STOCK-BASED COMPENSATION

Stock Options and Awards

The Company’s equity incentive program is a long-term retention program that is intended to attract, retain, and provide incentives for talented employees, consultants, officers, and directors and to align stockholder and employee interests. The Company may grant time based options, market condition based options, stock appreciation rights, restricted stock, restricted stock units (“RSUs”), performance shares, performance units, and other stock-based or cash-based awards to employees, officers, directors, and consultants. Under this program, stock options may be granted at prices not less than the fair market value on the date of grant for stock options. These options generally vest over four years and expire from seven to ten years from the date of grant. In addition to time based vesting, market condition based options are subject to a market condition: the closing price of the Company stock must exceed a certain level for a number of trading days within a specified timeframe or the options will be cancelled before the expiration of the options. Restricted stock generally vests over one year. RSUs generally vest over three years. Awards granted other than an option or stock appreciation right reduce the common stock shares available for grant under the program by 1.75 shares for each share issued.




	June 30, 2016
Common stock shares available for grant	653,077
Standard and market condition stock options outstanding	3,521,481
Restricted stock awards outstanding	77,540
RSU's outstanding	510,234

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (“ESPP”). Under the ESPP, eligible employees may purchase common stock through payroll deductions at a purchase price of 85% of the lower of the fair market value of the Company’s common stock at the beginning of the offering period or the purchase date. Participants may not purchase more than 2,000 shares in a six-month offering period or purchase stock having a value greater than $25,000 in any calendar year as measured at the beginning of the offering period. A total of 1,000,000 shares of common stock have been reserved for issuance under the ESPP. As of June 30, 2016, 621,269 shares had been purchased since the inception of the ESPP in 1999. Under ASC 718-10, the ESPP is considered a compensatory plan and the Company is required to recognize compensation cost related to the fair value of the award purchased under the ESPP. Shares purchased under the ESPP for the six months ended June 30, 2016 are listed below. Shares purchased under the ESPP for the six months ended June 30, 2015 are 23,713. The intrinsic value listed below is calculated as the difference between the market value on the date of purchase and the purchase price of the shares.




	Six Months Ended June 30, 2016
Shares purchased under ESPP	17,711
Average price of shares purchased under ESPP	$	7.21
Intrinsic value of shares purchased under ESPP	$	23,000

Summary of Standard Stock Options

The following table sets forth the summary of activity with respect to standard stock options granted under the Company’s stock option plans for the six months ended June 30, 2016:



	Six Months Ended June 30, 2016
Beginning outstanding balance	3,596,533
Granted	444,769
Exercised	(280,676		)
Forfeited	(219,457		)
Expired	(244,688		)
Ending outstanding balance	3,296,481
Aggregate intrinsic value of options exercised	$	700,000
Weighted average fair value of options granted	3.72

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the exercise price of the Company’s common stock for the options that were in-the-money.

Information regarding these standard stock options outstanding at June 30, 2016 is summarized below:



	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in millions)
June 30, 2016
Options outstanding	3,296,481	$	8.51	4.18	$	2.5
Options vested and expected to vest using estimated forfeiture rates	3,104,511	8.46		4.08	2.5
Options exercisable	2,097,193	8.08		3.42	2.4

Summary of Market Condition Based Stock Options

The following table sets forth activity with respect to market condition based stock options granted under the Company’s stock option plans for the six months ended June 30, 2016:



	Six Months Ended June 30, 2016
Beginning outstanding balance	200,000
Granted	75,000
Exercised	—
Canceled	(50,000		)
Ending outstanding balance	225,000
Aggregate intrinsic value of options exercised	$	—
Weighted average fair value of options granted	3.68

Information regarding these market condition based stock options outstanding at June 30, 2016 is summarized below:



	Number of Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in millions)
June 30, 2016
Options outstanding	225,000	$	8.39	6.00	$	—
Options vested and expected to vest using estimated forfeiture rates	202,048	8.38		5.99	—
Options exercisable	46,875	8.09		5.67	—

Summary of Restricted Stock Units

RSU activity for the six months ended June 30, 2016 was as follows:



	Six Months Ended June 30, 2016
Beginning outstanding balance	487,117
Awarded	295,880
Released	(214,222		)
Forfeited	(58,541		)
Ending outstanding balance	510,234
Weighted average grant date fair value of RSUs granted	$	8.85
Total fair value of RSUs released	1,806,000

Information regarding RSUs outstanding at June 30, 2016 is summarized below:



	Number of Shares	Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in millions)
June 30, 2016
RSUs outstanding	510,234	1.37	$	3.7
RSUs vested and expected to vest using estimated forfeiture rates	385,983	1.25	2.8

Summary of Restricted Stock Awards

Restricted stock award activity for the six months ended June 30, 2016 was as follows:



	Six Months Ended June 30, 2016
Beginning outstanding balance	21,356
Awarded	77,540
Released	(21,356		)
Forfeited	—
Ending outstanding balance	77,540
Weighted average grant date fair value of restricted stock awarded	$	6.52
Total fair value of restricted stock awards released	139,000

Stock Plan Assumptions

The assumptions used to value option grants under the Company’s stock plans were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Standard Stock Options
Expected life (in years)	4.5		4.6		4.5		4.7
Volatility	55	%	55	%	55	%	56	%
Interest rate	1.1	%	1.4	%	1.2	%	1.4	%
Dividend yield	N/A		N/A		N/A		N/A



	Three Months Ended June 30,		Six Months Ended June 30,
	2016	2015	2016		2015
Market Condition Based Stock Options
Expected life (in years)	N/A	N/A	7.0		7.0
Volatility	N/A	N/A	59	%	65	%
Interest rate	N/A	N/A	1.6	%	1.9	%
Dividend yield	N/A	N/A	N/A		N/A



	Three Months Ended June 30,		Six Months Ended June 30,
	2016	2015	2016		2015
Employee Stock Purchase Plan
Expected life (in years)	N/A	N/A	0.5		0.5
Volatility	N/A	N/A	53	%	45	%
Interest rate	N/A	N/A	0.5	%	0.1	%
Dividend yield	N/A	N/A	N/A		N/A

Compensation Costs

Total stock-based compensation recognized in the condensed consolidated statements of operations and comprehensive loss is as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
	(In thousands)
Statement of Operations Classifications
Sales and marketing	$	332	$	288	$	560	$	552
Research and development	258		264		784		760
General and administrative	665		677		2,245		1,657
Total	$	1,255	$	1,229	$	3,589	$	2,969

As of June 30, 2016, there was $8.3 million of unrecognized compensation cost, adjusted for estimated forfeitures, related to non-vested stock options, restricted stock awards and RSUs granted to the Company’s employees and directors. This cost will be recognized over an estimated weighted-average period of approximately 2.62 years for standard options, 2.76 years for market condition based options, 2.11 years for RSUs, and 0.93 years for restricted stock awards. Total unrecognized compensation cost will be adjusted for future changes in estimated forfeitures.