Derivative Financial Instruments

6 Months Ended

Jun. 30, 2012

Derivative Financial Instruments [Abstract]

Derivative Financial Instruments

7. Derivative Financial Instruments:

The Company generally does not use derivative instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of its financial instruments. However, certain other financial instruments, such as warrants and embedded conversion features that are indexed to the Company’s Common Stock, are classified as liabilities when either: (a) the holder possesses rights to net-cash settlement or (b) physical or net-share settlement is not within the control of the Company. In such instances, net-cash settlement is assumed for financial accounting and reporting, even when the terms of the underlying contracts do not provide for net-cash settlement. Such financial instruments are initially recorded at fair value estimated on the settlement date using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate, and then adjusted to fair value at the close of each reporting period. The following tabular presentation reflects the components of derivative assets and liabilities as of June 30, 2012 and December 31, 2011:

	June 30, 2012		December 31, 2011
Derivative asset at fair value:
Free standing warrants related party	$	401,200	$	388,540

	June 30, 2012		December 31, 2011
Shares into which derivative asset can be settled:
Free standing warrants related party		2,000,000		2,000,000

	June 30, 2012		December 31, 2011
Derivative liability at fair value:
Free standing warrants	$	5,638,001	$	279,302

The following tabular presentation reflects the components of the gain (loss) of derivative financial instruments for the six months ended June 30, 2012 and 2011:

	June 30, 2012			June 30, 2011
Shares into which derivative liability can be settled:
Free standing warrants		2,246,301			3,721,301
	June 30, 2012			June 30, 2011
Derivative income (expense) in the accompanying statement of operations related to the derivatives as follows:
Free standing warrants assets, related party	$	12,660		($	708,231	)
Free standing warrants liability		(5,358,699	)		1,267,787
	($	5,346,039	)	$	559,556