NOTE 8—STOCK-BASED COMPENSATION

The Company granted options under the 2007 Equity Incentive Plan (the “2007 Plan”) until August 2016 when it was terminated as to future awards, although it continues to govern the terms of options that remain outstanding under the 2007 Plan. In connection with the stockholders’ approval of the 2016 Equity Incentive Plan (the “2016 Plan”), 6,000,000 shares available for future award under the 2007 Plan were transferred to the 2016 Plan, 705,699 shares available for grant under the 2007 plan were canceled and the 2007 Plan was terminated. Shares subject to options under the 2007 Plan that expire or are forfeited for any reason after the date of the 2007 Plan’s termination will become available for grant under the 2016 Plan.

The 2016 Plan was approved by the Company’s board of directors in June 2016 and was subsequently approved by the Company’s stockholders in August 2016. The 2016 Plan provides for issuance of a variety of stock-based compensation awards, including stock options, restricted stock, restricted stock units, stock appreciation rights, performance shares, performance units, other stock-based awards and cash-based awards. The exercise price of each stock-based award issued under the 2016 Plan is required to be no less than the fair value of the Company’s common stock, as determined by the board of directors on the date of the grant.

As of December 31, 2016, 5,701,795 shares of common stock were available for grant under the 2016 Plan.

The following table summarizes the Company’s stock option activities for the nine months ended December 31, 2016:


			Weighted
		Number of Shares	Average	Weighted
	Shares	Underlying	Remaining	Average
	Available for	Options	Contractual	Exercise		Intrinsic
	Grant	Outstanding	Life (Years)	Price		Value
Balance at March 31, 2016	6,432,063	7,625,705		$	5.08
Options reserved	1,085,818	—			—
Terminated plan	(705,699)	—			—
Granted	(1,125,188)	1,125,188		$	4.92
Exercised	—	(138,683)		$	3.63	$	181,058
Forfeited	14,801	(962,634)		$	5.54
Balance at December 31, 2016	5,701,795	7,649,576		$	5.02
Options vested and exercisable		4,714,337	4.05	$	4.98	$	6,623,354
Options vested and expected to vest		7,595,022	5.74	$	5.02	$	9,967,662

The weighted average fair value per underlying share of options granted during the three months ended December 31, 2016 and 2015 was $1.75 and $1.48, respectively, and for the nine months ended December 31, 2016 and 2015 was $1.56 and $1.70, respectively.

Options outstanding by exercise price at December 31, 2016 were as follows:


				Number of	Options Outstanding			Options Exercisable
				Shares	Weighted		Weighted Average		Weighted
				Underlying	Average		Remaining	Number	Average
				Options	Exercise		Contractual	Vested and	Exercise
Exercise Price				Outstanding	Price		Life (Years)	Exercisable	Price
$	2.43	-	3.40	849,904	$	3.17	4.44	618,296	$	3.09
$	3.43	-	4.00	1,216,534	$	3.80	3.25	1,055,944	$	3.83
$	4.17	-	4.81	910,620	$	4.41	4.98	820,370	$	4.40
$	4.90	-	4.98	777,463	$	4.95	7.25	310,603	$	4.91
$	4.99	-	5.23	1,241,316	$	5.09	8.70	99,960	$	5.19
$	5.28	-	5.76	819,305	$	5.55	7.42	311,727	$	5.62
$	6.00	-	6.54	863,008	$	6.32	4.83	798,008	$	6.32
$	6.61	-	6.86	651,853	$	6.77	6.06	379,856	$	6.74
$	7.00			206,193	$	7.00	3.59	206,193	$	7.00
$	9.20			113,380	$	9.20	4.08	113,380	$	9.20
				7,649,576	$	5.02	5.77	4,714,337	$	4.98

The following table summarizes stock-based compensation expense by line item in the Condensed Consolidated Statements of Operations, all relating to employee stock plans:


	Three Months Ended December 31,				Nine Months Ended December 31,
	2016		2015		2016		2015
	(In thousands)
Cost of revenues	$	78	$	85	$	209	$	242
Research and development		251		208		712		649
Selling, general and administrative		100		121		438		496
Total	$	429	$	414	$	1,359	$	1,387

As stock-based compensation expense recognized in the Condensed Consolidated Statement of Operations is based on awards ultimately expected to vest, it has been reduced for estimated forfeitures in accordance with authoritative guidance. The Company estimates forfeitures at the time of grant and revises the original estimates, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

No tax benefit related to stock-based compensation was recognized in the three months or nine months ended December 31, 2016 or December 31, 2015 due to a full valuation allowance. There were no windfall tax benefits realized from exercised stock options in any of these periods. Compensation cost capitalized within inventory at December 31, 2016 was immaterial. As of December 31, 2016, the Company’s total unrecognized compensation cost was $3.4 million, which will be recognized over a weighted average period of 2.23 years. The Company calculated the fair value of stock-based awards in the periods presented using the Black-Scholes option pricing model and the following weighted average assumptions:


	Three Months Ended December 31,						Nine Months Ended December 31,
	2016			2015			2016				2015
	(In thousands)						(In thousands)
Stock Option Plans:
Risk-free interest rate		1.62	%		1.56	%	1.12	-	1.62	%	1.52	-	1.57	%
Expected life (in years)		5.00			5.00				5.00				5.00
Volatility		33.3	%		36.3	%	33.3	-	34.8	%	36.3	-	38.0	%
Dividend yield		—	%		—	%			—	%			—	%
Employee Stock Purchase Plan:
Risk-free interest rate		0.45	%		0.15	%	0.38	-	0.45	%	0.09	-	0.15	%
Expected life (in years)		0.50			0.50				0.50				0.50
Volatility		30.8	%		27.9	%	30.8	-	39.6	%	26.3	-	27.9	%
Dividend yield		—	%		—	%			—	%			—	%