Annual report pursuant to Section 13 and 15(d)

STOCK INCENTIVE PLANS AND STOCK-BASED COMPENSATION

v3.19.2
STOCK INCENTIVE PLANS AND STOCK-BASED COMPENSATION
12 Months Ended
Mar. 31, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
STOCK INCENTIVE PLANS AND STOCK-BASED COMPENSATION
NOTE 7:
STOCK INCENTIVE PLANS AND STOCK-BASED COMPENSATION
On April 19, 2017, all performance share units, restricted stock units and options to purchase our common stock outstanding under the Company’s Stock Incentive Plans were adjusted to reflect the impact of the Reverse Stock Split. The Reverse Stock Split also reduced the number of shares of common stock issuable under the Company’s 2012 Long Term Incentive Plan and Employee Stock Purchase Plan, as amended. The per share exercise price of all outstanding awards was increased and the number of shares of common stock issuable upon the exercise or settlement of all outstanding awards was reduced proportionately to the reverse split ratio. The following share and per share data has been adjusted to reflect the Reverse Stock Split.
2012 Long-Term Incentive Plan
The Company has a stockholder-approved 2012 Long-Term Incentive Plan (the “Plan”) which has 4.6 million shares authorized for issuance of new shares at March 31, 2019. There were 4.3 million shares available for grant under the plan exclusive of 1.8 million shares reserved for issuance related to approved grants that become effective when the Company becomes current with Securities and Exchange Commission (‘SEC”) reporting requirements or the Company becoming current with SEC reporting requirements and being listed on a national stock exchange. There were 0.3 million stock options, performance shares and restricted shares outstanding under the Plan as of March 31, 2019.
Stock options under the Plan are granted at prices determined by the Board of Directors, but at not less than the fair market value of our common stock on the date of grant. The majority of performance share units, restricted stock units and stock options granted to employees vest over three to four years. Stock option, performance share and restricted stock grants to nonemployee directors typically vest over one year. Stock options, performance share units and restricted stock units granted under the Plan are subject to forfeiture if employment terminates. The Company accounts for all forfeitures of stock-based awards when they occur.
In February 2018, the Company enacted a deferral of release of all vested restricted stock units and performance share units granted prior to February 2018. The deferral of release impacted only pre-February 2018 restricted stock units and performance share units and was intended to prevent the release of unregistered shares to grantees. During the deferral period, a grantee retained the legal right to the awards they had vested in, but the Company deferred the release of the underlying shares until it could become current with its SEC reporting requirements. The Company ended the deferral of release in February 2019. The deferral of release and its removal were both modifications to the awards; however, the impact of the modifications were not material and no incremental compensation expense was recorded. All employees with outstanding stock-based awards were impacted by the modifications.
Other Stock Incentive Plans
In addition to the Plan, we have other stock incentive plans which are inactive for future share grant purposes, including plans assumed in acquisitions, under which stock options, stock appreciation rights, stock purchase rights, restricted stock awards and long-term performance awards to employees, consultants, officers and affiliates were authorized (“Other Plans”).
 
Employee Stock Purchase Plan
The Company has an employee stock purchase plan (the “Purchase Plan”) that allows participating employees to purchase shares of the Company’s common stock at a discount to fair market value. Employees may purchase the Company’s common stock at a price that is no less than the lower of 85% of the fair market value at the grant date or exercise date. The maximum number of shares that has been approved for issuance since the adoption of the Purchase Plan is 8.9 million shares. The Purchase Plan is available to all employees, subject to certain eligibility requirements. Under the Purchase Plan, rights to purchase shares are granted during the second and fourth quarter of each fiscal year. The Purchase Plan allows a maximum amount of 0.3 million shares to be purchased in any six-month offering period. Employees purchased 0.0 million shares, 0.3 million shares, and 0.3 million shares, of common stock under the Purchase Plan in fiscal 2019, 2018 and 2017, respectively. The weighted-average price of stock purchased under the Purchase Plan was $0.00, $5.43, and $3.48 per share in fiscal 2019, 2018 and 2017, respectively. There were 0.5 million shares available for issuance under the Purchase Plan as of March 31, 2019.
The following tables summarize stock-based compensation expense (in thousands):
 
   
For the year ended March 31,
 
   
2019
   
2018
   
2017
(As Restated)
 
