7. Employee Benefits and Stock-based Compensation

401(k) Plan

The Company maintains a defined contribution 401(k) plan (the “401(k) Plan”) for all of its eligible U.S. employees. Under the 401(k) Plan, eligible employees may contribute up to the Internal Revenue Service annual contribution limitation. The Company is responsible for administrative costs of the Plan. The Company has not had any matching contributions to date.

Stock Option Plans

2004 Stock Plan. The board of directors adopted, and the shareholders approved, the 2004 Stock Plan, as amended, (the “2004 Plan”). The 2004 Plan was last amended on August 28, 2012. The 2004 Plan provides for the grant of incentive stock options (“ISOs”) within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”), nonstatutory stock options (“NSOs”), stock purchase rights to acquire restricted stock and restricted stock units. Upon the completion of the IPO, no additional awards will be granted under the 2004 Plan and the 2004 Plan was terminated. However, all outstanding stock options and other awards previously granted under the 2004 Plan will remain subject to the terms of the 2004 Plan.

2012 Equity Incentive Plan. The board of directors has adopted, and the shareholders have approved, the 2012 Equity Incentive Plan, (the “EIP”). The EIP became effective on October 8, 2012. The EIP permits the grant of ISOs, within the meaning of Section 422 of the Code, to employees of the Company and any of the Company’s subsidiary corporations, and the grant of NSOs, stock appreciation rights, restricted stock, restricted stock units, performance units, performance shares, deferred stock units and dividend equivalents to employees, directors and consultants of the Company and any of the Company’s subsidiary corporations’ employees and consultants.

The exercise price of ISOs granted to a holder of more than 10% of the voting power of all classes of the Company’s shares shall be no less than 110% of the estimated fair market value on the grant date. The exercise price of ISOs granted to other employees and NSOs shall be no less than 100% of estimated fair market value on the grant date. Options granted under the Plans have a term of up to 10 years from grant date. Options granted to new employees generally vest 25% on the first anniversary date of the grant and the remainder ratably over the following 36 months. Vesting schedules for other grants to employees vary and are subject to approval by the board of directors.

The fair value of restricted stock units, or RSUs, is determined on the grant date. Prior to the Company’s IPO, 1/16th of the RSUs were to vest each three months following the vesting commencement date, so as to be 100% vested on the fourth anniversary of the vesting commencement date (the “Time-Based Vesting Schedule”); provided, however, that the RSUs did not vest at all until a Liquidity Event has occurred, at which time the Time-Based Vesting Schedule would apply, subject to the RSU holder continuing to provide services to the Company through such vesting dates. For purpose of those RSUs, “Liquidity Event” means either (i) the expiration of the lock-up period that commenced on October 10, 2012 and ended on April 8, 2013 applicable in connection with the Company’s IPO, or (ii) a change in control of the Company. After the Company’s IPO, RSUs granted to new employees generally vest 25% on the first anniversary of the vesting commencement date and 1/16th of the RSUs vest each 3 months thereafter. Vesting schedules for other RSUs to employees vary and are subject to approval by the board of directors.

2012 Employee Stock Purchase Plan. The board of directors has adopted, and the shareholders have approved, the 2012 Employee Stock Purchase Plan, or ESPP, which became effective upon the completion of IPO. The ESPP permits eligible participants to purchase ordinary shares at a discount through contributions of up to 10% of their eligible compensation, subject to any IRS limitations. The ESPP provides for offering and purchase periods of six months in duration, except for the first offering period that commenced on the occurrence of the IPO and will end on September 16, 2013. The purchase price of ordinary shares is 85% of the lower of the closing market price of the Company’s ordinary shares on the first trading day of each offering period or on the purchase date.

Early exercise rights. Certain employees have the right to early exercise unvested options, subject to repurchase rights held by the Company at their original purchase price upon termination of employment until vested. As of April 30, 2013 and January 31, 2013, a total of 86,005 and 84,377 shares of unvested early exercised options were repurchased, respectively. There were 39,242 and 53,151 unvested shares subject to the Company’s repurchase rights as of April 30, 2013 and January 31, 2013, respectively.

Stock-based Compensation

The following table presents the classification of stock-based compensation for the periods indicated:


	Three Months Ended April 30,
	2013		2012
	(in thousands)
Stock-based compensation:
Cost of revenue	$	34	$	14
Research and development		974		532
Selling, general and administrative		598		397


Total stock-based compensation	$	1,606	$	943

As of April 30, 2013, total unrecognized compensation cost related to unvested stock options and unvested restricted stock units was $6.7 million and $2.0 million, respectively, and is expected to be recognized over a weighted-average period of 2.15 years and 1.83 years, respectively. As of January 31, 2013, total unrecognized compensation cost related to unvested stock options and unvested restricted stock units was $7.3 million and $2.4 million, respectively, and is expected to be recognized over a weighted-average period of 2.26 years and 1.77 years, respectively.

The income tax benefit on stock-based compensation recognized for the three months ended April 30, 2013 and 2012 was not material.

The following table sets forth the weighted-average assumptions used to estimate the fair value of the stock options for the periods indicated:


	Three Months Ended April 30,
	2013			2012
Stock Options:
Volatility		65	%		66	%
Risk-free interest rate		1.17	%		1.10	%
Expected term (years)		6.05			6.05
Dividend yield		0	%		0	%

The following table summarizes stock option activities for the three months ended April 30, 2013:


	Option Outstanding
	Shares			Weighted- Average Exercise Price		Weighted- Average Grant-date Fair Value		Total Intrinsic Value of options Exercised (in thousands)		Weighted- Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)

Outstanding at January 31, 2013		4,344,535			6.07
Granted		60,000			13.74	$	8.15
Exercised		(158,871	)		3.11			$	1,689
Forfeited		(31,561	)		8.45


Outstanding at April 30, 2013		4,214,103			6.27						6.67	$	31,311

Exercisable at April 30, 2013		3,084,125			5.42						6.07	$	25,522

Vested and expected to vest at April 30, 2013		4,140,490			6.23						6.64	$	30,940

Exercisable shares include options with early exercise rights. The vested and expected-to-vest options are calculated based on vesting schedule of each grant as of the reporting date.

The intrinsic value of options outstanding, exercisable and vested and expected-to-vest are calculated based on the difference between the fair market value of the Company’s ordinary shares on the reporting date and the exercise price. The closing price of the Company’s ordinary shares was $13.70 on April 30, 2013, as reported by the NASDAQ Global Market. The intrinsic value of exercised options is calculated based on the difference between the fair market value of the Company’s ordinary shares on the exercise date and the exercise price.

The following table summarizes restricted stock units activities for the three months ended April 30, 2013:


	Shares			Weighted- Average Grant-Date Fair Value
Unvested at January 31, 2013		339,217		$	9.99
Granted		11,000			13.74
Released		(39,364	)		9.99
Forfeited		(5,464	)		9.99


Unvested at April 30, 2013		305,389		$	10.13

As of April 30, 2013, the aggregate intrinsic value of unvested restricted stock units was $4.2 million.

Non-employee Stock-based Compensation

The fair value of awards granted to non-employees is determined on the date of grant and remeasured at the end of each reporting period until such awards vest. The non-employee stock-based compensation was not material for the three months ended April 30, 2013 and 2012, respectively.