10. Warrants

As of December 31, 2016, there were 616,770 warrants outstanding. In March 2017, we issued warrants to purchase up to 49,776 shares of common stock in connection with the Notes (see Note 1). The warrants were classified as permanent equity, and were recorded at the issuance date using a relative fair value allocation method, and were not subsequently remeasured. In connection with the Mergers, 660,715 shares of common stock were issued as a result of cashless exercises of such warrants.

In August 2017, in connection with the redeemable preferred stock issuance (Note 9), we granted warrants to holders of redeemable preferred stock to purchase up to 2,345,427 shares of our common stock. Warrants issued with the redeemable preferred stock are classified as a liability and are initially recorded at their grant date fair value, to be remeasured on each subsequent balance sheet date. The warrant liability is classified as component of other long-term liabilities.

A summary of warrant activity during the three and nine months ended September 30, 2017 and 2016 is as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017			2016
Warrants outstanding, beginning of period		4,658		477,613		616,770			208.614
Issuances		2,345,427		134,499		2,395,203			403,498
Exercises and conversions		—		—		(661,888	)		—

Warrants outstanding, end of period		2,350,085		612,112		2,350,085			612,112

Warrants outstanding at September 30, 2017 have an aggregate grant date fair value of $3,498,720 with a weighted average exercise price of $2.70.

The periodic changes in the fair value of the warrant liability, measured using Level 3 inputs, is as follows:


Balance, beginning of period	$	—
Issuance		3,498,632
Change in fair value		508,316

Balance, end of period	$	4,006,948

The fair value used to determine the initial carrying value of warrants classified as permanent equity was measured using Level 3 inputs and was estimated using the Black-Scholes option pricing model. The fair value of common warrants classified as a liability was estimated using the Monte Carlo simulation valuation model with Level 3 inputs. The following assumptions were used to estimate the fair value of warrants during the three and nine months ended September 30, 2017 and 2016:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Expected volatility		87.00	%		71.00	%		87.00	%		75.00	%
Expected term (years)		5.00			4.22			5.00			4.54
Risk-free interest rate		1.76	%		1.08	%		1.76	%		1.29	%
Expected dividend yield		0.00	%		0.00	%		0.00	%		0.00	%