Stock Option Plan | 9 Months Ended |
Oct. 31, 2014 |
Stock Option Plan | ' |
7. Stock Option Plan |
Stock Option Plans |
The Company adopted its stock option plan in 2000 (the “2000 Plan”). Under the 2000 Plan, as amended, the Company was able to grant options to purchase up to 1,181,689 shares of common stock to certain employees, directors and consultants. Under the terms of the 2000 Plan, the Company may grant incentive stock options (“ISO”), non-statutory stock options (“NSO”), common stock purchase agreements (“CSPA”) and stock purchase rights (“SPR”). Such awards are exercisable at prices generally equal to the fair value of the Company’s common stock at the date of grant, as determined by the board of directors. Awards granted under the 2000 Plan generally vest over four years with a six-month cliff period and may be exercised for a period of up to ten years. Vested options generally expire 30 days after termination of employment. In December 2010, the board of directors approved a decrease in the number of shares of common stock reserved for issuance under the 2000 Plan to 644,366 shares. No shares were available for future grant under the 2000 Plan as of January 31 and October 31, 2014, due to the adoption of the stock incentive plan described below. |
The Company adopted the 2010 stock incentive plan (the “2010 Plan”) in June 2010. The 2010 Plan provides that only employees are eligible for the grant of ISOs and that employees, consultants and outside directors are eligible for the grant of NSOs. The 2010 Plan also allows for the grant of SPRs and restricted stock units (“RSU”). Awards granted under the 2010 Plan also generally vest over four years with a six-month cliff period and may be exercised for a period of up to ten years. Vested options generally expire three months after termination of employment. No shares were available for future grant under the 2010 Plan as of January 31 and October 31, 2014 due to the adoption of a 2012 stock incentive plan as more fully described below. |
The Company adopted the 2012 stock incentive plan (the “2012 Plan”) in June 2011, as amended in April 2012. The 2012 Plan provides that only employees are eligible for the grant of ISOs and that employees, consultants and outside directors are eligible for the grant of NSOs. The 2012 Plan also allows for the grant of SPRs, RSUs and other types of equity awards. Awards granted under the 2012 Plan generally vest over four years with a twelve-month cliff period and may be exercised for a period of up to ten years. In general, the vesting of awards granted under the 2012 Plan accelerate as to 25% of the then remaining unvested portion of the awards upon a change in control of the Company. Vested options generally expire three months after termination of employment. Shares of common stock reserved for issuance under the 2012 Plan consist of 1,163,851 and 1,003,608 shares as of October 31, 2014 and January 31, 2014, respectively. The number of shares that have been authorized for issuance under the 2012 Plan are automatically increased on the first day of each fiscal year beginning in fiscal 2014 and ending in fiscal 2023, in an amount equal to the least of (i) 2,000,000 shares, (ii) 4% of the outstanding shares of the Company’s common stock on the last day of the immediately preceding fiscal year, or (iii) another amount determined by the Company’s board of directors. |
At the beginning of fiscal 2015, the board of directors ratified an increase in the number of shares authorized for issuance under the 2012 Plan based on 4% of the outstanding shares of the Company’s common stock on the last day of fiscal year 2014, or 1,084,782 shares. These shares were registered under the Securities Act of 1933 on Securities and Exchange Commission Form S-8 filed on May 9, 2014. |
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The following table summarizes the stock-based award activity for the 2000 Plan, the 2010 Plan and the 2012 Plan during the nine months ended October 31, 2014: |
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| | Shares | | | Stock | | | Weighted- | | | Average | | | Aggregate | |
Available | Options and | Average | Remaining | Intrinsic |
For Grant | SPRs | Exercise | Contractual Life | Value |
| Outstanding | Price | (in years) | (in thousands) |
January 31, 2014 | | | 1,003,608 | | | | 3,486,348 | | | $ | 1.65 | | | | 7.5 | | | $ | 8,530 | |
Additional options authorized | | | 1,084,782 | | | | | | | | | | | | | | | | | |
Options granted | | | (901,042 | ) | | | 901,042 | | | | 2.32 | | | | | | | | | |
RSUs granted | | | (148,512 | ) | | | | | | | | | | | | | | | | |
Options expired and forfeited | | | 125,015 | | | | (125,015 | ) | | | 4.2 | | | | | | | | | |
Exercised | | | | | | | (468,094 | ) | | | 0.36 | | | | | | | | | |
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October 31, 2014 | | | 1,163,851 | | | | 3,794,281 | | | | 1.88 | | | | 7.5 | | | $ | 1,813 | |
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Vested and expected to vest - October 31, 2014 | | | | | | | 3,751,892 | | | | 1.88 | | | | 7.5 | | | $ | 1,813 | |
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Vested - October 31, 2014 | | | | | | | 2,147,145 | | | | 1.44 | | | | 6.2 | | | $ | 1,809 | |
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Stock Purchase Rights and Common Stock Purchase Agreements |
