Company’s derivative liabilities for the three and nine months ended September 30, 2011:

	Three			Nine
	months			months
	ended			ended
Balance, beginning of period	$	(2,812,630	)	$	(8,675,619	)
Settlements		124,575			1,405,320
Issuances		—			(4,667,269	)
Loss on debt modification		(919,443	)		(919,443	)
Net gains (loss)		(2,297,229	)		6,952,284
Balance, end of period	$	(5,904,727	)	$	(5,904,727	)

The Company has other non-derivative financial instruments, such as cash, accounts receivable, accounts payable, accrued expenses, notes payable and convertible notes payable, for which carrying amounts approximate fair value.