7. Convertible Preferred Stock Warrants

As of September 30, 2019 and December 31, 2018, the Company had issued and outstanding warrants to acquire 2,019,245 shares of Series B convertible preferred stock for $1.73 per share with a fair value of $17.0 million and $4.6 million, respectively that were issued in conjunction with various equity and financing transactions.

The Company recognized the warrants at fair value at the time of issuance and remeasures the warrants at their fair value on a recurring basis thereafter. Given the deemed liquidation provisions of the underlying convertible preferred stock, the convertible preferred stock warrant liabilities are recorded at fair value and are subject to remeasurement at each balance sheet date. The Company calculates the warrants’ fair value as follows:

The Company’s equity value is estimated using the market approach.

The Company’s equity value is then allocated among classes of its capital structure, including Series B convertible preferred shares. The allocation is performed using the Option Pricing Methodology. This method treats securities as options with the Company. The allocation is used to determine the value of Series B convertible preferred shares, as well as the Series B convertible preferred stock warrants. The Company assumes that any exercise of the warrants would be to purchase Series B convertible preferred Shares, and assumes scenarios where the warrants will not be exercised.

No warrants were issued during the three and nine months ended September 30, 2019. The warrants outstanding at September 30, 2019 were valued at approximately $8.42 per share utilizing an option pricing model, time to liquidity of six months, underlying stock volatility of 45% and a risk-free interest rate of 1.8%.

The warrants outstanding at December 31, 2018, were valued at approximately $2.27 per share utilizing an option pricing model, time to liquidity of two years, underlying stock volatility of 43% and a risk-free interest rate of 2.3%.


Rollforward of warrants and fair value	Warrants	Liability
		(in thousands)
Total warrants and liability as of December 31, 2018	2,019,245	$	4,589
Revaluation of remaining warrants			12,419
Total warrants and liability as of September 30, 2019	2,019,245	$	17,008