Liability Attributable to Warrants (Tables)

6 Months Ended

Jun. 30, 2013

Liability Attributable to Warrants [Abstract]

Assumption used to determine the fair value of warrants

We used a binomial pricing model to determine the fair value of our warrants liability as of June 30, 2013 and December 31, 2012, the balance sheet dates, using the following assumptions:

	2011 Transaction						ipCapital
	June 30, 2013			December 31, 2012			June 30, 2013			December 31, 2012
Estimated volatility		136	%		159	%		135	%		163	%
Annualized forfeiture rate		—			—			—			—
Expected option term (years)		3.17			3.67			3.29			3.79
Estimated exercise factor		4			10			4			10
Risk-free interest rate		0.72	%		0.45	%		0.77	%		0.65	%
Dividends		—			—			—			—

Reconciliation of the warrants liability measured at fair value using significant unobservable inputs

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, 2013:

Warrants liability – December 31, 2012 fair value	$	7,390,100
Change in fair value of warrant liability recorded in other expenses		(1,319,200	)
Change in fair value of warrant liability recorded in general and administrative expense		(14,100	)
Reclassification of warrants liability to equity from exercise of warrants (1)		(348,300	)
Reclassification of warrants liability to equity from amendment to warrants (1)		(4,391,000	)
Warrants liability – June 30, 2013 fair value	$	1,317,500

(1)

During the six-month period ended June 30, 2013, in addition to the warrant amendment, we also reduced our warrants liability by $348,300 as a result of the exercise of 917,500 warrants during such period, prior to the amendment to the warrants. The aggregate reduction in the liability, combining the warrant amendment and this exercise, was $4,739,300. See Note 13.

Warrants outstanding

The following table reconciles the number of warrants outstanding for the periods ended June 30, 2013 and 2012, respectively.

	For the Three-Month Period Ended June 30, 2013
	Beginning Outstanding		Issued		Exercised		Ending Outstanding
2011 Transaction		22,612,500		—		9,455,000		13,157,500
ipCapital		400,000		—		—		400,000
Exercise Agreement		—		4,500,000		—		4,500,000
Total		23,012,500		4,500,000		9,455,000		18,057,500

	For the Six-Month Period Ended June 30, 2013
	Beginning Outstanding		Issued		Exercised		Ending Outstanding
2011 Transaction		23,075,000		—		9,917,500		13,157,500
ipCapital		400,000		—		—		400,000
Exercise Agreement		—		4,500,000		—		4,500,000
Total		23,475,000		4,500,000		9,917,500		18,057,500

	For the Three and Six-Month Period Ended June 30, 2012
	Beginning Outstanding		Issued		Exercised		Ending Outstanding
2011 Transaction		23,075,000		—		—		23,075,000
ipCapital		400,000		—		—		400,000
Total		23,475,000		—		—		23,475,000

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

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