Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Balances of Liabilities Measured at Fair Value on Recurring Basis

The following table presents the balances of liabilities measured at fair value on a recurring basis by level as of June 30, 2014:

	Fair Value Measurements Using
	Quoted Prices in		Significant Other		Significant
	Active Markets for		Observable		Unobservable
	Identical Assets		Inputs		Inputs
	(Level 1)		(Level 2)		(Level 3)		Total

As of June 30, 2014
Derivative liability	$	-	$	-	$	1,064,552	$	1,064,552
Warrant liability		-		-		2,091,631		2,091,631
Total	$	-	$	-	$	3,156,183	$	3,156,183

Changes in Liabilities with Significant Unobservable Inputs (Level 3)

The following table presents changes in the liabilities with significant unobservable inputs (Level 3) for the nine months ended June 30, 2014:

	Warrant		Derivative		Total
	Liability		Liability		Liability
Balance December 31, 2013	$	803,484	$	300,939	$	1,104,423

Liability on issuance of debt and warrants		-		-		-

Change in estimated fair value (1)		1,288,147		763,613		2,051,760

Elimination of liability on conversion		-		-		-

Balance June 30, 2014	$	2,091,631	$	1,064,552	$	3,156,183

(1) Included in the Condensed Statements of Operation on the line “Change in fair value of derivative and warrant liabilities.”

Derivative and Warrant Liabilities

Management used the following inputs to value the Derivative and Warrant Liabilities for the six months ended June 30, 2014:

	Derivative Liability	Warrant Liability
Expected term	6 months - 1 year	5 years
Exercise price	$0.045 - $0.099	$0.075 - $0.1287
Expected volatility	238% to 242%	189% to 190%
Expected dividends	None	None
Risk-free interest rate	0.11% to 0.13%	1.62% to 1.73%
Forfeitures	None	None

- Definition

Tabular disclosure of financial instruments measured at fair value, including those classified in shareholders' equity measured on a recurring or nonrecurring basis. Disclosures include, but are not limited to, fair value measurements recorded and the reasons for the measurements, level within the fair value hierarchy in which the fair value measurements are categorized and transfers between levels 1 and 2. Nonrecurring fair value measurements are those that are required or permitted in the statement of financial position in particular circumstances.

+ References+ Details

- Definition

Tabular disclosure of the fair value measurement of liabilities using significant unobservable inputs (Level 3), a reconciliation of the beginning and ending balances, separately presenting changes attributable to the following: (1) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings (or changes in net assets), and gains or losses recognized in other comprehensive income (loss) and a description of where those gains or losses included in earnings (or changes in net assets) are reported in the statement of income (or activities); (2) purchases, sales, issues, and settlements (each type disclosed separately); and (3) transfers in and transfers out of Level 3 (for example, transfers due to changes in the observability of significant inputs) by class of liability.

+ References+ Details