The Company had 599,285 shares of its $0.01 par value convertible preferred stock issued and outstanding as of January 1, 2017, all of which converted into common stock on a 1-to-1 basis in connection with the Mergers.

On August 16, 2017, the Company issued 15,656 shares of $0.0001 par value, redeemable preferred stock and warrants to purchase up to 78,181 shares of common stock (see Note 12), satisfying the second closing requirement under the Note Agreement for total gross proceeds of $14,716,370, and incurred issuance costs totaling $1,697,800. The redeemable preferred stock matured on August 16, 2018. In addition, the redeemable preferred stock agreements required that the Company reserve a sufficient number of common shares to cover at least 150% of the common shares expected to be issued upon the conversion of the redeemable preferred stock at the then current conversion price, and the exercises of common stock warrants issued in connection with the redeemable preferred stock.

Because the securities contained contingencies which could require the Company to redeem the shares for cash, and such contingencies were outside the control of the Company, the redeemable preferred stock was classified outside of permanent equity. Because a substantive conversion feature was also present at issuance, the redeemable preferred stock is only contingently redeemable and therefore prior to its redemption or conversion was classified as temporary equity and carried on the balance sheet in between liabilities and equity at its accreted redemption value.

In addition, certain features present in the redeemable preferred stock required separate recognition. For purposes of this evaluation, the Company determined that the redeemable preferred instrument is more akin to a debt host because the installment conversion feature, as the primary settlement mechanism, is indexed to an underlying other than interest rates or credit risk and settles in variable shares. Because the potential contingent redemption price contained a significant premium over the issuance price, the redemption feature is considered to be not clearly and closely related to the debt-like host instrument. All redemption features (including the change of control redemption, triggering event redemption, mandatory redemption, and installment redemption) were determined to be a single, compound embedded derivative financial instrument to be bifurcated and separately accounted for as a liability. The embedded derivative financial instrument was initially recorded at its fair value on the redeemable preferred stock issuance date and was being remeasured on each subsequent balance date with changes in fair value classified as a component of other income (expenses), net. The embedded derivative was classified as a component of other long-term liabilities until its expiration with the conversion of the last amount of redeemable preferred stock.

The redeemable preferred stock also contained a beneficial conversion feature at issuance. The conversion feature was “in-the-money” as of the commitment date as the fair value of the underlying common share was greater than the effective conversion price. The beneficial conversion feature, measured as the intrinsic value of the feature, totaled $1,506,196 on the redeemable preferred stock issuance date, and was classified as a component of additional paid-in capital. The beneficial conversion feature was not remeasured in subsequent periods but was released in nine equal amounts corresponding to each of the redeemable preferred stock installments. During the year ended December 31, 2018 and 2017, the Company released $1,338,840 and $167,356, respectively, of the beneficial conversion feature.

The net proceeds received during the year ended December 31, 2017 from the redeemable preferred stock financing were allocated as follows:

Common stock warrant liability (see Note 12)	$	3,498,632
Embedded derivative		19,857
Beneficial conversion feature		1,506,196
Initial carrying value of redeemable preferred stock		7,993,885
Net proceeds from redeemable preferred stock issuance	$	13,018,570

The periodic changes in the fair value of the embedded redemption derivative financial instrument for the years ended December 31, 2018 and 2017 are as follows:

Balance, January 1, 2017	$	—
Issuance		19,857
Changes in fair value		7,379
Balance, January 1, 2018		27,236
Changes in fair value		(27,236	)
Balance, December 31, 2018	$	—

The fair value used to determine the initial carrying value of the embedded redemption derivative financial instrument was measured using Level 3 inputs and was estimated using the Monte Carlo simulation valuation model. The assumptions used to estimate the fair value of the embedded redemption derivative financial instrument at December 31, 2017 and as of the redeemable preferred stock issuance date were as follows:

	December 31, 2017
Expected volatility		59.60	%
Incremental borrowing rate		12.00	%
Risk-free interest rate		1.59	%

During the years ended December 31, 2018 and 2017, the Company converted 9,813 and 3,479 shares, respectively, shares of the redeemable preferred stock for an aggregate of 502,078 and 82,483, respectively, shares of common stock. In June 2018, the Company additionally agreed to redeem the First Exchange investors’ remaining 2,364 shares of Series B Preferred Stock at their face value of $2,364,044. Since the redemption occurred prior to the stated maturity date, $56,792 of the redemption price is considered a deemed dividend. On July 11, 2018, we entered into exchange agreements with certain other holders of our Series B Preferred Stock and warrants (the “Second Exchange”) pursuant to which we (i) issued an aggregate of 32,124 shares of common stock and (ii) paid $22,241 in cash, in exchange for all of their outstanding shares of our Series B Preferred Stock. Due to the redemption occurring prior to the stated maturity date, this exchange resulted in a deemed contribution of $111,553.