Derivative Liabilities

9 Months Ended

Sep. 30, 2013

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

NOTE 5 - Derivative Liabilities

Derivative liabilities resulting from certain warrants issued in connection with the Company’s Series B financing were valued using the Black-Scholes option valuation model and the following assumptions on the following dates:

	September 30,			December 31,
	2013			2012
Series B warrants:
Risk-free interest rate		0.10	%		0.22	%
Expected volatility		62.28	%		65.94	%
Expected life (in years)		.94			1.69
Expected dividend yield		-			-
Number of warrants		21,423			21,423
Fair value	$	2,655		$	15,950

The risk-free interest rate was based on rates established by the Federal Reserve. The Company’s policy for expected volatility is disclosed in Note 3 Stock-Based Compensation. The expected life of the warrants was determined by the expiration date of the warrants. The expected dividend yield was based upon the fact that the Company has not historically paid dividends on its common stock, and does not expect to pay dividends on its common stock in the future. The warrants are considered to be level 3 financial liabilities in accordance with ASC 820 as there is no current market and determining the fair value requires significant judgment or estimation.

The fair value of these warrant liabilities was $2,655 at September 30, 2013 as compared to $57,610 at September 30, 2012 and has been classified within accounts payable and accrued expenses on the accompanying condensed consolidated balance sheet. The net change in fair value during the first nine months of 2013 is $13,295, which was reported in the Company’s condensed consolidated statement of operations as an unrealized gain on the change in fair value of the derivative liabilities. The fair value of the derivative liabilities are re-measured at the end of every reporting period and upon the exercise of the warrant. The change in fair value is reported in the condensed consolidated statement of operations as an unrealized gain or loss on the change in fair value of the derivative liability. During the nine months ended September 30, 2013, there were no transfers in or out of Level 3.