4. Warrants Liability

The exercise price of the warrants we issued in September 2011 in conjunction with the private placement of our common stock (the "2011 Private Placement") and the warrants we issued in October 2011 in connection with our engagement of an intellectual property firm (ipCapital Group) could, in certain circumstances, be reset to below-market value. Accordingly, we have concluded that such warrants are not indexed to our common stock; therefore, the fair value of the warrants was recorded as a liability upon their issuance. Changes in fair value of the 2011 Private Placement warrants liability are recognized in other expense and changes in the fair value of the warrants issued to ipCapital are recognized as a component of general and administrative expense in the condensed consolidated statement of operations.

We used a binomial pricing model to determine the fair value of our warrants as of June 30, 2012, the balance sheet date, using the following assumptions:

	Estimated Volatility	Annualized Forfeiture Rate	Expected Option Term (Years)	Estimated Exercise Factor	Risk-Free Interest Rate	Dividends
2011 Private Placement	198%	-	4.167	10	0.72%	-
ipCapital	196%	-	4.540	10	0.72%	-

The following table is a reconciliation of the warrants liability measured at fair value using significant unobservable inputs (Level 3) for the six months ended June 30, 2012:

Warrants liability - December 31, 2011 fair value	$	3,696,600
Change in fair value of warrant liability recorded in other income		(607,900	)
Accretion of warrant liability recorded in general and administrative expense		14,500
Warrants liability - June 30, 2012 fair value	$	3,103,200

We had no outstanding warrants during the six-month period ended June 30, 2011.