. Equity incentive plans and employee benefits

Equity incentive plans.

We have adopted equity incentive plans that provide for the grant of stock awards to employees, directors and consultants that are designed to encourage and reward their long-term contributions to us and provide an incentive for them to remain with us. These plans are also intended to align our employees’ interest with the creation of long-term shareholder value. On

July 10, 2015,

the Board of Directors of the Company approved, subject to shareholder approval, the Company’s

2015

Stock Incentive Plan (the

“2015

Plan”) and which was approved by the Company’s shareholders at the

2015

annual meeting of shareholders held on

August 20, 2015.

The

2015

Plan is the successor to and continuation of the Company’s Amended and Restated

2009

Stock Incentive Plan (the

“2009

Plan”) which was a continuation and preceded by the

2001

Stock Plan (the

“2001

Plan” and together with the

2001

Plan, the “Prior Plans”). As of

September 23, 2009

and

August 20, 2015,

the

2009

Plan and the

2001

Plan were closed for future grants, respectively; however, these plans will continue to govern all outstanding awards that we originally granted from each plan.

Our

2015

Plan provides for the grant of stock options, restricted stock, restricted stock units, and other stock-related and performance awards that

may

be settled in cash, stock or other property. The total number of shares of the Company’s common stock reserved for issuance under the

2015

Plan consists of

3,000,000

shares plus the number of shares subject to stock awards outstanding under the Prior Plans that terminate prior to exercise and would otherwise be returned to the share reserves under the Prior Plans up to a maximum of

5,000,000

shares.

As of

February 3, 2018,

there were

2,500,690

shares available for future grants under the

2015

Plan. Additionally, up to

1,529,139

shares of common stock subject to stock awards outstanding under the Prior Plans

may

become available for issuance.

The majority of restricted stock units and restricted stock awards that vested during fiscal

2018,

2017

and

2016

were net-share settled. As such, the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, the conversion to cash of which was remitted to the appropriate taxing authorities. The total shares withheld were approximately

80,758,

85,465

and

42,654

during fiscal

2018,

2017

and

2016,

respectively, and were based on the value of the RSUs on their respective vesting dates as determined by our closing stock price. Total payments for the employees’ tax obligations to taxing authorities were

$0.9

million,

$1.5

million and

$1.5

million during fiscal

2018,

2017

and

2016,

respectively, and are reflected as a financing activity in the accompanying consolidated statements of cash flows.

Stock Options

The total stock option activities and balances of our stock option plans are summarized as follows:

	Number of Options Outstanding			Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value

As of January 31, 2015		3,768,058		$	10.86		4.9
Granted (Weighted average fair value of $3.64)		104,200			8.74
Cancelled		(415,146	)		10.39
Exercised		(523,441	)		6.83
As of January 30, 2016		2,933,671			11.57		4.2
Granted (Weighted average fair value of $3.14)		483,400			6.87
Cancelled		(556,616	)		11.41
Exercised		(194,884	)		4.75
As of January 28, 2017		2,665,571			11.25		4.5
Granted (Weighted average fair value of $2.91)		45,900			6.16
Cancelled		(475,870	)		14.88
Exercised		(409,608	)		5.34
As of February 3, 2018		1,825,993		$	11.51		2.01	$	122,157

Ending vested and expected to vest		1,825,993		$	11.51		2.01	$	122,157
Ending exercisable		1,648,155		$	12.02		1.44	$	99,880

The aggregate intrinsic value as of

February 3, 2018

in the table above represents the total pretax intrinsic value based on our closing stock price of

$5.55

which would have been received by the option holders had all options holders exercised their options as of

February 3, 2018.

The aggregate exercise date intrinsic value of options that were exercised under our stock plans during fiscal

2018,

2017

and

2016

were

$0.6

million,

$0.6

million and

$1.6

million, respectively, determined as of the exercise date. The total fair value of options which vested during fiscal

2018,

2017

and

2016

was

$0.8

million,

$0.5

million and

$1.3

million, respectively.

