Accrued but unpaid salaries and vacation benefits total $746,377 and $516,083 as of September 30, 2013 and December 31, 2012, respectively. Debenture Interest accrued and unpaid is $40,663 and $45,716 at September 30, 2013 and December 31, 2012, respectively. Other accrued liabilities totaling $199,633 and $496,662 as of September 30, 2013 and December 31, 2102 are as follows:

The Company recognized a derivative liability for the conversion feature and warrants for the $1.0 million senior secured debenture issued to Hillair on June 27, 2012 as an embedded derivative. It was valued on the respective transaction dates of June 27, 2012 for issuance of the debentures and August 30, 2013, the date on which it was assigned to other holders, using a Black-Scholes pricing model. Warrants to purchase 5,000,000 shares of common stock were issued to Hillair as part of the debenture, and were exchanged pursuant to an agreement between Hillair and the Company on August 29, 2013 on a one for one basis with no receipt of cash. 380,952 warrants to purchase shares of common stock were issued to National Securities Corporation and several of its employees, who acted as placement agent to the Company in connection with the Debenture. These warrants have a cashless exercise provision effective six months after the issuance date. In accordance with ASC 815-10-25, we measured the subsequent derivative valuation using a Black-Scholes pricing model on December 31, 2012 and recorded the additional derivative liability as of that date. See Note 6: Stockholders’ Equity for additional information on the warrants issued.

On August 29, 2013, pursuant to an agreement between the Company, Hillair and four new holders, the original debenture was assigned and exchanged for an aggregate of $1,163,333 in new notes with the same provisions. The additional value represented an increase of $150,000 in prepayment fees and $13,333 in accrued but unpaid interest. The interest rate and maturity date were not changed.

On September 6, 2013, a holder of the reissued debenture issued a notice of voluntary conversion for $75,000 of the issuance price reducing the aggregate amount of the outstanding debentures to $1,088,333. 6,188,119 shares of common stock were issued. A loss on the conversion was recorded in the amount of $67,376.

At the end of each quarterly reporting date the values are evaluated and adjusted to current market value. The amount recorded as of September 30, 2013 and December 31, 2012 was $2,040,240 and $68,962, respectively.

Derivative liability activity for the nine months ending September 30, 2013 was as follows:

Fair market values of the Company's derivatives as of September 30, 2013 were based on the Black Scholes valuation using the following assumptions:

The conversion feature may be exercised at any time and are thus reported as current liabilities.

The Company recorded a loss on the derivative valuation for the debenture in the amount of $1,051,034 for the nine months ended September 30, 2013 and a gain on the derivative valuation in the amount of $46,257 for the nine months ended September 30, 2012.