7. Stockholders’ equity

 

The Company has a 2012 Equity Incentive Plan (2012 Plan) under which the Company granted options to purchase shares of its common stock. As of March 31, 2017, options to purchase 373,442 shares of common stock remained outstanding under the 2012 Plan. The 2012 Plan was terminated in connection with the Company’s initial public offering in February 2014, 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 Stock Incentive Plan (2002 Plan) as amended, under which the Company granted options to purchase shares of its common stock. As of March 31, 2017, options to purchase 104,737 shares of common stock remained outstanding under the 2002 Plan. The 2002 Plan was 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 (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, 2017, awards to purchase 1,672,138 shares of the Company’s common stock were outstanding, and 1,297,552 shares of common stock remained available for issuance under the 2014 Plan. The shares available for issuance under the 2014 Plan will be increased by any 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 is increased annually on the first day of each fiscal year by an amount equal to the least of:

 

For 2017, an additional 815,594 shares were added to the 2014 Plan share reserve pursuant to the provision described above.

Stock Options

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, as determined by the board of directors, at the deemed fair market value 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 unrecognized compensation expense related to non-vested stock-based compensation granted under the Plans as of March 31, 2017 and March 31, 2016 was $13,511 and $10,704, respectively.

Restricted Stock Units

 

The fair value of each restricted stock unit (RSU) is based on the fair market value of the awards on the grant date using the Black-Scholes pricing model. The shares vest and the restrictions lapse in one-fourth increments each year over a four-year service period.

RSU activity for the three months ended March 31, 2017, is summarized below:

 

 

As of March 31, 2017, there were $370 of unrecognized compensation cost related to unvested employee RSUs.  This amount is expected to be recognized over a weighted-average period of 3.8 years.

Employee Stock Purchase Plan

 

The Company’s board of directors adopted and its stockholders approved a 2014 Employee Stock Purchase Plan (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, 2017, a total of 605,629 shares of common stock were available for sale pursuant to the ESPP. The number of shares available for sale under the ESPP is increased annually on the first day of each fiscal year by an amount equal to the least of:

For 2017, an additional 179,069 shares were added to the ESPP share reserve pursuant to the provision described above.

Stock-based compensation

Stock-based compensation expense recognized for the three months ended March 31, 2017 and March 31, 2016 was as follows:

 

Employee stock-based compensation expense was calculated based on stock option plan awards and restricted stock units ultimately expected to vest based on the Company’s historical option cancellations. The employee stock-based compensation expense recognized for the three months ended March 31, 2017 and March 31, 2016 has been reduced for estimated forfeitures of stock option plan awards at a rate of 6.9% and 7.5%, respectively. The employee stock-based compensation expense recognized for the three months ended March 31, 2017 has been reduced for estimated forfeitures of restricted stock units at a rate of 5.7%. ASC 718 – Compensation-Stock Compensation 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, 2017 and March 31, 2016, stock-based compensation expense recognized under ASC 718, included in cost of revenues, sales and marketing expense, general and administrative expense, and research and development expense was as follows:

 

 

401(k) retirement savings plan

The Company maintains a 401(k) retirement savings plan for the benefit of eligible employees.  Under the terms of this plan, eligible employees are able to make contributions to the plan on a tax-deferred basis.  The Company began matching employees’ contributions, effective January 1, 2017.  The Company made $174 in contributions to the 401(k) plan for the three months ended March 31, 2017.  The Company made no contributions to the 401(k) plan for the three months ended March 31, 2016.