7. Net Income (Loss) Per Share

Basic income (loss) per common share is determined by dividing income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted income (loss) per share is computed by dividing the income (loss) attributable to common stockholders by the weighted-average number of common share equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of the Company’s stock option grants and the if-converted method is used to determine the dilutive effect of the Company’s preferred stock.

Prior to the Company’s initial public offering (IPO), net income (loss) per share was calculated under the two-class method under which all earnings (distributed and undistributed) are allocated to each class of common stock and participating securities based on their respective rights to receive dividends. In the event that the Board of Directors declared a dividend payable in cash or other property on the then-outstanding shares of common stock, the holders of the Series A-1, A-2, B, C, D, and D-2 convertible preferred stock would have been entitled to receive the amount of dividends per share of preferred stock that would be payable on the largest number of whole shares of common stock into which each share of preferred stock could then be converted. Therefore, the Series A-1, A-2, B, C, D and D-2 were participating securities. All of the outstanding shares of Series A-1, A-2, B, C, D, and D-2 convertible preferred stock converted to common stock upon the consummation of the Company’s IPO.

Basic and diluted income (loss) per common share is computed as follows (in thousands except share and per share data):


	Three Months Ended September 30,						Nine Months Ended September 30,
	2014			2013			2014			2013
Net income (loss)	$	(3,928	)	$	6,604		$	(19,295	)	$	2,944
Less: undistributed earnings allocated to participating securities		—			(6,435	)		—			(2,944	)

Net income (loss) allocable to common shares	$	(3,928	)	$	169		$	(19,295	)	$	—

Basic weighted average common shares outstanding		27,751,437			1,184,507			27,227,151			1,463,798
Basic income (loss) per common share	$	(0.14	)	$	0.14		$	(0.71	)	$	0.00
Net income (loss)	$	(3,928	)	$	6,604		$	(19,295	)	$	2,944
Less: undistributed earnings allocated to participating securities and other add-backs to net loss		—			(6,404	)		—			(2,944	)

Net income (loss) allocable to common shares	$	(3,928	)	$	200		$	(19,295	)	$	—

Basic weighted average common shares outstanding		27,751,437			1,184,507			27,227,151			1,463,798
Effect of dilutive securities		—			20,058,472			—			20,445,061

Diluted weighted average common shares outstanding		27,751,437			21,242,979			27,227,151			21,908,859

Diluted income (loss) per common share	$	(0.14	)	$	0.01		$	(0.71	)	$	0.00

In October 2013, the Company issued 5,750,000 shares of common stock in connection with its IPO and 16,955,790 shares of common stock in connection with the automatic conversion of its convertible preferred stock upon the closing of the IPO. In February 2014, the Company issued 2,250,000 shares of common stock in a follow-on offering. The issuance of these shares resulted in a significant increase in the Company’s weighted average shares outstanding for the three and nine months ended September 30, 2014 when compared to the comparable prior year period and is expected to continue to impact the year-over-year comparability of the Company’s income (loss) per share calculations for the remainder of 2014.

The following common stock equivalents were excluded from the calculation of diluted loss per share allocable to common stockholders because their inclusion would have been anti-dilutive:


	Three Months Ended Sept 30,				Nine Months Ended Sept 30,
	2014		2013		2014		2013
Series A-1 Preferred Stock		—		2,156,114		—		2,156,114
Series A-2 Preferred Stock		—		392,274		—		392,274
Series B Preferred Stock		—		4,336,037		—		4,336,037
Series C Preferred Stock		—		5,909,906		—		5,909,906
Series D Preferred Stock		—		769,468		—		769,468
Series D-2 Preferred Stock		—		3,391,991		—		3,391,991
Warrants to purchase Series D-2 Preferred Stock		—		180,784		—		180,784
Stock Options		2,264,749		2,910,952		2,274,734		2,910,952