Note

Stockholders’ Equit

y and Stock-based Compensation Expense

1998,

the Company adopted the

1998

Stock Plan, or

1998

Plan, under which

4,650,000

shares of the Company’s common stock were reserved for issuance to employees, directors and consultants. On

January 12, 2004,

the Board of Directors adopted the

2004

Equity Incentive Plan. A total of

1,750,000

shares of common stock were originally reserved for issuance pursuant to the

2004

Equity Incentive Plan. In addition, the shares reserved for issuance under the

2004

Equity Incentive Plan included shares reserved but un-issued under the

1998

Plan and shares returned to the

1998

Plan as the result of termination of options or the repurchase of shares. In

2012

the stockholders approved a “fungible share” provision whereby each full-value award issued under the

2004

Equity Incentive Plan results in a requirement to subtract

2.12

shares from the shares reserved under the Plan.

Activity under the Company’s Amended and Restated

2004

Equity Incentive Plan, as amended, is summarized as follows:

			Options Outstanding
	Shares Available for Grant		Number of Stock Options Outstanding		Weighted- Average Exercise Price
Balance, December 31, 2017		1,494,865		839,919	$	16.46
Options granted		(21,010)		21,010		50.65
Stock awards granted (1)		(395,511)		—		—
Options exercised		—		(188,859)		9.98
Options canceled		43,833		(43,833)		20.33
Stock awards canceled (1)		93,390		—		—
Balance, June 30, 2018		1,215,567		628,237	$	19.28

(

)

The

Company

has

“fungible

share”

provision

its

Amended

and

Restated

2004

Equity

Incentive

Plan

whereby

for

each

full-value

award

(RSU/PSU)

issued

canceled

under

the

Plan

requires

the

subtraction

add

back

2.12

from

the

Available

for

Grant,

respectively.

Under the

2004

Equity Incentive Plan, as amended, the Company issued

346,279

shares of common stock during the

six

months ended

June 30, 2018,

in conjunction with stock options exercised and the vesting of RSUs and PSUs.

As of

June 30, 2018,

there was approximately

$19.8

million of unrecognized compensation expense, net of projected forfeitures, for stock options and stock awards. The expense is expected to be recognized over the remaining weighted-average period of

2.5

years. The actual expense recorded in the future

may

be higher or lower based on a number of factors, including, actual forfeitures experienced and the degree of achievement of the performance goals related to the PSUs granted.

Non-Employee Stock-Based Compensation

The Company granted

3,384

RSUs and

3,384

PSUs to non-employees during the

six

months ended

June 30, 2018,

and

7,745

stock options and

2,478

RSUs during the year ended

December 31, 2017.

The stock options vest over

years at

25%

on the

first

anniversary of the grant date and

1/48th

each month thereafter. The RSUs vest over

years at

25%

on each anniversary of the grant date, whiles vesting of the PSUs is subject to the recipient's continued service and achievement of pre-established metrics. These RSUs/PSUs and stock options were granted in exchange for consulting services to be rendered and are measured and recognized as they are earned. The Company revalues stock options granted to non-employees at each reporting date as the underlying equity instruments vest.

Stock-based Compensation Expense

Stock-based compensation expense by department recognized during the

three

and

six

months ended

June 30, 2018

and

2017

were as follows (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Cost of revenue	$	227	$	147	$	380	$	276
Sales and marketing
Employee		660		401		1,112		821
Non-Employee		55		—		92		—
Research and development		262		239		453		476
General and administrative		1,002		444		1,856		1,053
Total stock-based compensation expense	$	2,206	$	1,231	$	3,893	$	2,626