Stock Authorization

The Board of Directors is authorized to issue from time to time up to an aggregate of 5,000,000 shares of preferred stock, in one or more series. Each such series of preferred stock shall have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges to be determined by the Board of Directors, including dividend rights, voting rights, redemption rights and sinking fund provisions, liquidation preferences, conversion rights and preemptive rights. No preferred stock has been designated or issued as of January 31, 2019.

Equity Plans

2011 Compensation and Incentive Plan.

Our 2011 Compensation and Incentive Plan (the “2011 Plan”) provides for the grant of incentive stock options, nonqualified stock options, restricted stock, restricted stock units (“RSUs”), deferred stock units (“DSUs”), performance stock units (“PSUs”) and other equity based non-stock option awards as determined by the plan administrator to our officers, employees, consultants, and directors. We may satisfy awards upon the exercise of stock options or the vesting of stock units with newly issued shares or treasury shares. The Board of Directors is responsible for the administration of the 2011 Plan and determining the terms of each award, award exercise price, the number of shares for which each award is granted and the rate at which each award vests. In certain instances, the Board of Directors may elect to modify the terms of an award. The number of shares authorized for issuance under the 2011 Plan is 9,300,000. Additionally, outstanding awards under the 2005 Equity Compensation and Incentive Plan that expired, terminated, surrendered or canceled without having been fully exercised became available for issuance under the 2011 Plan. As of January 31, 2019, there were 1,616,179 shares available for future grant.      

Nonemployee members of the Board of Directors may elect to receive DSUs in lieu of RSUs. The number of units subject to the DSUs is determined as of the grant date and shall fully vest one year from the grant date. The shares underlying the DSUs are not vested and issued until the earlier of the director ceasing to be a member of the Board of Directors (provided such time is subsequent to the first day of the succeeding fiscal year) or immediately prior to a change in control.

Option awards may be granted to employees at an exercise price per share of not less than 100% of the fair market value per common share on the date of the grant. Option awards granted under the 2011 Plan generally vest over a period of one to three years and expire ten years from the date of the grant.

We have a Long-Term Incentive (“LTI”) Program, adopted in fiscal 2016, under which the named executive officers and other of our key employees may receive long-term equity-based incentive awards, which are intended to align the interests of our named executive officers and other key employees with the long-term interests of our stockholders and to emphasize and reinforce our focus on team success. Long-term equity-based incentive compensation awards are made in the form of stock options, RSUs and PSUs subject to vesting based in part on the extent to which employment continues. 

2015 Employee Stock Purchase Plan

Under our 2015 Employee Stock Purchase Plan (the “ESPP), six-month offering periods begin on October 1 and April 1 of each year during which eligible employees may elect to purchase shares of our common stock according to the terms of the offering.  On each purchase date, eligible employees can purchase our stock at a price per share equal to 85% of the closing price of our common stock on the exercise date, but no less than par value.  The maximum number of shares of our common stock authorized for sale under the ESPP is 1,150,000 shares of which 1,094,783 remain available under the ESPP as of January 31, 2019.  Under the ESPP, 12,794 and 24,467 shares were purchased during fiscal 2019 and fiscal 2018, respectively.

Stock Option Valuation

Service-Based Options

We measure the fair value of service-based options using the Black-Scholes option-pricing model. Key input assumptions used to estimate the fair value of stock options include the exercise price, the expected option term, the risk-free interest rate over the option’s expected term, the expected annual dividend yield and the expected stock price volatility. The expected option term was determined using the “simplified” method for “plain vanilla” options. The expected stock price volatility was established using the historical volatility of our common stock over a period of time equal to the expected term of the stock option. The risk-free interest rate is based upon the U.S. treasury bond yield at the grant date, using a remaining term equal to the expected life. The expected dividend yield is 0%, as we have not paid cash dividends on our common stock since our inception.

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option pricing model to determine the fair value of stock options granted:

Market-Based Options

We have outstanding 800,000 market-based options issued in fiscal 2016 and fiscal 2017 to our CEO as of January 31, 2019. These stock options vest in approximately equal increments based upon the closing price of our common stock achieving a certain level and continued service conditions. We measured the grant-date fair value of these options using a Monte Carlo simulation model and recognized the associated expense over the requisite service period. The fair value of these stock options was $2.1 million, which was recognized over three years. In February 2019, these options were forfeited upon the resignation of our CEO.

We have not granted additional market-based options in fiscal 2019 or 2018.

Stock Option Activity

The following table summarizes our stock option activity:

The weighted average grant-date fair values of stock options granted during the years ended January 31, 2019 and 2018, was $0.86 per share and $1.34 per share, respectively.

Stock Units

We have granted RSUs and DSUs with service-based vesting criteria that generally vest over one to three years. We have also granted PSUs with performance-based and market-based vesting criteria. In fiscal 2019 and 2018, we granted an aggregate of 210,000 and 232,500 PSUs, respectively, to employees under the LTI Program. The PSUs vest in three equal annual installments upon the achievement of certain Company-specific goals in each of the three years. In fiscal 2017, we granted an aggregate of 307,963 PSUs to employees under the LTI Program, which vest at the end of a three-year period upon the fulfillment of the three-year service period and the achievement of a relative total shareholder return. We measured the grant-date fair value of these awards using a Monte Carlo simulation model and recognize the associated expense over the requisite service period, if fulfilled, regardless of the actual number of awards that vest.

The following table summarizes our stock unit activity:

Stock-based Compensation

We recognized stock-based compensation expense within the accompanying consolidated statements of operations and comprehensive income (loss) as follows:

As of January 31, 2019, unrecognized stock-based compensation expense related to unvested stock options was approximately $2.2 million, which is expected to be recognized over a weighted average period of 2.2 years.  As of January 31, 2019, unrecognized stock-based compensation expense related to unvested RSUs and DSUs was $1.5 million, which is expected to be recognized over a weighted average amortization period of 1.8 years. As of January 31, 2019, unrecognized stock-based compensation expense related to unvested PSUs was $0.9 million, which is expected to be recognized over a weighted average amortization period of 2.1 years.