Quarterly report pursuant to sections 13 or 15(d)

Fair Value Measurements

 v2.3.0.11
Fair Value Measurements
3 Months Ended
Jun. 30, 2011
Fair Value Measurements
 
4.
Fair Value Measurements
 
 The Company applies the provisions of ASC 820-10, “Fair Value Measurements and Disclosures.” ASC 820-10 defines fair value, and establishes a three-level valuation hierarchy for disclosures of fair value measurement that enhances disclosure requirements for fair value measures. The carrying amounts reported in the consolidated balance sheets for receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:
 
 
·
Level 1 inputs to the valuation methodology are quoted prices for identical assets or liabilities in active markets.
 
 
·
Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
 
 
·
Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement.
 
The Company analyzes all financial instruments with features of both liabilities and equity under ASC 480, “Distinguishing Liabilities From Equity” and ASC 815, “Derivatives and Hedging.” Derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives. The effects of interactions between embedded derivatives are calculated and accounted for in arriving at the overall fair value of the financial instruments. In addition, the fair values of freestanding derivative instruments such as warrant and option derivatives are valued using the Black-Scholes model.
 
The Company uses Level 2 inputs for its valuation methodology for the warrant derivative as their fair values were determined by using the Black-Scholes option pricing model based on various assumptions. The Company’s derivative liabilities are adjusted to reflect fair value at each period end, with any increase or decrease in the fair value being recorded in results of operations as adjustments to fair value of derivatives.  The Company determined the fair value of the warrants issued to be a $165, using the Black-Scholes option pricing model and the following assumptions:  expected life of 4.76 years, a risk free interest rate of 1.76%, a dividend yield of 0% and volatility of 75%.
 
At June 30, 2011, the Company identified the following assets and liabilities that are required to be presented on the balance sheet at fair value:
 
Measured at Fair Value on a Recurring Basis
 
(in thousands)
 
Total
   
Level 1
   
Level 2
   
Level 3
 
                         
Stock warrant - derivative liability
    (165 )     -       (165 )     -  
 
The stock warrant –derivative liability is included in other current liabilities in the accompanying consolidated balance sheet.
 
Measured at Fair Value on A Nonrecurring Basis
 
Certain assets and liabilities are measured at fair value on a nonrecurring basis; that is, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). As of March 31, 2011, the Company had incurred cumulative impairment losses on goodwill and other intangible assets of $68,770 based on the fair value measurement methods and criteria described in Note 9. For the period ended June 30, 2011, the Company determined that there was no evidence of impairment and therefore no additional impairment loss was recorded.