| Schedule of Assets and Liabilities Measured at Fair Value |
Our fair value hierarchies for our financial assets and liabilities which require fair value measurement on a recurring basis are as follows:
| | | Total | | | Quoted Prices in
Active Markets for
Identical Items
Level 1 | | | Significant Other
Observable Inputs
Level 2 | | | Significant
Unobservable
Inputs
Level 3 | |
| | | | | | | | | | | | | |
| March 31, 2014 | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Warrant liability | | $ | 88,050,250 | | | $ | - | | | $ | - | | | $ | 88,050,250 | |
| Convertible debt | | | - | | | | - | | | | - | | | | - | |
| Total liabilities measured at estimated fair value | | $ | 88,050,250 | | | $ | - | | | $ | - | | | $ | 88,050,250 | |
| | | | | | | | | | | | | | | | | |
| December 31, 2013 | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Warrant liability | | $ | 377,747 | | | $ | - | | | $ | - | | | $ | 377,747 | |
| Convertible debt | | | 5,062,417 | | | | - | | | | - | | | | 5,062,417 | |
| Total liabilities measured at estimated fair value | | $ | 5,440,164 | | | $ | - | | | $ | - | | | $ | 5,440,164 | |
|
The Company's fair value hierarchies for its financial assets and liabilities which require fair value measurement on a recurring basis are as follows:
| | | Total | | | Quoted Prices in
Active Markets for
Identical Items
Level 1 | | | Significant Other
Observable Inputs
Level 2 | | | Significant
Unobservable
Inputs
Level 3 | |
| | | | | | | | | | | | | |
| December 31, 2013 | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Warrant liability | | $ | 377,747 | | | $ | - | | | $ | - | | | $ | 377,747 | |
| Convertible debt | | | 5,062,417 | | | | - | | | | - | | | | 5,062,417 | |
| Total liabilities measured at estimated fair value | | $ | 5,440,164 | | | $ | - | | | $ | - | | | $ | 5,440,164 | |
| | | | | | | | | | | | | | | | | |
| December 31, 2012 | | | | | | | | | | | | | | | | |
| Liabilities: | | | | | | | | | | | | | | | | |
| Warrant liability | | $ | 563,822 | | | $ | - | | | $ | - | | | $ | 563,822 | |
| Convertible debt | | | 3,528,313 | | | | - | | | | - | | | | 3,528,313 | |
| Total liabilities measured at estimated fair value | | $ | 4,092,135 | | | $ | - | | | $ | - | | | $ | 4,092,135 | |
|
| Summary of Changes in Fair Value of Level 3 Liabilities |
The following table sets forth a summary of the changes in the fair value of our Level 3 financial liabilities, which were measured at fair value on a recurring basis.
| | | Warrant liability | | | Convertible debt | |
| Beginning balance December 31, 2013 | | $ | 377,747 | | | $ | 5,062,417 | |
| Transfer to equity upon settlement | | | (377,747 | ) | | | (5,062,417 | ) |
| Fair value of warrants on date of issuance | | | 10,613,550 | | | | - | |
| Change in fair value of warrants during the period | | | 77,436,700 | | | | - | |
| Ending balance March 31, 2014 | | $ | 88,050,250 | | | $ | - | |
The fair value of each warrant was determined using a lattice pricing model using the following assumptions:
| | | Three months
ended March 31, |
| | | 2014 |
| | | |
| Dividend yield | | - |
| Risk-free interest rate | | 0.81-0.90% |
| Current share price | | $0.60 - $3.19 |
| Expected term (in years) | | 2.80-3.00 |
| Volatility | | 79.0% |
| Periodic rate | | 0.24-0.25% |
| Periods in the model | | 10 |
|
The changes in the value of the Level 3 liabilities are summarized below:
| | | Convertible Notes
Payable | | | Warrant
Liability | |
| | | | | | | |
| Balance at January 1, 2012 | | $ | - | | | $ | 168,338 | |
| Issuance of warrants at fair value | | | - | | | | 412,610 | |
| Issuance of 2012 Series B convertible bridge notes at fair value | | | 3,354,021 | | | | - | |
| Mark to market, included in other expense, net | | | - | | | | (17,126 | ) |
| Mark to market, included in interest expense | | | 174,292 | | | | - | |
| Balance at December 31, 2012 | | | 3,528,313 | | | | 563,822 | |
| Issuance of 2012 Series B convertible bridge notes at fair value | | | 2,162,564 | | | | - | |
| Issuance of 2013 Series B convertible bridge notes at fair value | | | 5,062,417 | | | | - | |
| Issuance of right to receive common stock warrants at fair value included in other expense, net | | | - | | | | 95,760 | |
| Mark to market, included in other expense, net | | | - | | | | (281,835 | ) |
| Mark to market, included in interest expense | | | 799,194 | | | | - | |
| Converted to Series B convertible preferred stock | | | (6,490,071 | ) | | | - | |
| Balance at December 31, 2013 | | $ | 5,062,417 | | | $ | 377,747 | |
|