10.Share Based Awards

2008 Stock Plan

Our 2008 Stock Plan, or 2008 Plan, which expired on June 12, 2014, provided for the grant of incentive and nonstatutory stock options to employees, nonemployee directors and consultants of the Company. Options granted under the 2008 Plan generally become exercisable within three to four years following the date of grant and expire 10 years from the date of grant. When options are subject to our repurchase right, we may buy back any unvested shares at their original exercise price in the event of an employee’s termination prior to full vesting.

Our 2008 Plan was terminated following the date our 2014 Equity Incentive Plan, or our 2014 Plan, became effective. Any outstanding stock awards under our 2008 Plan will continue to be governed by the terms of our 2008 Plan and applicable award agreements.

2014 Equity Incentive Plan

Our 2014 Plan provides for the grant of incentive stock options, or ISOs, within the meaning of Section 422 of the Internal Revenue Code, or the Code, to our employees and our parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, and other forms of equity compensation to our employees, directors and consultants. Additionally, our 2014 Plan provides for the grant of performance cash awards to our employees, directors and consultants.

The initial number of shares of our common stock available to be issued under our 2014 Plan was 8,142,857, which number of shares will be increased by any shares subject to stock options or other stock awards granted under the 2008 Stock Plan that would have otherwise returned to our 2008 Stock Plan (such as upon the expiration or termination of a stock award prior to vesting), not to exceed 16,312,202.

The number of shares of our common stock reserved for issuance under our 2014 Plan automatically increase on January 1 of each year, beginning on January 1, 2015 and continuing through and including January 1, 2024, by 5% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our board of directors. On January 1, 2017, we increased the number of shares of common stock reserved for issuance under our 2014 Plan by 4,453,425 shares, which was 5% of the total number of shares of our common stock outstanding at December 31, 2016.

Amended and Restated 2015 Inducement Plan

On December 20, 2015, our board of directors adopted our 2015 Inducement Plan, or the Inducement Plan, to reserve 1,600,000 shares of our common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company. The terms and conditions of the Inducement Plan are substantially similar to our stockholder-approved 2014 Plan. On January 5, 2016, our board of directors approved the amendment and restatement of the Inducement Plan to increase the share reserve under the Inducement Plan to 1,970,000 shares of our common stock. As of September 30, 2017, there were 1,654,167 options and restricted stock units outstanding under the Inducement Plan.

2014 Employee Stock Purchase Plan

The purpose of our 2014 Employee Stock Purchase Plan, or ESPP, is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward our success and that of our affiliates. Our ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Our ESPP permits eligible employees to purchase our common stock through payroll deductions, which may not exceed 15% of the employee’s base compensation. Stock may be purchased under the plan at a price equal to 85% of the fair market value of our common stock on either the first day of the offering or the last day of the applicable purchase period, whichever is lower.

As of September 30, 2017 and December 31, 2016, approximately 990,501 and 575,974 shares of common stock were available for future issuance under our ESPP, respectively. The number of shares of our common stock reserved for issuance under our ESPP increase automatically each year, beginning on January 1, 2015 and continuing through and including January 1, 2024, by the lesser of (i) 1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year; (ii) 2,142,857 shares of common stock; or (iii) such lesser number as determined by our board of directors. Shares subject to purchase rights granted under our ESPP that terminate without having been exercised in full will not reduce the number of shares available for issuance under our ESPP. On January 1, 2017, we increased the number of shares available for issuance under the ESPP by 890,685 shares, which was 1% of the total number of shares of our common stock outstanding as of December 31, 2016. On June 14, 2017, our stockholders approved the amendment and restatement of the ESPP to provide for a one-time increase of 1.2 million shares of common stock available for issuance under the ESPP.

Restricted Stock Units

In 2014 we began granting restricted stock units under our 2014 Plan. For stock-based compensation expense, we measure the value of the restricted stock units based on the fair value of our common stock on the date of grant. Our restricted stock unit grants are subject to service conditions and we expense the fair value of those shares on a straight-line basis over their vesting periods.

Our restricted stock unit activity for the nine months ended September 30, 2017 was as follows:


	Restricted Stock Units
		Weighted-
		Average
	Number of	Grant Date
	Shares	Fair Value
Unvested, December 31, 2016	10,474,975	$	4.45
Granted	9,669,478		5.20
Vested	(4,948,583)		4.67
Forfeitures	(1,954,759)		5.12
Unvested, September 30, 2017	13,241,111	$	4.82

Bonus Plans

In 2015, our board of directors approved the 2015 Executive Bonus Plan and 2015 Non-Executive Bonus Plan, which provided for the issuance of shares of unrestricted common stock to employees based on meeting certain Company metrics.

We issued 1,653,371 shares of unrestricted common stock in the first quarter of 2016 based on amounts earned under the 2015 Non-Executive Bonus Plan. No shares were issued under the 2015 Executive Bonus Plan.

