8. Preferred Stock

Preferred Stock

As of September 30, 2016, the Company had 10,000,000 shares of preferred stock authorized with a par value of $0.001. No shares of preferred stock were outstanding as of September 30, 2016.

Convertible and Redeemable Convertible Preferred Stock

During the year ended December 31, 2015, the Company issued an aggregate of 481,671 shares of redeemable convertible preferred stock upon the cash exercise of the Company’s Series B-1 and Series C redeemable convertible preferred stock warrants, consisting of 444,286 shares ofSeries B-1 redeemable convertible preferred stock and 37,385 shares of Series C redeemable convertible preferred stock.

In addition, during the year ended December 31, 2015, the Company issued an aggregate of 390,032 shares of redeemable convertible preferred stock upon the net exercise of the Company’s Series B, Series B-1 and Series C redeemable convertible preferred stock warrants, consisting of 5,850 shares of Series B redeemable convertible preferred stock, 291,165 shares of Series B-1 redeemable convertible preferred stock and 93,017 shares of Series C redeemable convertible preferred stock.

On July 21, 2015 (closing date of the IPO), all outstanding shares of Series A convertible preferred stock converted into 252,817 shares of common stock and all outstanding shares of Series B, Series B-1, Series C and Series D redeemable convertible preferred stock converted into 18,109,136 shares of common stock. On issuance, the Company’s convertible and redeemable convertible preferred stock was recorded at fair value or the amount of allocated proceeds, net of issuance costs.

The Company’s Series B, B-1, C and D redeemable convertible preferred stock was classified outside of stockholders’ equity (deficit) from issuance through the closing of the IPO, because the stock contained redemption features that commenced at any time on or after December 31, 2018 at the election of the Series B, B-1, C and D redeemable convertible preferred stockholders. The Company adjusted the carrying amount of the redeemable convertible preferred stock to equal the redemption value at the end of each reporting period. Due to the absence of retained earnings, adjustments to redemption value were recorded against additional paid-in capital, if any, and then to accumulated deficit. The change in the redemption value of the redeemable convertible preferred stock for the nine months ended September 30, 2015 was as follows:


Redeemable Convertible Preferred Stock
	(in thousands)
Series B	$	46,976
Series B-1		36,961
Series C		52,832
Series D		237,246

Total adjustment to redemption value on redeemable convertible preferred stock	$	374,015

As the redemption value for the redeemable convertible preferred stock was at times based on fair market value, the Company determined the fair value of the redeemable convertible preferred stock using a combination of the OPM and/or the PWERM models, or the fair value of the Company’s common stock. At July 21, 2015 (closing date of the IPO), the fair value of redeemable convertible preferred stock was estimated based on the underlying value of the Company’s common stock.

Amendment to Dividend Rights

On June 11, 2015, the Company’s stockholders approved an amendment to the Company’s Certificate of Incorporation to modify the terms of the cumulative accruing dividends on the outstanding shares of the Company’s Series C and Series D redeemable convertible preferred stock. Under the terms of the Amended Certificate of Incorporation, upon conversion of the Company’s redeemable convertible preferred stock into common stock in connection with an IPO, the Company was required to pay 50% of the then accrued but unpaid accruing dividends on shares of the Series C and Series D redeemable convertible preferred stock in shares of the Company’s common stock instead of payment in cash and the remaining 50% of the then accrued but unpaid accruing dividends was to be forfeited. The settlement of the accrued but unpaid accruing dividends in shares of common stock was required to be at the original issue price of the Series C and Series D redeemable convertible preferred stock of $5.215 per share. The terms of the dividends payable on the Series B and Series B-1 preferred stock were not modified.

Settlement of Cumulative Dividends

On July 21, 2015 (closing date of the IPO), the Company had total cumulative unpaid dividends in arrears of $18.9 million, which consisted of $9.4 million for the Series B, $1.7 million for the Series B-1, $1.7 million for the Series C and $6.1 million for the Series D redeemable convertible preferred stock. During the year ended December 31, 2015, the Company paid in cash accruing dividends in the aggregate amount of $5.5 million to the Series B and B-1 redeemable convertible preferred stockholders, consisting of $4.7 million for the Series B and $0.8 million for the Series B-1 redeemable convertible preferred stockholders. In addition, during the year ended December 31, 2015, the Company issued an aggregate of 750,946 shares of common stock to the Series C and D redeemable convertible preferred stockholders with an aggregate fair value of $20.4 million in settlement of the Series C and Series D redeemable convertible preferred stock cumulative dividends in accordance with the June 11, 2015 amendment discussed above, consisting of 161,536 shares of common stock with a fair value of $4.4 million to the Series C redeemable convertible preferred stockholders and 589,410 shares of common stock with a fair value of $16.0 million to the Series D redeemable convertible preferred stockholders.