Derivative Instruments

12 Months Ended

Dec. 31, 2012

Derivative Instruments [Abstract]

DERIVATIVE INSTRUMENTS

11. DERIVATIVE INSTRUMENTS

Certain warrants outstanding 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 derivative liabilities. 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 December 31, 2012 and 2011 was $14,584,818 and $35,473,230, respectively and is 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 (losses) are non-cash income (expenses) and for the years ended December 31, 2012 and 2011 $17,479,674 and $(26,065,579) respectively were included in other income (expense) in the consolidated statements of operations.

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

	As of December 31,
	2012	2011
Risk free interest rate	0.32-0.35%	0.52-0.58%
Expected dividend yield	0%	0%
Contractual term	2.7-2.9 years	3.7-3.9 years
Expected volatility	73%	79%

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 during the years ended December 31, 2012 and 2011:

	Year Ended December 31,
	2012			2011
Balance at beginning of year	$	35,473,230		$	10,647,190
Increase (decrease) in the fair value of the warrants		(17,479,674	)		26,065,579
Reduction in derivative liability due to exercise of warrants		(3,408,738	)		(1,239,539	)
Balance at end of year	$	14,584,818		$	35,473,230