7. Capitalization

As of December 31, 2016 and 2015, the authorized capital stock of the Company included 100,000,000 shares of common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share. The Company’s restated certificate of incorporation and bylaws, which were adopted in connection with the IPO, contain the rights, preferences and privileges of the Company’s stockholders and their respective shares.

Conversion to C-corporation

On September 16, 2014, the Company converted from an LLC to a C-corporation. Upon the conversion, the Company’s outstanding Series A Preferred Units, Series B Preferred Units and Class A units were subject to a 50-to-1 reverse unit split, and converted into shares of Series A Preferred Stock, Series B Preferred Stock and common stock of the Company. Additionally, upon the conversion, the Company’s Class B Units were terminated along with the Company’s 2009 Equity Incentive Plan.

The Company evaluated the conversion of Series A Preferred Units and Series B Preferred Units into Series A Preferred Stock and Series B Preferred Stock, respectively, giving consideration to all changes in the rights, preferences and privileges of each class of securities. As a result of the conversion, holders of previously issued preferred units were given a conversion option to convert their newly issued preferred stock into common stock. Additionally, dividends on the newly issued preferred shares were no longer compounded annually as they were under the preferred units, which decreased the liquidation and redemption values of the securities. Management determined that the changes to these rights, privileges and preferences should be accounted for as a modification of the securities.

Issuance of Series C Preferred Stock

On January 13, 2015, the Company completed the sale and issuance of 4,631,774 shares of Series C convertible preferred stock (Series C Preferred Stock), par value $0.0001 per share, at a per share price of $6.477 for aggregate gross proceeds of $30.0 million, which included $26.0 million in cash proceeds, net of issuance costs of $0.2 million, and the conversion of $3.8 million of debt by FoxKiser LLP (FoxKiser).

Extinguishment of Preferred Stock

In connection with the issuance of the Series C Preferred Stock in January 2015, the rights, preferences and privileges of Series A Preferred Stock and Series B Preferred Stock then outstanding were modified. More specifically, Series C Preferred Stock received preference in dividends and liquidation proceeds over Series A Preferred Stock and Series B Preferred Stock. Additionally, the dividend rights changed from cumulative dividend rights to non-cumulative dividend rights, and all accrued but unpaid cumulative dividends on the Series A Preferred Stock and Series B Preferred Stock as of January 13, 2015 were forfeited. As a result of this modification, the redemption value and liquidation preferences of Series A Preferred Stock and Series B Preferred Stock, which were previously equal to original issue price plus accrued but unpaid cumulative dividends, were reduced to original issue price plus non-cumulative dividends declared. Additionally, the redemption date of Series A Preferred Stock and Series B Preferred Stock was changed from October 30, 2018 to December 31, 2019.

The Company has accounted for the amendment to the rights, preferences and privileges of the Series A Preferred Stock and Series B Preferred Stock as an extinguishment of the original convertible preferred stock and issuance of new convertible preferred stock due to the significance of the modifications to the substantive contractual terms of the convertible preferred stock and the associated fundamental changes to the nature of the convertible preferred stock. Accordingly, upon extinguishment the Company recorded a loss of $1.3 million on the Series A Preferred Stock and a gain of $2.1 million on the Series B Preferred Stock within stockholders’ equity (deficit) equal to the difference between the fair value of the new shares of preferred stock issued and the carrying amount of the old shares of preferred stock extinguished. The Company allocated the entire net gain on extinguishment of convertible preferred stock of $0.8 million to additional paid-in capital. The net gain on extinguishment is reflected in the calculation of net loss available to common stockholders in accordance with FASB ASC Topic 260, Earnings per Share. The fair value of the Series A Preferred Stock and Series B Preferred Stock was determined using the option-pricing method (OPM) back-solve method on the per share price of Series C Preferred Stock to estimate aggregate equity value. The OPM was used to allocate equity value to the Series A Preferred Stock and Series B Preferred Stock using the Black-Scholes option-pricing model.

Issuance of Series D Preferred Stock

On May 15, 2015, the Company completed the sale and issuance of 7,366,849 shares of Series D convertible preferred stock (Series D Preferred Stock), par value $0.0001 per share, at a per share price of $9.5699 for proceeds of $68.0 million, net of issuance costs of $2.5 million.

Outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock, as well as Series A Preferred Units and Series B Preferred Units, were presented outside of stockholders’ equity due to the rights, preferences and privileges of these securities, including redemption features. These securities were marked to their respective redemption values at each reporting date and the accretion of the securities was excluded from net loss applicable to common stockholders for purposes of calculating net loss per share.

Prior to the closing of the IPO on September 22, 2015, all of the outstanding shares of the Company’s convertible preferred stock were converted into 16,298,045 shares of its common stock. As of December 31, 2016 and 2015, the Company did not have any preferred stock outstanding.

The Company’s reserved shares of common stock for future issuance are as follows (in thousands):

	December 31, 2016		December 31, 2015
Reserved for issuance under equity incentive plans		6,887		5,998
Reserved for issuance under employee stock purchase plan		254		254
		7,141		6,252