Note 6 - Fair Value Measurements

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Text Block]

6.      Fair Value Measurements

In determining fair value, the Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value.

The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

Level 1- Unadjusted quoted prices in active markets for identical assets or liabilities that are accessible at the measurement date.

Level 2- Other inputs that are observable for the asset or liability, either directly or indirectly. Level 2 inputs include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

 Level 3- Inputs that are unobservable for the asset or liability.

On a nonrecurring basis, the Company uses fair value measures when analyzing asset impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If it is determined such indicators are present and the review indicates that the assets will not be fully recoverable, based on undiscounted estimated cash flows over the remaining amortization periods, their carrying values are reduced to estimated fair value. The Company uses an income approach and inputs that constitute level 3. During the fourth quarter of each year and earlier if necessary, the Company evaluates indefinite-lived intangibles for impairment at the asset level. During the current quarter the Company determined it was necessary to evaluate its indefinite-lived intangibles for impairment due to ongoing reduced revenues, over capacity in the industry, the need to raise capital during the period and the overall reduction in the Company’s market valuation.   Reflective primarily of the reduction of the royalty rate, reduced revenues and other factors, the review resulted in a full impairment of the asset and the Company recorded an impairment charge of $6,190 during the period.  There was no impairment, and therefore, no write-down of any of the Company’s long lived assets during the prior year quarter.

The carrying values of cash and cash equivalents, accounts receivable, security deposits, and accounts payable approximate their estimated fair value because of their short-term nature. The revolving credit carrying value approximates fair value due to the variable nature of the interest rate.