The options outstanding and currently exercisable as of

February 3, 2018

were in the following exercise price ranges:

Options Outstanding and Exercisable
Range of Exercise Prices			Number Outstanding	Weighted Average Remaining Contractual Term (Years)		Weighted Average Exercise Price Per Share	Number Exercisable		Weighted Average Exercise Price Per Share

$4.34	-	$6.40	114,202	4.17	$	5.33	66,037	$	4.89
$6.48	-	$6.48	190,000	4.52		6.48	133,750		6.48
$6.49	-	$7.44	196,887	5.98		7.08	132,717		6.95
$7.64	-	$10.32	85,243	2.06		8.87	75,990		8.92
$10.59	-	$10.59	303,200	0.79		10.59	303,200		10.59
$10.87	-	$10.87	287,000	0.43		10.87	287,000		10.87
$11.07	-	$11.07	132,100	0.89		11.07	132,100		11.07
$11.09	-	$11.09	203,334	0.67		11.09	203,334		11.09
$11.47	-	$15.64	188,027	1.79		12.42	188,027		12.42
$16.70	-	$41.58	126,000	0.15		36.82	126,000		36.82
			1,825,993	2.01	$	11.51	1,648,155	$	12.02

As of

February 3, 2018,

the unrecorded stock-based compensation balance related to stock options and restricted stock units outstanding excluding estimated forfeitures was

$0.5

million and

$6.4

million, respectively, which will be recognized over an estimated weighted average amortization period of

2.3

and

3.8

years, respectively. The amortization period is based on the expected vesting term of the awards.

Restricted Stock Awards

Restricted stock awards (“RSAs”)

may

be granted under our

2015

Plan and will reduce shares available to grant under the plan by

one

share for every

one

share of restricted stock granted. Historically, RSAs were granted under our

2009

Plan and consisted of time-based restricted shares subject to forfeiture until vested if length of service requirements had

not

been met. These RSAs had a contractual term of

ten

years and generally vested over

one

five

years according to the terms specified in the individual grants. As of

February 3, 2018,

January 28, 2017

and

January 30, 2016,

there was

unrecognized stock-based compensation balance related to RSAs as all previously outstanding RSAs had vested.

Restricted Stock Units

We value RSUs using the quoted market price of the underlying stock on the date of grant. RSUs are granted under our

2015

Plan and have a contractual term of

ten

years and generally vest over

four

years, are based on continued employment and are settled upon vesting in shares of the Company’s common stock on a

one

-for-

one

basis. Each share issued with respect to RSUs granted under the

2015

Plan reduces the number of shares available for grant under the plan by

one

share. RSUs cancelled and shares withheld to satisfy tax withholding obligations increase the number of shares available for grant under the

2015

Plan utilizing a factor of

one

times the number of RSUs cancelled or shares withheld. All awards generally provide for accelerated vesting upon a change in control or normal or early retirement (as defined in the applicable stock incentive plan).

During the

fourth

quarter of fiscal

2016,

the Company approved

299,971

performance based RSUs to certain employees, the vesting of which is contingent upon the achievement of certain performance criteria, namely future sales targets attributable to certain types of products. These RSUs have a multi-year performance period and are expected to vest over a

two

year period commencing upon the achievement of the respective performance criteria. In

February 2017,

the Company cancelled the previous awards,

none

of which were determined to be achieved, while simultaneously approving the same number of shares with different quantitative thresholds for future sales targets (“new awards”). As of

February 3, 2018,

the Company determined certain sales targets were achieved during fiscal

2018

which resulted in stock-based compensation of

$0.2

million.

Stock-based compensation expense will be recognized over the requisite service period based on management’s best estimate of the probability of the performance criteria being satisfied using the most currently available projections of future sales performance, adjusted at each balance sheet date. Changes in the subjective and probability-based assumptions can materially affect the estimate of fair value of stock-based compensation and consequently, the related amount recognized in our consolidated statements of operations. We did

not

recognize any compensation expense related to these performance-based RSUs during fiscal

2017

and

2016.

