2.                                      Significant accounting policies

Unaudited interim financial data

The accompanying unaudited September 30, 2012 interim balance sheet, the statements of operations and comprehensive loss, the statement of stockholders’ equity (deficit) and the statement of cash flows for the nine months ended September 30, 2012, the period from April 5, 2011 (inception) to September 30, 2011 and the period from April 5, 2011 (inception) to September 30, 2012, and the statement of operations and comprehensive loss for the three months ended September 30, 2012, and the related interim information contained within the notes to the financial statements, have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all of the information and the notes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited interim financial statements reflect all adjustments, consisting of normal and recurring adjustments, necessary for the fair statement of the Company’s financial position at September 30, 2012 and results of its operations for the three and nine months then ended, and its cash flows for the nine months ended September 30, 2012. The results for the three and nine months ended September 30, 2012 are not necessarily indicative of future results.

Use of estimates

The preparation of the Company’s financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from such estimates.

The Company utilizes significant estimates and assumptions in determining the fair value of its common stock. The Company granted stock options at exercise prices not less than the fair market value of its common stock as determined by the board of directors contemporaneously at the date such grants were made, with input from management. The fair value of common stock at certain of the grant dates was adjusted in connection with the Company’s retrospective fair value assessment for financial reporting purposes. The board of directors has determined the estimated fair value of the Company’s common stock based on a number of objective and subjective factors, including external market conditions affecting the biotechnology industry sector, the prices at which the Company sold shares of preferred stock and common stock, the superior rights and preferences of securities senior to the Company’s common stock at the time and the likelihood of achieving a liquidity event, such as an initial public offering or sale of the Company.

The Company utilized various valuation methodologies in accordance with the framework of the 2004 American Institute of Certified Public Accountants Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation, to estimate the fair value of its common stock. The methodologies included a probability analysis including both a potential public trading scenario and potential sale scenario. For the sale scenario, the Company used the reverse backsolve method and in the public trading scenario the Company assumed that all of its shares of convertible preferred stock would convert into common stock. Valuation methodologies include estimates and assumptions that require the Company’s judgment. These estimates include assumptions regarding future performance, including the successful completion of the Company’s AUGMENT marketing study in humans and the time to complete a public trading scenario or sale. Significant changes to the key assumptions used in the valuations could result in different fair values of common stock at each valuation date.

Comprehensive loss

Comprehensive loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Comprehensive loss was equal to net loss for the period April 5, 2011 (inception) to September 30, 2011, April 5, 2011 (inception) to September 30, 2012, as well as the three and nine months ended September 30, 2012.

In June 2011, the Financial Accounting Standards Board issued revised guidance on the presentation of comprehensive income and its components in the financial statements. As a result of this guidance, companies are now required to present the components of net income and other comprehensive income either as one continuous statement or as two consecutive statements, eliminating the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. This update does not change the items that must be reported in other comprehensive income, how such items are measured or when they must be reclassified to net income. This guidance is effective for the Company for interim and annual periods ending after December 15, 2011. The new guidance is to be applied retrospectively. The Company adopted this new guidance on January 1, 2012 and elected to present comprehensive income (loss) in one continuous statement as part of the condensed financial statements.

Concentrations of credit risk and off-balance sheet risk

Cash is the only financial instrument that potentially subjects the Company to concentrations of credit risk. As of September 30, 2012 and December 31, 2011, all of the Company’s cash was deposited in accounts at a single financial institution. The Company maintains its cash with a high quality, accredited financial institution and, accordingly, such funds are subject to minimal credit risk. The Company has no significant off-balance sheet concentrations of credit risk, such as foreign currency exchange contracts, option contracts or other hedging arrangements.