Fair Value Measurements

12 Months Ended

Dec. 31, 2013

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 3 - Fair Value Measurements

We define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. We report assets and liabilities that are measured at fair value using a three-level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

• Level 1 - Quoted prices in active markets for identical assets or liabilities.

• Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

An asset's or liability's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, we perform a detailed analysis of our assets and liabilities that are measured at fair value. All assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.

We have segregated our financial assets and liabilities that are measured at fair value into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date in the table below. We have no non-financial assets and liabilities that are measured at fair value at December 31, 2013 and 2012.

The following table represents the Company's fair value hierarchy for its financial assets and liabilities measured at fair value on a recurring basis:

	As of December 31, 2013
	Level 1		Level 2		Level 3		Balance
Liabilities
Current portion of derivative instruments related to stock purchase warrants	$	-	$	-	$	51,663	$	51,663
Non-current portion of derivative instruments related to stock purchase warrants		-		-		1,688,572		1,688,572
Total derivative instruments related to stock purchase warrants	$	-	$	-	$	1,740,235	$	1,740,235

	As of December 31, 2012
	Level 1		Level 2		Level 3		Balance
Liabilities
Non-current portion of derivative instruments related to stock purchase warrants	$	-	$	-	$	1,295,613	$	1,295,613
Total derivative instruments related to stock purchase warrants	$	-	$	-	$	1,295,613	$	1,295,613

The following table sets forth a summary of changes in the fair value of the Company's Level 3 liabilities for the twelve months ended December 31, 2013, 2012 and 2011:

	Balance as of		New		Unrealized		Balance as of
	December 31,		Liabilities		Losses		December 31,
Description	2012		2013		2013		2013
Derivative liabilities related to stock purchase warrants	$	1,295,613	$	-	$	444,622	$	1,740,235

	Balance as of		New		Unrealized			Balance as of
	December 31,		Liabilities		(Gains)			December 31,
Description	2011		2012		2012			2012
Derivative liabilities related to stock purchase warrants	$	1,886,652	$	-	$	(591,039	)	$	1,295,613

	Balance as of		New		Unrealized			Balance as of
	December 31,		Liabilities		(Gains)			December 31,
Description	2010		2011		2011			2011
Derivative liabilities related to stock purchase warrants	$	8,362,995	$	668,640	$	(7,144,983	)	$	1,886,652

At December 31, 2013 and 2012 derivative liabilities are comprised of 2,899,991 warrants to purchase common stock. The warrants are considered to be derivative liabilities due to the presence of net settlement features and/or non-standard anti-dilution provisions, and as a result, are recorded at fair value at each balance sheet date. The fair value of our warrants is determined based on the Black-Scholes option pricing model. Use of the Black-Scholes option pricing model requires the use of unobservable inputs such as the expected term, anticipated volatility and expected dividends. Changes in any of the assumptions related to the unobservable inputs identified above may change the stock purchase warrants' fair value; increases in expected term, anticipated volatility and expected dividends generally result in increases in fair value, while decreases in the unobservable inputs generally result in decreases in fair value. Gains and losses on the fair value adjustments for these derivative instruments are classified in other income (expense) as the change in fair value of derivative instruments in our consolidated statements of operations.

Quantitative Information about Level 3 Fair Value Measurements
Fair Value at 12/31/2013		Valuation Technique	Unobservable Inputs
$	1,740,235	Black-Scholes option pricing model	Expected term
			Expected dividends
			Expect volatility

As of December 31, 2013 and 2012 the Company had property and equipment and goodwill which are subject to measurement at fair value on a non-recurring basis.

The fair value of long-term debt approximates its face value at December 31, 2013, which was $1.8 million.