The following table sets forth the shares of RSUs outstanding as of

February 3, 2018:

	Restricted Stock Units			Weighted Average Grant Date Fair Value per Unit		Aggregate Intrinsic Value

As of January 31, 2015		1,313,915		$	4.91	$	8,356,499
Granted		1,165,832			8.74		-
Vested		(861,259	)		5.52		-
Cancelled/forfeited		(215,876	)		7.37		-
As of January 30, 2016		1,402,612			7.53		9,299,318
Granted		1,057,944			7.42		-
Vested		(783,909	)		7.13		-
Cancelled/forfeited		(38,029	)		7.67		-
As of January 28, 2017		1,638,618			7.64		10,487,155
Granted		144,382			6.37		-
Vested		(492,849	)		8.18		-
Cancelled/forfeited		(269,652	)		7.53		-
As of February 3, 2018		1,020,499		$	7.23	$	6,531,194

The total fair value of RSUs which vested during fiscal

2018,

2017

and

2016

was

$4.0

million,

$5.6

million and

$4.8

million, respectively. The aggregate intrinsic value, as of

February 3, 2018,

in the table above represents the total pretax intrinsic value, based on our closing stock price of

$5.55

on that date which would have been received by the RSU holders had all RSU holders vested as of that date. As of

February 3, 2018,

the unrecognized stock-based compensation balance related to RSUs outstanding excluding estimated forfeitures was

$6.4

million and will be ratably recognized over an estimated weighted average amortization period of

3.8

years.

Employee stock purchase plan

July 10, 2015,

the Board of Directors of the Company approved the Company’s

2015

Employee Stock Purchase Plan (the

“2015

ESPP”) and which was approved by the Company’s shareholders at the

2015

annual meeting of shareholders held on

August 20, 2015.

The

2015

ESPP has replaced the Company’s

2010

Employee Stock Purchase Plan (the

“2010

ESPP”), which was terminated. There are

3,500,000

shares of common stock reserved for issuance under the

2015

ESPP. The

2015

ESPP is implemented by offerings of rights to eligible employees. Each offering will be in such form and will contain such terms and conditions as our Board or a committee deems appropriate, subject to compliance with applicable regulations. The provisions of separate offerings need

not

be identical. Under the terms of the offerings that have commenced to date under the

2015

ESPP, eligible employees

may

authorize payroll deductions of up to

15%

of their regular base salaries limited to

$25,000

during any calendar year, to purchase common stock at

85%

of the fair market value of our common stock at the beginning or end of the

six

-month offering period, whichever is lower. The maximum number of shares that can be purchased in any single offering period is limited under the terms of the offering. These terms will automatically apply to future offerings under the

2015

ESPP unless modified by the Board or a committee thereof.

During fiscal

2018,

2017

and

2016,

531,593,

486,131

and

92,122

shares of our common stock were purchased at an average price of

$4.97,

$5.23

and

$5.37

per share, respectively. As of

February 3, 2018,

we had

2,390,154

available for issuance of the

3,500,000

shares of common stock reserved under the

2015

ESPP. As of

January 28, 2017,

we had

2,921,747

available for issuance. Circumstances arose during fiscal

2015

resulting in the issuance of

315,810

shares in excess of the

2,500,000

shares previously reserved under the then-governing

2010

ESPP. All material matters related to the excess issuance have been resolved as of February

2018.

Valuation of stock-based compensation

The fair value of RSA and RSU awards is based on the quoted market price of the underlying stock at the date of grant. The fair value of stock option and employee stock purchase plan right awards is estimated at the grant date using the Black-Scholes-Merton option pricing model. The determination of fair value of stock option and employee stock purchase plan rights awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are

not

limited to, our expected stock price volatility over the term of the awards and actual employee stock option exercise behavior.

