10. Stockholders’ Equity and Stock-Based Compensation

Adoption of Accounting Pronouncement

During the first quarter of fiscal year 2018, the Company adopted ASU 2016-09, Compensation – Stock Compensation (Topic 718) – Improvements to Employee Share-Based Payment Accounting. The provision simplifies several aspects of the accounting for employee share-based payment transactions, including the way companies account for share-based award forfeitures. Under the new provision, an entity can elect to either estimate the number of awards that are expected to vest or account for forfeitures when they occur.

As part of the adoption of this standard, the Company has elected to prospectively account for forfeitures when they occur. As a result, the Company adjusted its opening retained earnings balance as of February 1, 2017 to reflect the additional expense that would have been recognized if the Company had not been applying an estimated forfeiture rate in prior periods. The resulting adjustment was an increase to accumulated deficit of $34, with the offset recorded to additional paid-in capital.

Stock-Based Compensation Expense

The fair value of common stock service-based options for employees is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used:

	Three Months Ended April 30,
	2017		2016
Expected life (years)		6.25		6.25
Risk-free interest rate		2.05%		1.54%
Expected volatility		34.1%		35.3%
Expected dividend yield		0.0%		0.0%

The weighted-average grant date fair value per share for service-based stock options granted in the three months ended April 30, 2017 and 2016 was $4.84 and $4.18, respectively.

In April 2017, the Company granted time-based restricted stock units to certain executives for a total of 337,000 shares of common stock, which will vest over a two-year period.

The weighted-average grant date fair value per share for time-based restricted stock units granted in the three months ended April 30, 2017 was $13.01.

For standard service-based stock options and restricted stock units, the Company records stock-based compensation expense over the estimated service/vesting period. The amount of stock-based compensation expense recognized during a period is based on the value of the portion of the awards that will ultimately vest.

Total stock-based compensation expense related to stock options and restricted stock units issued by the Company is as follows:

	Three Months Ended April 30,
	2017		2016
Cost of revenues	$	37	$	44
Sales and marketing		71		90
Research and development		271		183
General and administrative		246		172
Total	$	625	$	489

The total unrecognized compensation cost related to all outstanding stock options and restricted stock units is $6,752 at April 30, 2017. This amount is expected to be recognized over a weighted-average period of 1.96 years.