Note P – Fair Value Measurements

6 Months Ended

Jun. 30, 2011

Fair Value Disclosures [Text Block]

NOTE P – FAIR VALUE MEASUREMENTS

U.S. GAAP defines fair value as the price that would be received to sell an asset or paid to transfer a liability to a third party with the same credit standing (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. In many cases, the exit price and the transaction (or entry) price will be the same at initial recognition. However, in certain cases, the transaction price may not represent fair value. Given our financial condition described in Note A, it is not practicable to estimate the fair value of our notes payable at June 30, 2011 and December 31, 2010. We believe that the carrying amounts of cash and cash equivalents, our accounts receivable and accounts payable approximate fair value due to their short-term nature.  Given our financial condition, described in “Liquidity and Capital Resources,” it is not practicable to estimate the fair value of our debt.

The Company has categorized its liabilities measured at fair value into the three-level fair value hierarchy based upon the priority of inputs to respective valuation techniques. Liabilities included within Level 3 of the fair value hierarchy included an embedded conversion feature which, at March 31, 2010 and June 30, 2010, required fair value measurement on a recurring basis.  The valuation methodology uses a combination of observable and unobservable inputs in calculating fair value.  The fair value of the conversion feature in 2010 was determined using a lattice pricing model.

For the three months and six months ended June 30, 2010, respectively, a gain of $1,909,000 and a loss of $8,125,000 are included in the Statements of Operations caption “Gain (loss) on change in fair value of embedded conversion feature.”