7. Stock incentive plans

The Company has a 2012 Stock Incentive Plan, or 2012 Plan, under which the Company granted options to purchase shares of its common stock.  As of March 31, 2015, options to purchase 771,499 shares of common stock remained outstanding under the 2012 Plan.  The 2012 Plan was terminated in connection with the Company’s initial public offering, and accordingly, no new options are available for issuance under this plan.  The 2012 Plan continues to govern outstanding awards granted thereunder.

The Company has a 2002 Plan Incentive Plan, or 2002 Plan, as amended, under which the Company granted options to purchase shares of its common stock.  As of March 31, 2015, options to purchase 555,527 shares of common stock remained outstanding under the 2002 Plan.  The 2002 Plan terminated in March 2012 in connection with the adoption of the 2012 Plan, and, accordingly, no new options are available for issuance under this plan.  The 2002 Plan continues to govern outstanding awards granted thereunder.

The Company’s board of directors adopted and its stockholders approved a 2014 Equity Incentive Plan, or 2014 Plan, effective immediately prior to the effectiveness of its initial public offering. The 2014 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Internal Revenue Code, to the Company’s employees and any parent and subsidiary corporation’s employees, and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to its employees, directors and consultants and its parent and subsidiary corporations’ employees and consultants.

As of March 31, 2015, a total of 1,654,819 shares of common stock have been reserved for issuance pursuant to the 2014 Plan, of which options to purchase 728,250, shares of the Company’s common stock were outstanding, and 989,577  shares of common stock remained available for issuance. The shares to be reserved for issuance under the 2014 Plan will include shares returned to the 2002 Plan, 2012 Plan and the 2014 Plan as a result of expiration or termination of awards (provided that the maximum number of shares that may be added to the 2014 Plan pursuant to such previously granted awards under the 2002 Plan and 2012 Plan is 2,328,569 shares). The number of shares available for issuance under the 2014 Plan also includes an annual increase on the first day of each fiscal year equal to the least of:

For 2015, an additional 762,373 shares were added to the 2014 Plan share reserve pursuant to the provision described above.

Options typically expire between seven and ten years from the date of grant and vest over one to four year terms. Options have been granted to employees, directors and consultants of the Company at the deemed fair market value, as determined by the board of directors, of the shares underlying the options at the date of grant.

The activity for stock options under the Company’s stock plans is as follows:  

The Company’s board of directors adopted and its stockholders approved a 2014 Employee Stock Purchase Plan, or the ESPP, effective immediately prior to the effectiveness of its initial public offering. The ESPP provides for the grant to all eligible employees an option to purchase stock under the ESPP, within the meaning Section 423 of the Internal Revenue Code.  The ESPP permits participants to purchase common stock through payroll deductions of up to 15% of their eligible compensation, which includes a participant’s base straight time gross earnings, incentive compensation, bonuses, overtime and shift premium, but exclusive of payments for equity compensation and other similar compensation.  A participant may purchase a maximum of 1,500 shares during a purchase period.  Amounts deducted and accumulated by the participant are used to purchase shares of the Company’s common stock at the end of each six-month period.  The purchase price of the shares will be 85% of the lower of the fair market value of the Company’s common stock on the first trading day of each offering period or on the exercise date.  The offering periods are currently approximately six months in length beginning on the first business day on or after March 1 and September 1 of each year and ending on the first business day on or after September 1 and March 1 approximately six months later.

As of March 31, 2015, a total of 309,299 shares of common stock have been reserved for sale pursuant to the ESPP.  The number of shares available for sale under the ESPP includes an annual increase on the first day of each fiscal year.

For 2015, an additional 179,069 shares were added to the ESPP share reserve pursuant to the provision described above.

The activity for the 2014 ESPP Stock Plan is as follows:

Stock-based compensation expense recognized for the three months ended March 31, 2015 for the ESPP was $85 and is combined with the 2014 Plan compensation expense for a total compensation expense of $518 for the three months ended March 31, 2015.

The number of equity awards available for grant under the 2014 Plan as of March 31, 2015 and December 31, 2014 was 989,577 and 221,178, respectively.

Employee stock-based compensation expense recognized for the three months ended March 31, 2015 and March 31, 2014 was calculated based on awards ultimately expected to vest and has been reduced for estimated forfeitures at a rate of 7.6% and 6.9%, based on the Company’s historical option cancellations. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

For the three months ended March 31, 2015 and March 31, 2014, stock-based compensation expense recognized under ASC 718, included in cost of sales, sales and marketing expense, general and administrative expense, and research and development expense, totaled $518 and $122, respectively. The unrecognized compensation expense related to non-vested share based compensation granted under the Plans as of March 31, 2015 and March 31, 2014 was $4,528 and $1,254, respectively.