Stock-based compensation expense:
                       
Cost of revenue
  $ 334     $ 725     $ 895  
Research and development
    440       906       1,300  
Sales and marketing
    179       1,790       2,256  
General and administrative
    2,456       1,973       2,247  
   
 
 
   
 
 
   
 
 
 
Total stock-based compensation expense
  $ 3,409     $ 5,394     $ 6,698  
   
 
 
   
 
 
   
 
 
 
 
   
For the year ended March 31,
 
   
2019
   
2018
   
2017
(As Restated)
 
Stock-based compensation by type of award:
                       
Restricted stock
  $ 3,178     $ 5,004     $ 5,653  
Performance share units
    274       (171     561  
Stock options
    (43     44       484  
Employee stock purchase plan
    —         517       —    
   
 
 
   
 
 
   
 
 
 
Total stock-based compensation expense
  $ 3,409     $ 5,394     $ 6,698  
   
 
 
   
 
 
   
 
 
 
The Company also recorded $0.6 million of stock based compensation expense which was included in restructuring charges in the accompanying consolidated statements of operations and comprehensive loss related to the modification of certain restricted stock awards.
During fiscal years 2019, 2018 and 2017, no tax benefit was realized for the tax deduction from stock-based awards due to tax benefit carryforwards and tax ordering requirements.
 
The following table summarizes unrecognized compensation cost related to non-vested restricted stock units, performance share units and stock options (in thousands).
 
   
For the years ended March 31,
 
   
2019
   
2018
   
2017

(As Restated)
 
   
Amount
   
Weighted-
Average
Remaining
Recognition
Period
(Years)
   
Amount
   
Weighted-
Average
Remaining
Recognition
Period
(Years)
   
Amount
   
Weighted-
Average
Remaining
Recognition
Period
(Years)
 
Unrecognized Compensation Expense:
                                               
Restricted stock
  $ 2,489       1.09     $ 8,016       1.94     $ 6,308       1.73  
Performance share units
    742       1.23       2,143       1.94       529       1.73  
Stock options
    —         —         1,028       —         —         0.09  
   
 
 
           
 
 
           
 
 
         
Unrecognized compensation expense
  $ 3,231             $ 11,187             $ 6,837          
   
 
 
           
 
 
           
 
 
         
Stock Options
A summary of activity relating to our stock options is as follows (shares in thousands):
 
   
Shares
   
Weighted-
Average
Exercise Price
Per Share
   
Weighted-
Average
Remaining
Contractual
Term in
(Years)
   
Aggregate
Intrinsic
Value
 
Outstanding as of March 31, 2017 (as restated)
    179     $ 20.02       0.86     $ 4,760  
Granted
    250     $ 6.20                  
Exercised
    (1   $ 5.04                  
Expired
    (177   $ 20.23                  
   
 
 
                         
Outstanding as of March 31, 2018
    251     $ 6.19       0.41     $ —    
                                 
Forfeited
    (250   $ 6.20                  
Expired
    (1   $ 5.04                  
   
 
 
                         
Outstanding, vested and exercisable as of March 31, 2019
    0     $ 5.04       1.57     $ —    
                                 
Vested and expected to vest as of March 31, 2019
    1     $ 5.04       1.57     $ —    
   
 
 
                         
 
For estimating fair value of stock options, the Company uses the Black-Scholes Merton stock option valuation model (“Black-Scholes”), which requires the use of assumptions. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms, exercise patterns and post-vesting forfeitures. The Company estimates volatility based on the historical volatility of our common stock over the most recent period corresponding with the estimated expected life of the award. The Company bases the risk-free interest rate used in the Black-Scholes stock option valuation model on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent term equal to the expected life of the award. The Company has not paid any cash dividends on its common stock and does not anticipate paying any cash dividends in the foreseeable future. The Company amortizes the fair value of stock options on a ratable basis over the requisite service periods, which are generally the vesting periods.
Assumptions used in the Black-Scholes model for stock option grants in fiscal 2018 are as follows:
 
Weighted-Average:
     
