Derivative Financial Instruments

9 Months Ended

Sep. 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 September 30, 2012 and December 31, 2011:

	September 30, 2012		December 31, 2011
Derivative asset at fair value:
Free standing warrants related party	$	187,600	$	388,540
	September 30, 2012		December 31, 2011
Shares into which derivative asset can be settled:
Free standing warrants related party		2,000,000		2,000,000
	September 30, 2012		December 31, 2011
Derivative liability at fair value:
Free standing warrants	$	8,949,412	$	279,302
	September 30, 2012		December 31, 2011
Shares into which derivative liability can be settled:
Free standing warrants		2,246,301		3,246,301

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

	3 months ending September 30, 2012			3 months ending September 30, 2011			9 months ending September 30, 2012			9 months ending September 30, 2012
Derivative (loss) gain in the accompanying statement of operations is related to the individual derivatives as follows:
Free standing warrants assets, related party	$	(213,600	)	$	(124,400	)	$	(200,940	)	$	(832,891	)
Free standing warrants liabilities		(3,311,411	)		2,596,950			(8,670,110	)		3,864,997
	$	(3,525,011	)	$	2,472,550		$	(8,871,050	)	$	3,032,106