The fair value of each stock option and employee stock purchase plan right was estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted-average assumptions:

	Fiscal Years Ended
Stock Options	February 3, 2018			January 28, 2017			January 30, 2016

Expected Volatility		51.79	%		50.77	%		44.84	%
Risk-free interest rate		1.89	%		1.27	%		1.60	%
Expected term (in years)		5.22			5.23			5.19
Dividend yield		0	%		0	%		0	%
Weighted average fair value at grant date	$	2.91		$	3.14		$	3.64

	Fiscal Years Ended
Employee stock purchase plans	February 3, 2018			January 28, 2017			January 30, 2016

Expected Volatility		38.05	%		57.19	%		77.90	%
Risk-free interest rate		1.13	%		0.50	%		0.44	%
Expected term (in years)		0.50			0.50			0.46
Dividend yield		0	%		0	%		0	%
Weighted average fair value at grant date	$	1.51		$	1.91		$	2.24

The computation of the expected volatility assumptions used in the Black-Scholes-Merton calculations for new stock option and employee stock purchase plan right awards is based on the historical volatility of our stock price measured over a period equal to the expected term of the grants or purchase rights. The risk-free interest rate is based on the yield available on U.S. Treasury Strips with an equivalent remaining term. The expected term of stock options represents the weighted-average period that the stock options are expected to remain outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based payment awards and vesting schedules. The expected term of employee stock purchase rights is the period of time remaining in the current offering period. The dividend yield assumption is based on our history of

not

paying dividends will

not

pay dividends in the future. Stock-based compensation expense related to purchases of common stock under the

2015

ESPP and

2010

ESPP for fiscal

2018,

2017

and

2016

was

$0.8

million,

$1.0

million and

$0.2

million, respectively.

The following table sets forth the total stock-based compensation expense that is included in each functional line item in the consolidated statements of operations (in thousands):

	Fiscal Years Ended
	February 3, 2018			January 28, 2017			January 30, 2016

Cost of revenue	$	218		$	294		$	227
Research and development		2,547			3,452			3,241
Sales and marketing		978			1,197			1,151
General and administrative		1,675			1,562			1,940
Less: Discontinued operations		(1,248	)		(1,289	)		(1,058	)
Stock-based compensation	$	4,170		$	5,216		$	5,501

Shares reserved for future issuance

We had the following shares of common stock reserved for future issuance upon exercise or issuance of equity instruments as of

February 3, 2018:

	February 3, 2018

Authorized for future grants under stock incentive plans		4,890,844
Stock options outstanding		1,825,993
Restricted stock units outstanding		1,020,499
Shares reserved for future issuance		7,737,336

401

(k) tax deferred savings plan.

We maintain a

401

(k) tax deferred savings plan for the benefit of qualified employees who are U.S. based. Under the

401

(k) tax deferred savings plan, U.S. based employees

may

elect to reduce their current annual taxable compensation up to the statutorily prescribed limit, which is

$18,000

in calendar year

2017.

Employees age

or over

may

elect to contribute an additional

$6,000.

We made matching contributions to the

401

(k) tax deferred savings plan during fiscal

2018,

2017

and

2016

$0.6

million,

$0.6

million and

$0.3

million, respectively.

Endowment insurance pension plan.

Related to our acquisition of our DTV business in

May 2012,

we added operations in Shanghai, China. It is required by the “Procedures of Shanghai Municipality on Endowment Insurance for Town Employees” to provide pension insurance for Shanghai employees. This mandatory plan is managed by the local authority. Under the current plan, an employee will contribute

8.0%

of the annual base to the plan and the employer will match

20%

of the annual base. From

April 2016

March 2018,

the annual base is capped at RMB

19,512

per employee. During fiscal

2018,

2017

and

2016,

we made matching contributions of

$2.2

million,

$2.3

million, and

$2.3

million, respectively.

Retirement pension plans.

We maintain retirement pension plans for the benefit of qualified employees in Denmark, Taiwan, The Netherlands, and Germany. We made matching contributions under these plans of

$0.8

million for fiscal

2018

and

$0.7

million for each of fiscal

2017

and

2016.

Severance plan

We maintain a severance plan for several Israeli employees pursuant to Israel's Severance Pay Law based on the most recent salary of the employees multiplied by the number of years of employment. Upon termination of employment, employees are entitled to

one

month salary for each year of employment or a portion thereof. As of

February 3, 2018,

we have an accrued severance liability of

$1.0

million offset by

$0.9

million of severance employee funds. We made contributions of less than

$0.1

million per year related to this obligation during fiscal

2018,

2017

and

2016.