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Note C - Fair Values of Financial Instruments
 12 Months Ended
Dec. 31, 2013
Fair Value Disclosures [Abstract]  
Fair Value Disclosures [Text Block]

NOTE C—FAIR VALUES OF FINANCIAL INSTRUMENTS


Cash and cash equivalents, accounts receivable, due from factor, accounts payable, accrued liabilities, and notes payable - related party, are carried at, or approximate, fair value because of their short-term nature.


The fair value of the warrant liabilities and derivative liabilities are measured at fair value using the following assumptions:


           

Risk free interest rate

    0.07% - 1.38%

Expected term

    0.25% - 4.65%

Expected dividends

      0  

Volatility of stock price

    78.0% - 136.2%

For the anti-dilution features, the Company utilized the Monte Carlo simulation. The stock volatility for each grant is determined based on the review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected term and the risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the derivative.


The warrant liabilities and derivative liabilities are considered Level 3 liabilities on the fair value hierarchy as the determination of fair value includes various assumptions about of future activities and the Company’s stock prices and historical volatility as inputs.


The table below provides a reconciliation of the beginning and ending balances for the liabilities measured at fair value using significant unobservable inputs (Level 3). There were no assets as of or during the year ended December 31, 2013 and no assets or liabilities as of or during the year ended December 31, 2012 measured using significant unobservable inputs.


Fair Value Measurements Using


Significant Unobservable Inputs (Level 3):


Balance, January 1, 2013

  $ -  
           

Compensatory Warrant (Note M3)

       
 

Fair value at issuance

    89,637  
 

Gain on derivative

    (53,267 )
           
 

Value at December 31, 2013

    36,370  
           

Warrants issued Under PI SPA (Note M2c)

       
 

Fair value at issuance

    325,891  
 

Gain on derivative

    (119,184 )
           
 

Value at December 31, 2013

    206,707  
           

Anti-Dilution Features From July Private Investor SPA (Note M2b)

       
 

Fair value at issuance

    20,323  
 

Loss on derivative

    93,639  
 

Reclassification to additional paid-in capital

    (113,962 )
           
 

Value at December 31, 2013

    -  
           
           

Balance, December 31, 2013

  $ 243,077