Capitalization

At December 31, 2013, the authorized capital stock of the Company consisted of 73,380,126 shares of common stock, of which 32,500,000 shares were designated Class A common stock and 4,190,063 shares were designated Class B common stock, and 29,691,524 shares of preferred stock. On March 14, 2014 the authorized capital stock of the Company was increased to 80,608,856 shares of common stock. In connection with the IPO, the outstanding shares of Class A common stock and Class B common stock were converted into shares of a single class of common stock on a one-for-one basis. Class A common stock and Class B common stock are collectively referred to herein as common stock.

Initial Public Offering

On April 7, 2014, the Company closed its IPO whereby 6,432,445 shares of common stock were issued and sold by the Company (including 1,015,649 shares sold pursuant to the underwriters’ exercise of their over-allotment option), and 1,354,199 shares of common stock were sold by selling stockholders at an IPO price of $15.00 per share. The Company received proceeds from the offering of approximately $86.2 million after deducting underwriting discounts and commissions and offering expenses. The Company did not receive any proceeds from the sales of shares by the selling stockholders.

In connection with the Company’s IPO: (i) all shares of the Company’s outstanding convertible Series A, B, C and D preferred stock automatically converted into an aggregate of 14,410,238 shares of Class A common stock on a one for one-half basis; (ii) each outstanding share of Class B common stock automatically converted into one share of Class A common stock; (iii) all shares of Class A common stock (including all shares of Class A common stock issued upon conversion of convertible preferred stock and Class B common stock) converted into a single class of common stock; (iv) a warrant for 845,867 shares of convertible preferred stock was net exercised, resulting in the issuance of 286,055 shares of common stock based on the IPO price of $15.00 per share and taking into account the 1-for-2 reverse stock split; (v) a warrant exercisable for 25,174 shares of convertible preferred stock automatically converted into a warrant exercisable for 12,587 shares of common stock (which was subsequently net exercised); and (vi) the Company’s certificate of incorporation was amended in various respects, including to provide for authorized capital stock of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock. The board of directors is authorized to establish, from time to time, the number of shares to be included in each series of preferred stock, and to fix the designation, powers, privileges, preferences, and relative participating, optional or other rights, if any, of the shares of each series of preferred stock, and any of its qualifications, limitations or restrictions.

In addition, upon completion of the IPO, costs associated with the IPO of $3.5 million were reclassified from other assets, non-current to additional paid-in capital.

Convertible Preferred Stock

At December 31, 2013 the Company’s outstanding convertible preferred stock consisted of the following:



	December 31, 2013
	Shares Authorized	Shares Outstanding	Carrying Values		Liquidation Preference

			(Dollars in thousands)
Series A	6,154,000	6,154,000	$	4,000	$	6,118
Series B	13,588,160	13,562,986	21,087		30,754
Series C	4,765,173	3,919,306	9,484		12,779
Series D	5,184,191	5,184,189	18,000		23,121
Total	29,691,524	28,820,481	$	52,571	$	72,772

Prior to the conversion of the preferred stock into common stock in April 2014, the rights and preferences of the convertible preferred stock were as follows:

Voting Rights: On any matters presented to the Company’s stockholders for their action or consideration, each holder of convertible preferred stock was entitled to one vote for each share of Class A common stock into which such holder’s shares of convertible preferred stock were then convertible. Except as provided by law or the Company's amended and restated certificate of incorporation, the holders of the convertible preferred stock and Class A common stock vote together as a single class.

Dividends: The holders of the convertible preferred stock were entitled, when, as, and if declared by the board of directors, and prior and in preference to common stock, to cumulative dividends at the following per annum rates (pro-rated for partial years elapsed): $0.052 per share for Series A, $0.1244480 per share for Series B, $0.1941832 per share for Series C, and $0.2844824 per share for Series D. Cumulative preferred stock dividends at December 31, 2013 were $19.7 million. Unless declared, dividends were not payable except in the event of a liquidation, dissolution or winding up of the Company. No dividends had been declared or paid to date.

