Preferred Stock Warrants

The Company classifies its preferred stock warrants as liabilities on the accompanying condensed consolidated balance sheets. As of June 30, 2015 and December 31, 2014, the preferred stock warrant liabilities were $10.6 million and $1.8 million.

The key terms of the redeemable convertible preferred stock warrants are summarized in the following table:


	Warrants Outstanding
	Warrants Outstanding June 30, 2015		Warrants Outstanding December 31, 2014		Exercise Price		Expiration
Series B preferred stock warrants		10,414		10,414	$	7.45	July 31, 2018
Series B-1 preferred stock warrants		43,969		47,060		7.45	June 30, 2018
Series B-1 preferred stock warrants		663,343		746,295		2.6075	Various dates in 2016 – 2021
Series C preferred stock warrants		166,318		171,566		5.215	Various dates in 2022 – 2023

Total preferred stock warrants		884,044		975,335

The warrants are immediately exercisable in whole or in part over the term of the warrants. In the event of an IPO, all of the Company’s outstanding preferred stock warrants expire unless the warrant holders elect to exercise them prior to the IPO. During the year ended December 31, 2014, no warrants were exercised. During the three and six months ended June 30, 2015, 3,079 of the Series B-1 warrants were exercised at an exercise price of $7.45 per share, 82,949 of the Series B-1 warrants were exercised at an exercise price of $2.6075 per share and 5,247 of the Series C warrants were exercised at an exercise price of $5.215 per share, resulting in total aggregate cash proceeds to the Company of $0.3 million. Upon exercise of warrants, the fair value of the warrant liability of $1.1 million was reclassified to redeemable convertible preferred stock.

Determination of Fair Value

At each reporting date, the Company remeasures the preferred stock warrants to fair value using the OPM and/or the PWERM models with the following assumptions used in the OPM:


	As of June 30, 2015			As of December 31, 2014
Expected term (in years)		0.9		1.2 – 2.5
Expected volatility		66	%	69 – 86%
Risk-free interest rate		0.2	%	0.3 – 0.6%
Expected dividend rate		—	%	— %
Discount for lack of marketability		11.3	%	19.5 – 24.3%

The assumptions used in calculating the estimated fair market value at each reporting period represent the Company’s best estimate, however inherent uncertainties are involved. As a result, if factors or assumptions change the warrant liability, the estimated fair value could be materially different.

The Company estimates the volatility of its stock based on comparable peer public companies historical volatility. The risk-free interest rate is based on the U.S. Treasury zero-coupon bond. The expected term applied in the OPM considers both the probabilities of failure and success of the Company. Cumulative dividends associated with preferred stock are calculated as of the accrual start date of each security to the OPM maturity date.