Note

Stockholders’ Equity and Stock-based Compensation Expense

1998,

the Company adopted the

1998

Stock 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

Stock Plan and shares returned to the

1998

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

2012

the Company's 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 as of December 31, 2017		1,494,865		839,919	$	16.46

Options granted		(21,010)		21,010		50.65
Stock awards granted (1)		(530,876)
Options exercised		—		(241,021)		10.16
Options canceled		46,333		(46,333)		22.14
Stock awards canceled (1)		95,775		—		—
Balance, as of September 30, 2018		1,085,088		573,575	$	19.90

(

)

The Company has a “fungible share” provision in its Amended and Restated

2004

Equity Incentive Plan whereby for each full-value award (RSU/PSU) issued or canceled under the plan requires the subtraction or add back of

2.12

shares from or to the Shares Available for Grant, respectively.

Under the Amended and Restated

2004

Equity Incentive Plan, the Company issued

412,617

shares of common stock during the

nine

months ended

September 30, 2018,

in conjunction with stock options exercised and the vesting of restricted stock units ("RSUs") and Performance stock units ("PSUs").

As of

September 30, 2018,

there was approximately

$14.5

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

2.53

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 PSUs granted.

Non-Employee Stock-Based Compensation

The Company granted

3,384

RSUs and

3,384

PSUs to non-employees during the

nine

months ended

September 30, 2018,

and

7,745

stock options and

2,478

RSUs during the year ended

December 31, 2017.

Stock options typically 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, while vesting of the PSUs is subject to the recipient's continued service and achievement of pre-established metrics. The RSUs, PSUs and stock options were granted in exchange for consulting services to be rendered. The Company recognizes stock-based compensation expense for the stock options and stock awards granted to non-employees in an amount equal to the equity instruments fair value when the equity instrument vests.

Stock-based Compensation Expense

Stock-based compensation expense by department recognized during the

three

and

nine

months ended

September 30, 2018

and

2017

were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2018		2017		2018		2017
Cost of revenue	$	196	$	101	$	576	$	377
Sales and marketing
Employee		572		394		1,684		1,215
Non-Employee		(32)		—		60		—
Research and development		164		157		617		633
General and administrative		731		345		2,587		1,398
Total stock-based compensation expense	$	1,631	$	997	$	5,524	$	3,623