We issued 1,010,550 shares of unrestricted common stock in the first quarter of 2017, after withholding 677,547 shares to cover employee payroll taxes, based on amounts earned under the Executive Bonus Plan and 2016 Non-Executive Bonus Plan, or 2016 Bonus Plans, in the first quarter of 2017.

In April 2017, the Compensation Committee of our board of directors approved the 2017 Executive Bonus Plan and 2017 Non-executive Bonus Plan, or collectively, the 2017 Bonus Plans. The 2017 Bonus Plans are funded based on the achievement of certain 2017 Company metrics. Other than with respect to our CEO, amounts earned under the 2017 Bonus Plans, if any, will be issued in shares of unrestricted common stock in the first quarter of 2018.

Shares issued under the aforementioned Bonus Plans will be issued from our 2014 Plan and reduce the 2014 Plan shares available for issuance.

We record stock-based compensation expense related to the bonus plans over the service period of eligible employees based on forecasted performance relative to the Company metrics. To the extent that updated estimates of bonus expense differ from original estimates, the cumulative effect on current and prior periods of those changes is recorded in the period those estimates are revised.

In the three months ended March 31, 2017, we recorded $1.7 million of stock-based compensation expense under the 2016 Bonus Plans. In the three and nine months ended September 30, 2017, we recorded $2.0 million and $6.1 million, respectively, of stock-based compensation expense under the 2017 Bonus Plans. In the three months ended March 31, 2016, we recorded $924,000 of stock-based compensation expense under the 2015 Non-Executive Bonus Plan. In the three and nine months ended September 30, 2016, we recorded $1.4 million and $5.1 million, respectively, of stock-based compensation expense related to the 2016 Bonus Plans.

Stock Options

Stock option activity under the 2008 Plan, 2014 Plan and 2015 Inducement Plan for the nine months ended September 30, 2017 was as follows:


		Options Outstanding
						Weighted-
	Number of					Average	Aggregate
	Shares		Weighted-			Remaining	Intrinsic
	Available	Number of	Average		Contractual		Value
	for Issuance	Shares	Exercise Price			Term (Years)	(In thousands)
Balance—December 31, 2016	4,199,415	9,835,992	$	4.39		6.23	$	5,734
Authorized	4,453,425	—
Stock options granted	(100,000)	100,000		4.90
Issuance of shares under 2016 Bonus Plans	(1,688,077)	—
Shares withheld from net settlement of restricted stock units	677,547
Restricted stock units granted	(7,981,401)	—
Exercised	—	(1,033,121)		2.99
Stock options canceled	1,006,137	(1,006,137)		6.31
Restricted stock units canceled	1,954,759	—
Balance—September 30, 2017	2,521,805	7,896,734	$	4.34		4.84	$	4,387
Vested and exercisable—September 30, 2017		6,593,808	$	4.26			$	4,147
Vested and expected to vest(1)—September 30, 2017		7,752,157	$	4.34			$	4,354

(1)

Options expected to vest reflect an estimated forfeiture rate.

Our stock-based compensation expense was recorded in the following cost and expense categories (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Cost of revenue	$	932	$	747	$	2,859	$	2,192
Research and development		3,914		2,709		11,046		9,122
Sales and marketing		2,258		2,307		6,612		8,418
General and administrative		1,974		2,109		5,732		6,934
Total	$	9,078	$	7,872	$	26,249	$	26,666

We used the Black-Scholes Model to estimate the fair value of our stock options granted to employees with the following assumptions:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2017	2016	2017	2016
Expected dividend yield	n/a	—	—	—
Risk-free interest rate	n/a	1.5%	2.1%	1.4 -1.5%
Expected volatility	n/a	42%	41%	42%
Expected life (in years)	n/a	6.1	6.1	6.1

We used the Black-Scholes model to estimate the fair value of our Employee Stock Purchase Plan awards with the following assumptions:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2017	2016	2017	2016
Expected dividend yield	—	—	—	—
Risk-free interest rate	1.3%	0.6%	0.9 - 1.3%	0.6%
Expected volatility	54%	34-38%	34% -54%	34 - 41%
Expected life (in years)	1.3	1.3	1.3	1.3

As required by Topic 718 Compensation—Stock Compensation, we estimate expected forfeitures and recognize compensation costs only for those equity awards expected to vest.

As of September 30, 2017, unrecognized stock-based compensation expense and its remaining weighted-average recognition period was as follows:


	Unrecognized		Remaining
	Stock-based		Weighted-Average
	Compensation		Recognition
	Expense		Period
	(in millions)		(in years)
Stock options	$	2.1	1.8
Restricted stock units		52.7	2.9
ESPP		1.7	0.6
Total	$	56.5