Derivative Instruments

6 Months Ended

Jun. 30, 2012

Derivative Instruments [Abstract]

DERIVATIVE INSTRUMENTS

9. DERIVATIVE INSTRUMENTS

Certain warrants issued to the investors in the fourth quarter of 2010 have provisions that include anti-dilution protection and, under certain conditions, grant the right to the holder to request the Company to repurchase the warrant. Accordingly, these warrants are accounted for as a derivative liability on the consolidated balance sheet and measured at fair value. The Company uses the Black-Scholes option pricing model and assumptions that consider among other factors the fair value of the underlying stock, risk-free interest rate, volatility, expected life and dividend rates in estimating fair value for the warrants considered to be derivative instruments. The fair value of these derivative instruments at June 30, 2012 and December 31, 2011 was $23,527,882 and $35,472,230, respectively, and are included as a derivative warrant liability, a current liability. Changes in fair value of the derivative financial instruments are recognized currently in the Statement of Operations as a derivatives gain or loss. The warrant derivative gains or losses are non-cash item and are included in other income in the consolidated statement of operations. The warrant derivative gain for the three and six months ended June 30, 2012 was $4,954,238 and $10,567,444, respectively. The warrant derivative gain for the three and six months ended June 30, 2011 was $1,162,897 and $1,284,244, respectively.

The assumptions used principally in determining the fair value of warrants were as follows:

	June 30, 2012
Risk-free interest rate	0.44%-0.48%
Expected dividend yield	0%
Expected term	3.17-3.43 years
Expected volatility	64.8%

The primary underlying risk exposure pertaining to the warrants is the change in fair value of the underlying Common Stock for each reporting period. The table below presents the changes in derivative warrant liability for the six months ended June 30, 2012 and 2011:

	Six Months Ended June 30,
	2012			2011
Balance at December 31,	$	35,473,230		$	10,647,190
Decrease in the fair value of the warrants		(10,567,444	)		(1,282,244	)
Reduction in derivative liability due to exercise of warrants		(1,377,904	)		—
Balance at June 30,	$	23,527,882		$	9,364,946