The Company grants SPRs to its French employees and in limited past instances, CSPAs to service providers in the U.S. The SPRs and CSPAs provide the holder with a note equal to the aggregate exercise price of the related options, therefore, allowing the holder to legally exercise the related options at the time of issuance in consideration of the notes. Generally, the SPRs and CSPAs are subject to a vesting period of four years with the Company retaining the right to repurchase unvested shares at the aggregate exercise price of the underlying options. In the event that a holder’s status as an employee ceases for any reason, the notes and the related options are cancelled. As of October 31, 2014 and January 31, 2014, 392,479 shares were subject to repurchase under the provisions of the SPRs and 97,464 shares were subject to repurchase under the provisions of the CSPAs. |
The notes receivable issued to employees in conjunction with the SPRs and CSPAs are secured by the underlying shares and carry interest rates ranging from 2.1% to 5.9%. While the note terms indicate that they are full recourse, the Company has not pursued recourse in instances when a note receivable balance exceeds the fair value of the shares at the date of repurchase, and accordingly, the exercises of the SPRs and CSPAs have been considered non-substantive. Notes receivable relating to the SPRs and CSPAs are not recorded on the consolidated balance sheet due to the non-substantive exercise consideration. Accordingly, the SPRs and CSPAs have been accounted for as stock options and are included within the outstanding stock options as of each balance sheet date presented. |
Restricted Stock Units |
The Company grants RSUs to employees, executives and directors of the Company. As of October 31, 2014, the Company had 381,588 RSUs outstanding. |
Of the total RSUs outstanding, 229,076 are subject to service, market and performance-based vesting terms that include the requirement that the Company’s stock price exceed specified milestones relative to the Company’s stock price following the initial public offering and, in some cases, are subject to acceleration under certain circumstances, including a change in control. The Company uses a modified binary option pricing model (European call option) to establish the expected value of these RSUs. |
During the three and nine months ended October 31, 2014, the Company recorded $17,000 and $66,000 of stock-based compensation expense related to RSUs with service, market and performance-based vesting, respectively. During the three and nine months ended October 31, 2014, the Company recorded $86,000 and $233,000 of stock-based compensation expense related to RSUs with only service-based vesting, respectively. |
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A summary of the Company’s RSU activity for the nine months ended October 31, 2014 is presented below: |
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| | RSUs | | | Weighted | | | | | | | | | | | | | |
Outstanding | Average | | | | | | | | | | | | |
| Grant Date | | | | | | | | | | | | |
| Fair Value | | | | | | | | | | | | |
31-Jan-14 | | | 358,026 | | | $ | 6.5 | | | | | | | | | | | | | |
Granted | | | 148,512 | | | | 2.02 | | | | | | | | | | | | | |
Released | | | (124,950 | ) | | | 2.35 | | | | | | | | | | | | | |
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31-Oct-14 | | | 381,588 | | | $ | 6.12 | | | | | | | | | | | | | |
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Stock-based Compensation |
Total stock-based compensation expense during the three and nine months ended October 31, 2014 and 2013 are recognized in the consolidated statements of operations as follows (in thousands): |
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| | Three Months Ended October 31, | | | Nine Months Ended October 31, | | | | | |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | | | | | |
Cost of revenue | | $ | 7 | | | $ | 1 | | | $ | 22 | | | $ | 3 | | | | | |
Research and development | | | 13 | | | | 34 | | | | 83 | | | | 87 | | | | | |
Sales and marketing | | | 62 | | | | 109 | | | | 222 | | | | 285 | | | | | |
General and administrative | | | 250 | | | | 487 | | | | 1,243 | | | | 1,323 | | | | | |
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Total stock-based compensation | | $ | 332 | | | $ | 631 | | | $ | 1,570 | | | $ | 1,698 | | | | | |
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The weighted average assumptions used to estimate the fair value of the Company’s employee stock options at the grant dates during the three and nine months ended October 31, 2014 and 2013 were as follows: |
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| | Three Months Ended October 31, | | | Nine Months Ended October 31, | | | | | |
| | 2014 | | | 2013 | | | 2014 | | | 2013 | | | | | |
Expected term (in years) | | | 6.25 | | | | 6.25 | | | | 6.25 | | | | 6.25 | | | | | |
Volatility | | | 68 | % | | | 57 | % | | | 68 | % | | | 57 | % | | | | |
Risk-free interest rate | | | 1.97 | % | | | 2.01 | % | | | 1.98 | % | | | 1.68 | % | | | | |
Expected dividend | | | 0 | % | | | 0 | % | | | 0 | % | | | 0 | % | | | | |
As of October 31 2014, total compensation cost not yet recognized for unvested stock option grants and unvested stock awards was $2.1 million and $261,000 respectively, which are expected to be recognized over the following 3.1 years and 1.2 years based on the weighted average vesting terms, respectively. |
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