FAIR VALUE MEASUREMENTS AND DERIVATIVE INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2014

Fair Value Measurements

Schedule of assumptions used to determine the fair value

The following assumptions were used in the Monte Carlo option-valuation model to determine the fair value of the Financing Warrant and Senior Convertible Note derivative liability during the period from June 17, 2013 to September 30, 2013:

	Expected Life (Years)	Risk Free Rate	Volatility	Probability of a Capital Raise
Financing Warrant	6.5 - 7	1.57% - 2.28%	65.3% - 68.6%	—
Senior Convertible Note Derivative Liability	0.75 - 1.75	0.19% - 0.24%	81.0% - 102.1%	75% - 90%

The following assumptions were used in the Black-Scholes option-pricing model to determine the fair value of the warrant liabilities:

	December 31, 2013	IPO Date
Assumptions:
Risk-free interest rate	0.8% - 2.45%	1.25% - 2.31%
Expected dividend yield	0%	0%
Expected volatility	60.0% - 65.6%	64.0% - 69.6%
Expected term (in years)	4.08 - 7.0	3.58 – 5.95

Schedule of liabilities measured at fair value on a recurring basis

Liabilities measured at fair value on a recurring basis as of December 31, 2013 are as follows:

			Fair Value Measurements Using
	Balance as of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Liabilities:
Senior convertible note derivative	$	5,056,502	$	—	$	—	$	5,056,502
Bridge loan warrants	1,338,071		—		—		1,338,071
Consulting warrant	1,228,616		—		—		1,228,616
Financing warrant	709,397		—		—		709,397
Total	$	8,332,586	$	—	$	—	$	8,332,586

Schedule of reconciliation of all liabilities measured at fair value using Level 3 significant unobservable inputs

	Warrant Liabilities(1)			Senior Convertible Note Derivative Liability(2)
Balance at December 31, 2013	$	3,276,084		$	5,056,502
Issuance of warrant and derivative liabilities	—			—
Change in fair value	382,327			1,633,272
Write-off due to conversion and IPO	(3,658,411		)	(6,689,774		)
Balance at September 30, 2014	$	—		$	—

(1) The change in the fair value of the warrants was recorded as a gain of $0 and a reduction of $382,327 to other income in the condensed consolidated statement of operations for the three and nine months ended September 30, 2014, respectively. Due to the expiration of the redemption and put option features included in the Bridge Warrants, Consulting Warrant and Financing Warrant as of the IPO Date, these warrant liabilities were recorded as an increase of $3.7 million to additional paid-in capital in the condensed consolidated balance sheet as of September 30, 2014.

(2) The extinguishment of the senior convertible note derivative liability was recorded as an increase of $5.5 million to additional paid-in capital and a gain of $0 and $1.2 million to other income in the condensed consolidated statement of operations for the three and nine months ended September 30, 2014, respectively.