4. Liability Attributable to Warrants

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.

Under ASC 820, "Fair Value Measurement," we re-measure the fair value of our outstanding warrants at every balance sheet date. As an integral part of the re-measurement process, we reevaluate each of the assumptions used, and when circumstances change or we become aware of new information affecting any of our assumptions, we adjust those assumptions accordingly. During the three months ended March 31, 2013 two investors in the 2011 private placement exercised an aggregate 462,500 warrants. While closing our books for the three months ended March 31, 2013, we reevaluated our internal assumptions based on historic and recent exercise patterns and analysis of our stock performance. Based on the work performed, we concluded that a lowering of our estimated exercise factor for the warrants issued in conjunction with the 2011 private placement from 10 to 4 was appropriate (see the assumptions used, as set forth in the tables, below).

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 the exercise price of the warrants, as well as the fair market value of its common stock, to determine the fair value of its warrants. The exercise price for warrants issued in conjunction with the 2011 private placement ranged between $0.20 and $0.26, per share, and was $0.26 per share for the warrants issued to ipCapital. The fair market value of the Company's common stock was $0.63 and $0.18 per share as of March 31, 2013 and 2012, respectively.

We used a binomial pricing model to determine the fair value of our warrants as of March 31, 2013 and December 31, 2012, the balance sheet date, using the following assumptions:

	For the Three Months Ended December 31, 2012
	Estimated Volatility			Annualized Forfeiture Rate		Expected Option Term (Years)		Estimated Exercise Factor		Risk-Free Interest Rate			Dividends
2011 Private Placement		145	%		—		3.42		4		0.36	%		—
ipCapital		145	%		—		3.54		4		0.36	%		—

For the Year Ended December 31, 2012
	Estimated Volatility	Annualized Forfeiture Rate	Expected Option Term (Years)	Estimated Exercise Factor	Risk-Free Interest Rate	Dividends
2011 Private Placement	159% - 202%	—	3.67 – 4.42	10	0.47% - 1.04%	—
ipCapital	163% - 201%	—	3.80 – 4.54	10	0.47% - 1.04%	—

The following table is a reconciliation of the warrants liability measured at fair value using significant unobservable inputs (Level 3) for the three months ended March 31, 2013: During the three month period ended March 31, 2013 warrants were exercised for 462,000 shares.

Warrants liability – December 31, 2012 fair value	$	7,390,100
Change in fair value of warrant liability recorded in other expenses		3,448,700
Accretion of warrant liability recorded in general and administrative expense		73,500
Reclassification of warrants liability to equity from the exercise of warrants		(215,100	)
Warrants liability – March 31, 2013 fair value	$	10,697,200

The following table reconciles the number of warrants outstanding for the periods ended March 31, 2013 and 2012, respectively.

For the Period Ended March 31, 2013
	Beginning Outstanding		Exercised		Ending Outstanding
2011 Private Placement		23,075,000		462,500		22,612,500
ipCapital		400,000		—		400,000
Total		23,475,000		462,500		23,012,500

For the Period Ended March 31, 2012
	Beginning Outstanding		Exercised		Ending Outstanding
2011 Private Placement		23,075,000		—		23,075,000
ipCapital		400,000		—		400,000
Total		23,475,000		—		23,475,000