Carrying amounts of certain of our financial instruments,
including accounts receivable, accounts payable and other payables approximate fair value due to their short maturities. Carrying
values of note receivable, convertible notes payable, derivative liability and long-term debt approximate fair values as they approximate
market rates of interest. None of our financial instruments are held for trading purposes.
Fair value measurements are based upon inputs that market
participants use in pricing an asset or liability, which are classified into two categories: observable inputs and unobservable
inputs. Observable inputs represent market data obtained from independent sources, whereas unobservable inputs reflect a companys
own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. These two
types of inputs are further prioritized into the following fair value input hierarchy:
||Level 1 quoted prices for identical assets or liabilities in active markets.|
||Level 2 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 (e.g. interest rates) and inputs derived principally from or corroborated by observable market data by correlation or other means.|
||Level 3 unobservable inputs for the asset or liability.|
The fair value input hierarchy level to which an asset or
liability measurement in its entirety falls is determined based on the lowest level input that is significant to the measurement
in its entirety.
Derivative liabilities, described in
Note 9, are classified as Level 2, and the Company incurred no gain or loss in the current fiscal year as a result of these liabilities.