6. STOCKHOLDERS’ DEFICIT

Preferred Stock

The Company had outstanding convertible preferred stock before its IPO. Upon the closing of the Company’s IPO, all outstanding shares of its convertible preferred stock automatically converted into 80.8 million shares of Class B common stock on a one-to-one basis.

On October 2, 2017, the Company filed an Amended and Restated Certificate of Incorporation, which changed the capital structure of the Company. The Company is now authorized to issue 10.0 million shares of undesignated preferred stock with rights and preferences determined by the Company’s Board of Directors (the “Board”) at the time of issuance of such shares. As of March 31, 2018 and December 31, 2017, there were no shares of preferred stock issued and outstanding.

Common Stock

The Company’s Amended and Restated Certificate of Incorporation filed on October 2, 2017, established two classes of authorized common stock, Class A common stock and Class B common stock. All shares of common stock outstanding immediately prior to the IPO, including shares of common stock issued upon the conversion of the convertible preferred stock, were converted into an equivalent number of shares of Class B common stock.

Holders of Class A common stock are entitled to one vote for each share of Class A common stock held on all matters submitted to a vote of stockholders and holders of Class B common stock are entitled to ten votes for each share of Class B common stock held on all matters submitted to a vote of stockholders. Except with respect to voting, the rights of the holders of Class A and Class B common stock are identical. Common stock options held prior to the IPO can be exercised into Class B or Class A common stock at the option of the holder. Warrants to purchase common stock held prior to the IPO were exercised into Class B common stock. Shares of Class B common stock are voluntarily convertible into shares of Class A common stock at the option of the holder and are automatically converted into shares of the Company's Class A common stock upon sale or transfer. All stock options and restricted stock units granted after the IPO are exercised or vested into shares of Class A common stock.

The Company has reserved the following shares of common stock for future issuances (in thousands):

	March 31, 2018
Common stock awards granted under equity incentive plans		24,933
Common stock awards available for grant under equity incentive plan		17,096
Total reserved shares of common stock		42,029

Equity Incentive Plans

The 2008 Equity Incentive Plan (the “2008 Plan”) became effective in February 2008. The 2008 Plan allowed for the grant of incentive stock options to employees and for the grant of non-statutory stock options and restricted stock awards to employees, directors and consultants. Options granted under the 2008 Plan were granted at a price per share equivalent to the fair market value on the date of grant. Recipients of option grants under the 2008 Plan who possess more than 10% of the combined voting power of the Company (a “10% Shareholder”) are subject to certain limitations, and incentive stock options granted to such recipients were at a price no less than 110% of the fair market value at the date of grant. Options under the 2008 Plan generally vest over four years and have a term of 10 years.

Commensurate with the Company’s IPO, the Company’s Board of Directors adopted the 2017 Equity Incentive Plan (the “2017 Plan”) which became effective in September 2017. No further equity awards can be granted under the 2008 Plan. The 2017 Plan provides for the grant of incentive stock options to employees and for the grant of non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other forms of equity compensation to employees, directors and consultants. Options and restricted stock units under the 2017 Plan generally vest over four years and have a term of 10 years.

Stock-Based Compensation

The Company measures the cost awards granted under equity incentive plans based on the grant date fair value of the award. The Company uses the straight-line method for expense recognition. The Company recognizes forfeitures as they occur.

The following table shows total stock-based compensation expense for the three months ended March 31, 2018 and 2017 (in thousands):

	Three Months Ended
	March 31, 2018		March 31, 2017
Cost of platform revenue	$	19	$	21
Cost of player revenue		44		36
Research and development		2,296		888
Sales and marketing		1,110		601
General and administrative		960		629
Total stock-based compensation	$	4,429	$	2,175

Stock Options

The summary of the Company’s stock option activity is as follows (in thousands, except price per share data):

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Weighted Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value
Balance, December 31, 2017 - outstanding		26,336		$	4.59		6.4		—
Granted		82			45.96		—	$	19.32
Exercised		(1,670	)		3.04		—		—
Forfeited and expired		(302	)		6.37		—		—
Balance, March 31, 2018 - outstanding		24,446		$	4.81		6.4		—	$	644,801

Options exercisable at March 31, 2018		14,583		$	3.16		4.8		—	$	407,437

The intrinsic value for options exercised during the three months ended March 31, 2018 and 2017, was $56.2 million and $0.1 million, respectively, representing the difference between the fair values of the Company’s common stock underlying these options at the dates of exercise and the exercise prices paid. As of March 31, 2018, the Company had $29.3 million of unrecognized stock compensation expense related to unvested stock options that is expected to be recognized over a weighted-average period of approximately 2.5 years.

The fair value of options granted under the equity incentive plans is estimated on the grant date using the Black-Scholes option-valuation model. The assumptions used in the Black-Scholes model are as follows:

	Three Months Ended
	March 31, 2018		March 31, 2017
Dividend rate		—		—
Expected term (in years)		6.1	6.1 - 6.5
Risk-free interest rate	2.32 - 2.67%		2.18 - 2.25%
Expected volatility	39 - 40%		43 - 44%

Restricted Stock Units

Pursuant to the 2017 Plan, the Company issued restricted stock units to employees. The summary of the Company’s restricted stock unit activity is as follows (in thousands, except price per share data):

	Number of Shares			Weighted Average Grant Date Fair Value Per Share
Balance, December 31, 2017 - outstanding		272		$	43.55
Awarded		227			42.98
Released		—			—
Forfeited		(12	)		43.55
Balance, March 31, 2018 - outstanding		487		$	43.29

The unrecognized compensation cost related to restricted stock units as of March 31, 2018 was $19.7 million, which the Company expects to recognize over 3.7 years. No restricted stock units vested during the three months ended March 31, 2018.

Warrants

On March 31, 2018, the Company had no outstanding warrants. As of December 31, 2017, the Company had outstanding warrants to purchase 0.2 million shares of Class B common stock.

Convertible preferred stock warrants issued and outstanding at the time of the Company’s IPO were automatically converted into Class B common stock warrants at the time of the Company’s IPO. Prior to the IPO the fair value of these convertible preferred stock warrants was recorded as a liability and remeasured at the end of each balance sheet date using the Black-Scholes option pricing model. The changes in the fair value during the year were recognized in the condensed consolidated statements of operations.

The assumptions used to value the preferred stock warrants outstanding during the three months ended March 31, 2017 as follows:

	Three Months Ended
	March 31, 2017
Dividend rate	$	—
Expected term (in years)	3.2 - 3.4
Risk-free interest rate	1.5% - 1.6%
Expected volatility	45.3% - 45.9%