good news is they beat the drop-dead 9/21/09 deadline to file per the otcbb. "E" will go away in a day or two!
I wish there was a short/sweet answer but I will have to double check with one of my business partners as he and his wife are cpa/corp auditors and will know more than myself on this issue.
Liabilities show up in the Balance Sheet. Does look like they've increased their 'derivative liabilities' as they must have 'understated' them in 2q08 for the 3mos #s then the 6mos #s when you add in the 1q08 #s.
Which means they've decreased their 'extinguishments of derivative liabilities' as they must have 'overstated' them in 2q08 #s then the 6mos #S when you add in the 1q08 #s.
Not sure what the 'Reclass' of the interest expense to change derivative liabilities as these #s show up in the Income/Loss Statement. I'll keep looking.
Here's the explanation of Level I,II,III assets, as they didn't have this when I was working for CPAs in the old days.
Fair Value Measurements (US markets) The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 157: Fair Value Measurements ("FAS 157") in September 2006 to provide guidance about how entities should determine fair value estimations for financial reporting purposes. FAS 157 broadly applies to financial and nonfinancial assets and liabilities measured at fair value under other authoritative accounting pronouncements. However, application to nonfinancial assets and liabilities is deferred until 2009. Absence of one single consistent framework for applying fair value measurements and developing a reliable estimate of a fair value in the absence of quoted prices has created inconsistencies and incomparability. The purpose of this guidance is to eliminate the inconsistencies by developing a solid framework to be used in any fair value measurements.
FAS 157 defines fair value as follows: the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. This is sometimes referred to as "exit value."
FAS 157 emphasizes the use of market inputs in valuing an asset or liability. Examples of specific market inputs mentioned include: quoted prices, interest rates, yield curve, credit data, etc. Fair value is, by definition, derived from a current transaction which happens in an active market with knowledgeable and unrelated parties. When fair value is not available due to the lack of an actual transaction, it is logical to use information from an active market. However, sometimes quoted prices might not represent the best estimate of fair value.
The basis of the framework centers on a fair value hierarchy which indicates reliability of inputs used to estimate fair value. The hierarchy is broken down into three levels:
Level One This is for liquid assets with quoted prices. For instance, the price of a listed security. This level requires the use of unadjusted quoted prices from an active market for identical assets or liabilities. To use this level, the entity must have immediate access to the market (could exchange in current condition). If more than one market is available, FAS 157 requires the use of the “most advantageous market.” Both the price and costs to do the transaction must be considered in determining which market is the most advantageous market. Level Two This is valuation based on market observables. For instance, the price of an option based on Black-Scholes and market implied volatility. Within this level, fair value is estimated using a valuation technique. Significant assumptions or inputs used in the valuation technique requires the use of inputs that are observable in the market. Examples of observable market inputs include: quoted prices for similar assets, interest rates, yield curve, credit spreads, prepayment speeds, etc. In addition, assumptions used in estimating fair value must be assumptions that an unrelated party would use in estimating fair value. Level Three This is valuation based on non-observable assumptions. Within this level, fair value is also estimated using a valuation technique. However, significant assumptions or inputs used in the valuation technique are based upon inputs that are NOT observable in the market and, therefore, necessitates the use of internal information. The entity may only rely on internal information if the cost and effort to obtain external information is too high. In addition, financial instruments must have an input that is observable over the entire term of the instrument. While internal inputs are used, the objective remains the same: estimate fair value using assumptions a third party would consider in estimating fair value. Also known as mark to management. FASB published a staff position brief on October 10, 2008, in order to clarify the provision in case of an illiquid market.[2]
BB, LIABILITIES. At June 30, 2009, the Company had total liabilities of $20,779,991 compared to total liabilities of $18,692,369 as of December 31, 2008. The increase of $2,087,622 was principally due to $2,136,154 in changes associated with the derivative liabilities (see note 7 of the financial statements.) This comes out of the 10Q, I'm having difficulty duplicating! fwiw
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