Liability Attributable to Warrants (Tables)

9 Months Ended

Sep. 30, 2013

Liability Attributable to Warrants [Abstract]

Assumption used to determine the fair value of warrants

We used a binomial pricing model to determine the fair value of our warrants liability as of September 30, 2013 and December 31, 2012, the balance sheet dates, using the following assumptions:

	2011 Transaction						ipCapital
	September 30, 2013			December 31, 2012			September 30, 2013			December 31, 2012
Estimated volatility		120	%		159	%		125	%		163	%
Annualized forfeiture rate		—			—			—			—
Expected option term (years)		2.92			3.67			3.04			3.79
Estimated exercise factor		4			10			4			10
Risk-free interest rate		0.50	%		0.45	%		0.64	%		0.65	%
Dividends		—			—			—			—

Reconciliation of the warrants liability measured at fair value using significant unobservable inputs

The following table is a reconciliation of the warrants liability measured at fair value using significant unobservable inputs (Level 3) for the nine months ended September 30, 2013:

Warrants liability – December 31, 2012 fair value	$	7,390,100
Change in fair value of warrant liability recorded in other income		(680,100	)
Change in fair value of warrant liability recorded in general and administrative expense		35,700
Reclassification of warrants liability to equity from exercise of warrants (1)		(385,900	)
Reclassification of warrants liability to equity from amendment to warrants  (1)		(4,391,000	)
Warrants liability – September 30, 2013 fair value	$	1,968,800

(1) During the nine-month period ended September 30, 2013, our warrants liability was reduced as a result of the warrants amendment, as discussed above. Additionally, our warrants liability was further reduced by $385,900 as a result of the exercise of 1,072,500 warrants during such period, whose terms were not affected by the changes made under the warrants amendment. The aggregate reduction in the liability, combining the warrant amendment and this exercise, was $4,776,900. See Note 13.

Warrants outstanding

The following tables reconcile the number of warrants outstanding for the periods indicated:

For the Three-Month Period Ended September 30, 2013
	Beginning Outstanding		Issued		Exercised		Ending Outstanding
2011 Transaction		13,157,500		—		305,000		12,852,500
Exercise Agreement		4,500,000		—		—		4,500,000
ipCapital		400,000		—		—		400,000
Consultant Warrant (1)		—		312,500		—		312,500
Offer to Exercise		—		152,500		—		152,500
Total		18,057,500		465,000		305,000		18,217,500

For the Nine-Month Period Ended September 30, 2013
	Beginning Outstanding		Issued		Exercised		Ending Outstanding
2011 Transaction		23,075,000		—		10,222,500		12,852,500
Exercise Agreement		—		4,500,000		—		4,500,000
ipCapital		400,000		—		—		400,000
Consulting Warrant (1)		—		312,500		—		312,500
Offer to Exercise		—		152,500		—		152,500
Total		23,475,000		4,965,000		10,222,500		18,217,500

For the Three and Nine-Month Period Ended September 30, 2012
	Beginning Outstanding		Issued		Exercised		Ending Outstanding
2011 Transaction		23,075,000		—		—		23,075,000
ipCapital		400,000		—		—		400,000
Total		23,475,000		—		—		23,475,000

(1) Effective September 18, 2013, we entered into a consulting agreement with Genesis Select to provide us with a variety of investor relations services. As part of their compensation, we issued to them a warrant to purchase 312,500 shares of our common stock at an exercise price of $0.50 per share. The warrant will vest, monthly, over the initial twelve-month service period of the contract, assuming that the agreement remains in-force, with the first vesting having occured on October 18, 2013. The warrant is substantially similar in nature to those issued in the warrant amendment, discussed above, thus; the warrant is accounted in equity and is not included as a component of our warrants liability as of September 30, 2013. We used the following assumptions in a binomial pricing model to calculate the fair value of the warrant issued to Genesis: estimated volatility – 181%; expected term – 4.96 years; estimated exercise factor – 4, risk free interest rate – 1.41%; and dividends – 0. Expense associated with this warrant is recognized as a component of general and administrative expense over the one-year vesting term of the warrant.