Expected term (years)
    7  
Contractual term (years)
    7  
Risk-free interest rate
    2.48
Stock price volatility
    75.52
Grant date fair value
  $ 4.29  
Performance Share Units
The Company granted 0.7 million and 0.5 million of performance share units with market conditions (“Market PSUs”) in fiscal 2019 and 2018, respectively. The number of Market PSUs issued is dependent on Quantum’s common stock achieving certain 60-day average closing stock price targets as of specified dates and the Company becoming current with SEC reporting requirements or the Company becoming current with SEC reporting requirements and being relisted on a national stock exchange. Market PSUs issued vest 1-3 years after the issuance date based on the stock price targets achieved. The estimated fair value of these Market PSUs is determined at the issuance date using a Monte Carlo simulation model.
Assumptions used in the Monte Carlo model to calculate fair values of market PSU’s during each fiscal period are as follows:
 
Weighted-Average:
 
2019
   
2018
 
Discount period (years)
    1.95       7.00  
Risk-free interest rate
    2.63     2.48
Stock price volatility
    69.35     75.52
Grant date fair value
  $ 1.70     $ 4.29  
The Company granted 0.4 million and 0.4 million of performance share units with financial performance conditions (“Performance PSUs”) in fiscal 2018 and 2017, respectively. No Performance PSU’s were issued in fiscal 2019. Performance PSUs become eligible for vesting based on Quantum achieving certain financial performance targets through the end of the fiscal year when the performance PSUs were granted. Performance PSUs are valued at the market closing share price on the date of grant and compensation expense for Performance PSUs is recognized when it is probable that the performance conditions will be achieved.
 
A summary of activity relating to the Company’s Performance PSUs is as follows (shares in thousands):
 
   
Shares
   
Weighted-Average
Grant Date Fair
Value Per Share
 
Nonvested as of March 31, 2017 (as restated)
    505     $ 4.49  
Granted
    851     $ 4.49  
Vested released
    (114   $ 5.70  
Forfeited
    (527   $ 4.84  
   
 
 
         
Nonvested as of March 31, 2018
    715     $ 7.05  
Granted
    735     $ 1.70  
Vested released
    (34   $ 3.45  
Forfeited
    (646   $ 4.05  
   
 
 
         
Nonvested as of March 31, 2019
    770     $ 1.78  
   
 
 
         
The fair value of Performance PSUs vested during fiscal years 2019, 2018 and 2017 was $0.1 million, $0.7 million and $0.3 million, respectively.
Restricted Stock Units
The Company granted 1.0 million, 1.5 million and 0.7 million of service-based restricted stock units (“RSUs”), during fiscal 2019, 2018, and 2017 respectively which generally vest ratably over a three-year service period. Certain RSUs are subject to the Company becoming current with SEC reporting requirements or the Company becoming current with SEC reporting requirements and being relisted on a national stock exchange, which were both evaluated as a performance condition. RSUs are valued at the market closing share price on the date of grant and compensation expense for RSUs is recognized ratably over the applicable vesting period. The fair value of RSUs vested during fiscal years 2019, 2018 and 2017 was $5.1 million, $4.8 million and $7.2 million, respectively.
A summary of activity relating to our RSUs is as follows (shares in thousands):
 
   
Shares
   
Weighted-Average
Grant Date Fair
Value per share
 
Outstanding as of March 31, 2017 (as restated)
    1,260     $ 7.65  
Granted
    1,465     $ 6.61  
Vested released
    (580   $ 8.20  
Forfeited
    (306   $ 7.63  
   
 
 
         
Outstanding as of March 31, 2018
    1,839     $ 6.65  
Granted
    1,005     $ 2.33  
Vested released
    (835   $ 6.16  
Forfeited
    (696   $ 6.73  
   
 
 
         
Outstanding as of March 31, 2019
    1,313     $ 3.61  
Vested and expected to vest as of March 31, 2019
    1,313     $ 3.61  
   
 
 
         
 
Employee Stock Purchase Plan
The Company uses the Black-Scholes pricing model to determine the fair value of shares purchased under the Employee Stock Purchase Plan. The weighted-average fair values and the assumptions used in calculating fair values during each fiscal period are as follows:
 
   
For the year ended March 31,
 
   
2019
   
2018
   
2017
(As Restated)
 
Option life (in years)
    N/A       0.50       0.50  
Risk-free interest rate
    N/A       0.91     49.50
Stock price volatility
    N/A       0.05     75.14
Weighted-average grant date fair value
    N/A     $ 2.20     $ 1.89