Liquidation: In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or a sale of the Company, the holders of the convertible preferred stock were entitled to receive out of the assets available for distribution to the Company’s stockholders, on a pari passu basis prior to distribution of any assets of the Company to the holders of common stock, an amount equal to the greater of (a) the original issuance price plus accrued but unpaid dividends, or (b) such amount as would have been payable had the convertible preferred stock converted into common stock immediately prior to the liquidation, dissolution or winding up. If amounts available to be distributed were insufficient to pay the liquidation preferences of the preferred stock in full, then the entire assets and funds of the Company legally available for distribution would be distributed to the holders of convertible preferred stock ratably in proportion to the preferential amount each holder would have otherwise been entitled to receive. After payment of the liquidation preferences to the convertible preferred stock, all remaining assets were to be distributed to the common stock.

The liquidation preference provisions of the convertible preferred stock were considered contingent redemption provisions because there were certain elements that were not solely within the control of the Company, such as a change in control of the Company. Accordingly, the Company presented the convertible preferred stock within the mezzanine portion of the accompanying consolidated balance sheets.

Conversion: Each outstanding share of convertible preferred stock was convertible, at the holder’s option, into shares of Class A common stock at a conversion rate determined by dividing the original issue price for such share by the then Conversion Price for such share. The original issue price and conversion price of the each series of preferred stock were as follows:



	Original Issue Price per share		Conversion Price per share
Series A	$	0.65	$	1.30
Series B	$	1.55556	$	3.11112
Series C	$	2.42729	$	4.85458
Series D	$	3.55603	$	7.11206

The conversion price was subject to adjustment in the event of certain anti-dilutive issuances of shares of common stock. The conversion price per share in the table above reflects the adjustment for the 1-for-2 reverse stock split of the Company’s common stock effected on March 18, 2014.

Each share of convertible preferred stock would automatically convert into shares of common stock at its then effective conversion rate immediately upon the earlier of (i) the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, with proceeds to the Company of not less than $20 million (net of underwriting discounts and commissions) based on a pre-offering enterprise value of at least $250 million, (ii) or upon the consent of the holders on the date specified by a vote of at least 75% of all then-outstanding shares of convertible preferred stock voting together as a single class on an as-converted to Class A common stock basis, provided that the Series C preferred stock shall not be converted as a result of such a vote without the consent of the holders of a majority of the shares of Series C preferred stock then outstanding, and the Series D preferred stock shall not be converted as a result of such a vote without the consent of the holders of a majority of the shares of Series D preferred stock then outstanding.

Redemption: The convertible preferred stock was not redeemable at the option of the holder.

Convertible Preferred Stock Warrants

On March 1, 2009, the Company issued a fully vested, non-forfeitable warrant to purchase 25,174 shares of the Company’s Series B preferred stock at an exercise price of $1.55556 per share. The warrant was issued to the Company’s bank, Silicon Valley Bank, in connection with securing an equipment term loan. The warrant was fully vested upon issuance and expires on March 1, 2019. The holder of the warrant has the right to include shares issued upon exercise of the warrant in certain registered offerings by the Company of its common stock. The fair value of the warrants at issuance was recorded as a deferred financing cost and was amortized over the term of the loan. In connection with the Company's IPO, this warrant was automatically converted into a warrant exercisable for 12,587 shares of common stock, and was net exercised in June 2014.

On January 12, 2010, the Company issued a warrant to an investment bank to purchase 845,867 shares of the Company’s Series C preferred stock at an exercise price of $2.42729 per share. The warrant was issued for banking and financial advisory services provided to the Company. The warrant was fully vested upon issuance and expired on the earliest of January 12, 2015, a firm commitment underwritten initial public offering if the lead underwriter requests termination, or, under certain circumstances, a liquidation, dissolution, winding up or change in control as defined in the Company's amended and restated certificate of incorporation. The holder of the warrant had the right to exercise the warrant for cash or on a net issuance basis. In December 2013, the lead underwriter of the Company's initial public offering requested the termination of the warrant in connection with the offering, and in March 2014, the warrant holder agreed to net exercise the warrant upon the consummation of the offering. In April 2014, the warrant was net exercised, resulting in the issuance of 286,055 shares of common stock based on the IPO price of $15.00 per share and taking into account the 1-for-2 reverse stock split.

Common Shares Reserved For Issuance

The Company is required to reserve and keep available out of its authorized but unissued shares of common stock such number of shares sufficient to effect the contingent consideration and the conversion of all shares granted and available for grant under the Company’s stock award plans. The number of shares of the Company's stock reserved for these purposes at December 31, 2016 was 12,116,233.