SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2013

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There were no material changes to the summary of significant accounting policies disclosed in Note 3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

Fair Value Measurements—The Company considers warrants that are not indexed to the Company’s own stock to be classified as Level 3 in the fair value hierarchy. Level 3 valuations are based on inputs that are unobservable and significant to the overall fair value measurement. The degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. During the three months ended September 30, 2013, the Company recorded the issuance of warrants to purchase 24,359 shares of the Company’s common stock as a result of anti-dilution adjustments triggered by the issuances of shares of common stock and warrants. The value at the date of issuance of $552 was recorded to reflect these additional warrants. During the three and nine months ended September 30, 2012, the Company did not grant any warrants not indexed to the Company’s own stock.

The following table presents the change in Level 3 liabilities:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2013			2012			2013			2012
Balance at beginning of period	$	26,377		$	169,738		$	61,808		$	687,580
Warrants issued		552			—			552			—
Fair value adjustment		(13,257	)		(22,856	)		(48,688	)		(494,986	)
Balance at end of period	$	13,672		$	192,594		$	13,672		$	192,594

The fair value of these warrants was derived using the Black-Scholes pricing model.  The most significant input to the model is the Company’s stock price, which was $0.90 and $2.00 at September 30, 2013 and 2012, respectively.

The Company’s financial instruments consist principally of accounts receivable, accounts payable and debt. The Company classifies its outstanding debt as Level 2 in the fair value hierarchy and estimated that its carrying value approximated fair value as of September 30, 2013. This estimate is based on acceptable valuation methodologies which use market data of similarly sized and situated debt issuers.

Recently Issued Accounting Standards—In the normal course of business, the Company evaluates all new accounting standards issued by the Financial Accounting Standards Board, Securities and Exchange Commission, Emerging Issues Task Force, American Institute of Certified Public Accountants and other authoritative accounting bodies to determine the potential impact they may have on the Company’s financial statements. Based upon this review, management does not expect any of the recently issued accounting standards to have a material impact on the Company’s financial statements.