Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2013

Fair Value of Financial Instruments [Abstract]

2. Fair Value of Financial Instruments

The carrying amount of certain of the Company's financial instruments, including prepaid expenses and other current assets, deposits, accounts payable and accrued expenses and other payables approximate fair value due to their short maturities. The carrying value of the Company's notes payable and convertible notes payable at December 31, 2012 approximated fair value because the interest rates under those obligations approximate market rates of interest available to the Company for similar instruments.

As a basis for determining the fair value of certain of the Company's financial instruments, the Company utilizes a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

Level I - Observable inputs such as quoted prices in active markets for identical assets or liabilities.

Level II - Observable inputs, other than Level I prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level III - 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 hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. The Company's financial instruments that are measured at fair value on a recurring basis consist only of the preferred stock warrant liability at December 31, 2012 and the common stock liability at September 30, 2013. The preferred stock warrants were amended to common stock warrants at the time of the Company's initial public offering. They continue to be treated as a financial instrument based on ASC 480-10 and ASC 815-40-15 and accordingly the Company continues to remeasure the liability quarterly and record the change in fair value as other income (expense). The Company's preferred stock warrants liability as of December 31, 2012 was classified within Level III of the fair value hierarchy and as of September 30, 2013 the common stock warrants liability is classified within Level II of the fair value hierarchy.

The change in the fair value of the Level II common stock warrant liability is summarized below:


Fair value of preferred stock warrants liability at December 31, 2012	$	92,150
Issuances		-
Change in fair value during the period		122,202

Fair value of common stock warrants liability at September 30, 2013	$	214,352

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

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