There were no material changes to the summary of significant accounting policies disclosed in Note 2 to the Company's Annual Report on Form 10-K for the year ended December 31, 2011.

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. This subset of warrants are not publicly traded and are classified as liabilities. 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 six months ended June 30, 2012, the Company did not grant any warrants not indexed to the Company's own stock. During the six months ended June 30, 2011, the Company granted 438,918 warrants at a weighted average exercise price of $4.13. The following table presents the change in Level 3 liabilities:

	Six Months Ended June 30,

	2012			2011
Balance at January 1	$	687,580		$	1,674,170
Warrants issued					1,103,657
Fair value adjustment		(472,129	)		94,850

Balance at June 30	$	215,451		$	2,872,677

Management estimated the fair value of these warrants using the Black-Scholes pricing model. The most significant input to the model is the Company's stock price which management estimated to be $1.99 and $8.88 at June 30, 2012 and 2011, 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 estimates that its carrying value approximated fair value as of June 30, 2012. This estimate is based on acceptable valuation methodologies which use market data of similarly sized and situated debt issuers.

Recently Issued Accounting Pronouncements—In the normal course of business, the Company evaluates all new accounting pronouncements 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 consolidated financial statements. Based upon this review, management does not expect any of the recently issued accounting pronouncements to have a material impact on the Company's condensed consolidated financial statements.