Derivative Liability

6 Months Ended

Jun. 30, 2013

Derivative liability [Abstract]

Derivative liability

4. Derivative liability

The Company has determined that certain warrants related to the Company's financings and the embedded conversion feature on the Series A-1 Cumulative Convertible Preferred Stock (the "Series A-1 Preferred Stock") require liability classification because of certain provisions that may result in an adjustment to the number of shares upon settlement and an adjustment to their exercise or conversion. The fair value of the embedded conversion feature for the Series A-1 Preferred Stock at June 30, 2013, and December 31, 2012, was insignificant.

In December 2010, the Company determined that the embedded conversion feature of its Series B Participating Convertible Preferred Stock (the "Series B Preferred Stock") and Series C Participating Convertible Preferred Stock (the "Series C Preferred Stock") required liability classification due to the impact the anti-dilution provisions could have had on the number of shares issuable upon conversion. In March 2011, the Company amended its Amended and Restated Certificate of Designation for its Series B Preferred Stock and its Certificate of Designation for its Series C Preferred Stock by amending the anti-dilution provisions. Under the amendments, in the event additional stock is issued at a price lower than the conversion price then in effect, the new conversion price of the Series B and/or Series C Preferred Stock cannot be (A) lower than the average closing market price for the Common Stock for the twenty (20) trading days prior to the closing date of a transaction requiring an adjustment in the conversion price or (B) greater than the conversion price then in effect. The amendments were approved by the Company's Board of Directors and the necessary majorities of the Company's Series A-1, Series B and Series C Preferred Stock, and were filed with the Delaware Secretary of State on March 31, 2011. As a result of these amendments, the Series B Preferred Stock and Series C Preferred Stock no longer require liability classification.

The fair value of the outstanding derivative liabilities at June 30, 2013, and December 31, 2012, was $63 and $128, respectively.

The Company uses the Black-Scholes pricing model to calculate fair value of its warrant derivative liabilities. Key assumptions used to apply these models are as follows:

	June 30, 2013	December 31, 2012
Expected term	0.1 to 2.3 years	0.3 to 2.8 years
Volatility	204.6%	205.3%
Risk-free interest rate	2.49%	1.78%
Dividend yield	0%	0%

Fair value measurements:

Assets and liabilities measured at fair value as of June 30, 2013, are as follows:

	Value at	Quoted prices in active markets	Significant other observable inputs	Significant unobservable inputs
	June 30, 2013	(Level 1)	(Level 2)	(Level 3)
Derivative liability	$ 63	$ -	$ -	$ 63

The fair value framework requires a categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets and liabilities. Level 1 provides the most reliable measure of fair value, whereas Level 3 generally requires significant management judgment. The three levels are defined as follows:

Level 1: Applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2: Applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3: Applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The Company's assets and liabilities measured at fair value, whether recurring or non-recurring, at June 30, 2013, and December 31, 2012, and the fair value calculation input hierarchy level that we have determined applies to each asset and liability category.

Changes in the fair market value of the Level 3 derivative liability for the six-month period ended June 30, 2013 are as follows:

	Derivative Liability
Balance at January 1, 2013	$ 128
Gain on derivative liability	(65)
Balance at June 30, 2013	$ 63