The fair value hierarchy prioritizes the inputs used in valuation techniques into three levels as follows:

The Company recorded its warrants issued from 2010 through 2013 at fair value and designated them as Level 3 on their issuance dates.

Warrants – Except for the warrants issued September 26, 2012, the warrants were valued using a Monte Carlo Binomial Lattice-Based valuation methodology, adjusted for marketability restrictions. The warrants issued September 26, 2012, did not contain any anti-dilution protection features. As a result, the warrants were valued using the Black-Scholes Valuation Model. Of the various inputs used, the volatility and the current price of the Company’s common stock most significantly impact the fair value adjustments of the warrants. As the Company’s common stock increases or decreases, the valuation of the warrants will increase or decrease, respectively. As the estimated volatility of the Company’s common stock increases or decreases, the valuation of the warrants will increase or decrease, respectively. These changes may result in significantly higher or lower fair value measurements from period to period.

Significant assumptions used and related fair values for the warrants as of September 30, 2013 were as follows:

Significant assumptions used and related fair values for the warrants as of December 31, 2012 were as follows:

Convertible Notes – The conversion feature imbedded in the convertible notes was valued using a combination of a Monte Carlo Binomial Lattice-Based valuation methodology, adjusted for marketability restrictions. Significant assumptions used and related fair value for the conversion feature as of September 30, 2013 were as follows:

Other Derivative Instruments – The Company’s other derivative instruments consist of commodity positions. The fair value of the commodity positions are based on quoted prices on the commodity exchanges and are designated as Level 1.

The following table summarizes fair value measurements by level at September 30, 2013 (in thousands):

__________

(1)   Included in other current assets in the consolidated balance sheets.

(2)   Included in warrant liabilities and conversion features at fair value in the consolidated balance sheets.

(3)   Included in accrued liabilities in the consolidated balance sheets.

The following table summarizes fair value measurements by level at December 31, 2012 (in thousands):

__________

(1)   Included in other current assets in the consolidated balance sheets.

(2)   Included in warrant liabilities and conversion features at fair value in the consolidated balance sheets.

(3)   Included in accrued liabilities in the consolidated balance sheets.

For fair value measurements using significant unobservable inputs (Level 3), a description of the inputs and the information used to develop the inputs is required along with a reconciliation of Level 3 values from the prior reporting period. The changes in the Company’s fair value of its Level 3 inputs were as follows (in thousands):

Other financial instruments not measured at fair value on a recurring basis include accounts receivable, net, accounts payable – trade, accrued liabilities, current portion – long-term debt, accrued preferred dividends, other liabilities and long-term debt. With the exception of long-term debt, the carrying amount approximates fair value because of the short maturity of these instruments as reported on the Company’s consolidated balance sheets as of September 30, 2013 and December 31, 2012. The carrying value of the long-term debt either has a short period to maturity or bears interest at a variable rate and therefore is also considered to approximate fair value.