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FAIR VALUE OF FINANCIAL INSTRUMENTS
9 Months Ended
Sep. 30, 2014
FAIR VALUE OF FINANCIAL INSTRUMENTS  
FAIR VALUE OF FINANCIAL INSTRUMENTS

 

5. FAIR VALUE OF FINANCIAL INSTRUMENTS

 

Our financial instruments consist of cash equivalents, restricted cash and derivative liabilities.  U.S. GAAP defines “fair value” as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):

 

·

Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

 

·

Level 2 — Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means.

 

·

Level 3 — Prices or valuation techniques requiring inputs that are both significant to the fair-value measurement and unobservable.

 

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents.  The Company continually monitors its positions with, and the credit quality of, the financial institutions with which it invests.  Periodically throughout the year, the Company has maintained balances in various U.S. operating accounts in excess of U.S. federally insured limits.

 

The following table presents information about financial instruments recognized at fair value on a recurring basis as of September 30, 2014 and December 31, 2013, and indicates the fair value hierarchy:

 

 

 

September 30, 2014

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

Restricted cash

 

$

4,010,968 

 

$

 

$

 

$

4,010,968 

 

Total financial assets

 

$

4,010,968 

 

$

 

$

 

$

4,010,968 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

 

$

 

$

3,811,876 

 

$

3,811,876 

 

Total financial liabilities

 

$

 

$

 

$

3,811,876 

 

$

3,811,876 

 

 

 

 

December 31, 2013

 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

Restricted cash

 

$

4,010,937 

 

$

 

$

 

$

4,010,937 

 

Total financial assets

 

$

4,010,937 

 

$

 

$

 

$

4,010,937 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Derivative liabilities

 

$

 

$

 

$

2,169,408 

 

$

2,169,408 

 

Total financial liabilities

 

$

 

$

 

$

2,169,408 

 

$

2,169,408