Note 14. Benefit Plans

We have shareholder approved equity incentive plans, a shareholder approved Section 423 Stock Purchase Plan (the “ESPP”) and an employee tax-deferred savings plan, which are described in more detail below.

Equity Incentive Plans

The Company has 2006 and 2010 Equity Incentive Plans (collectively, the “Equity Plans”). In April 2016, the number of shares of common stock reserved for issuance under the Equity Plans was increased to 2.5 million shares by vote of a majority of the Company's security holders. The Board is authorized to grant incentive stock options, nonstatutory stock options, stock appreciation rights (“SARs”), restricted stock awards (“RSAs”), restricted stock units ("RSUs"), performance units, performance shares, dividend equivalent rights and other stock based awards to our officers, key employees and non-employee directors. Stock options, RSAs and SARs have restrictions as to transferability. Stock option exercise prices are fixed by the Board but shall not be less than the fair market value of our common stock on the date of the grant. SARs may be granted in conjunction with stock options. Stock options generally vest ratably over 4 years and expire 10 years from the date of grant. The Company also has an international award program to provide RSUs for the benefit of certain employees outside the United States. At October 31, 2016, there were 0.8 million shares available for grant. At October 31, 2016, equity awards outstanding consisted of incentive stock options, nonstatutory stock options, RSAs and RSUs.

The Company's 1998 Equity Incentive Plan remains in effect only to the extent of awards outstanding under the plan at October 31, 2016.

Share-based compensation was reflected in the consolidated statements of operations as follows (in thousands):



	2016		2015		2014
Cost of revenues	$	745	$	769	$	751
General and administrative expense	2,110		1,990		1,718
Research and development expense	504		360		436
	$	3,359	$	3,119	$	2,905

Stock Options

We account for stock options awarded to employees and non-employee directors under the fair value method. The fair value of stock options is estimated on the grant date using the Black-Scholes option valuation model and the following weighted-average assumptions:



	2016		2015		2014
Expected life (in years)	7.0		7.0		7.0
Risk free interest rate	1.5	%	1.7	%	2.3	%
Volatility	80.1	%	80.3	%	81.1	%
Dividend yield	—	%	—	%	—	%

The expected life is the period over which our employees are expected to hold the options and is based on historical data for similar grants. The risk free interest rate is based on the expected U.S. Treasury rate over the expected life. Expected volatility is based on the historical volatility of our stock. Dividend yield is based on our expected dividend payments over the expected life.

The following table summarizes our stock option activity for the year ended October 31, 2016:



			Weighted- Average Option
Options	Shares		Price
Outstanding at October 31, 2015	257,769		$	57.89
Granted	24,310		$	6.44
Canceled	(35,156	)	$	113.31
Outstanding at October 31, 2016	246,923		$	44.88

The weighted average grant-date fair value per share for options granted during the years ended October 31, 2016, 2015 and 2014 was $6.44, $13.24 and $21.48, respectively. There were no options exercised in fiscal year 2016, 2015 or 2014.

The following table summarizes information about stock options outstanding and exercisable at October 31, 2016:



	Options Outstanding				Options Exercisable
		Weighted Average	Weighted Average			Weighted Average
Range of	Number	Remaining	Exercise		Number	Exercise
Exercise Prices	outstanding	Contractual Life	Price		exercisable	Price
$3.24 — $61.20	165,498	6.2	$	18.78	154,421	$	19.49
$61.21 — $119.04	76,205	0.9	$	96.40	76,205	$	96.40
$119.05 — $176.88	5,220	0.9	$	120.28	5,220	$	120.28
	246,923	4.5	$	44.88	235,846	$	46.57

There was no intrinsic value for options outstanding and exercisable at October 31, 2016.

Restricted Stock Awards and Units

The following table summarizes our RSA and RSU activity for the year ended October 31, 2016:



		Weighted- Average
Restricted Stock Awards and Units	Shares	Price
Outstanding at October 31, 2015	483,570	16.67
Granted	704,153	6.40
Vested	182,738	16.11
Forfeited	14,950	13.21
Outstanding at October 31, 2016	990,035	9.52

RSA and RSU expense is based on the fair value of the award at the date of grant and is amortized over the vesting period, which is generally 4 years. At October 31, 2016, the 1.0 million outstanding RSAs and RSUs had an average remaining life of 2.8 years and an aggregate intrinsic value of $3.0 million.

At October 31, 2016, total unrecognized compensation cost related to RSAs including RSUs was $7.5 million which is expected to be recognized over the next 2.8 years on a weighted-average basis.

Stock Awards

During the years ended October 31, 2016, 2015 and 2014, we awarded 24,379; 2,399 and 979 shares, respectively, of fully vested, unrestricted common stock to the independent members of our board of directors as a component of board of director compensation which resulted in recognizing $0.2 million, $0.1 million and $0.1 million of expense for each of the respective years.

Employee Stock Purchase Plan

Under the ESPP, eligible employees have the right to purchase shares of common stock at the lesser of (i) 85% of the last reported sale price of our common stock on the first business day of the offering period, or (ii) 85% of the last reported sale price of the common stock on the last business day of the offering period, in either case rounded up to avoid impermissible trading fractions. Shares issued pursuant to the ESPP contain a legend restricting the transfer or sale of such common stock for a period of 0.5 years after the date of purchase.

ESPP activity for the year ended October 31, 2016 was as follows:



	Number of
ESPP	Shares
Balance at October 31, 2015	88,043
Issued at $9.02 per share	(11,664	)
Issued at $5.07 per share	(14,153	)
Available for issuance at October 31, 2016	62,226

The fair value of shares under the ESPP was determined at the grant date using the Black-Scholes option-pricing model with the following weighted average assumptions:



	2016		2015		2014
Expected life (in years)	0.5		0.5		0.5
Risk free interest rate	0.30	%	0.07	%	0.08	%
Volatility	37.0	%	72.0	%	75.0	%
Dividends yield	—	%	—	%	—	%

The weighted-average fair value of shares issued under the ESPP during fiscal year 2016 and 2015 was $6.86 and $16.08 per share, respectively.

Employee Tax-Deferred Savings Plans

We offer a 401(k) plan (the “Plan”) to all full time employees that provides for tax-deferred salary deductions for eligible employees (beginning the first month following an employee’s hire date). Employees may choose to make voluntary contributions of their annual compensation to the Plan, limited to an annual maximum amount as set periodically by the Internal Revenue Service. Employee contributions are fully vested when made. Under the Plan, there is no option available to the employee to receive or purchase our common stock. Matching contributions of 2% under the Plan aggregated $0.6 million, $0.4 million and $0.3 million for the years ended October 31, 2016, 2015, and 2014, respectively.