NOTE 9 — NON-CONTROLLING INTERESTS

As discussed in Note 1 — Business Organization, Carvana Co. consolidates the financial results of Carvana Group and reports a non-controlling interest related to the portion of Carvana Group owned by the Existing LLC Unitholders. Changes in the ownership interest in Carvana Group while Carvana Co. retains its controlling interest will be accounted for as equity transactions.

Future direct exchanges of LLC Units will result in a change in ownership and reduce the amount recorded as non-controlling interests and increase additional paid-in capital.

Upon the exercise of options issued by Carvana Co., or the issuance of other types of equity compensation by Carvana Co. such as the issuance of restricted or non-restricted stock, payment of bonuses in stock or settlement of stock appreciation rights in stock, Carvana Group is required to issue to Carvana Co. a number of Class A Units equal to 1.25 times the number of shares of Class A common stock being issued in connection with the exercise of such options or issuance of other types of equity compensation, subject to adjustment for stock splits, stock dividends, reclassifications and similar transactions. Issuance of Class A Units to Carvana Co. in these circumstances will result in a change in ownership and reduce the amount recorded as non-controlling interest and increase additional paid-in capital. Additionally, forfeitures of unvested equity awards issued by Carvana Co. will result in an increase in the amount recorded as non-controlling interest and decrease additional paid-in capital.

The non-controlling interest related to the Class B Units is determined based on the respective participation thresholds and the share price of Class A common stock on an as-converted basis. To the extent that the number of as-converted Class B Units change or Class B Units are forfeited, the resulting difference in ownership will be accounted for as equity transactions adjusting the non-controlling interest and additional paid-in capital.

For the three and six months ended June 30, 2017, the total adjustments related to equity compensation issued by Carvana Co., changes in the number of as-converted Class B Units and forfeitures of Class B Units was a decrease in non-controlling interests and a corresponding increase in additional paid-in capital of approximately $0.8 million which has been included in adjustments to the non-controlling interests in the accompanying unaudited condensed consolidated statement of stockholders' equity.

As of June 30, 2017, Carvana Co. owned approximately 11% of Carvana Group with the Existing LLC Unitholders owning the remaining 89%. The non-controlling interests on the accompanying unaudited condensed consolidated statements of operations represents the portion of the loss attributable to the economic interest in Carvana Group held by the non-controlling Existing LLC Unitholders calculated based on the average non-controlling interests' ownership during the periods presented.

The following table summarizes the effects of changes in ownership in Carvana Group on the Company's equity (in thousands):



	Three Months Ended June 30, 2017			Six Months Ended June 30, 2017
Transfers (to) from non-controlling interests:
Decrease in additional paid-in capital as a result of the Organizational Transactions	$	(174,255	)	$	(174,255	)
Increase in additional paid-in capital as a result of adjustments to the non-controlling interests	846			846
Total transfers to non-controlling interests	$	(173,409	)	$	(173,409	)