Stock-Based Compensation — As of September 30, 2020, we maintained three stock-based incentive compensation plans (“Stock Plans”), as well as an Employee Stock Purchase Plan (“ESPP”). See Note 12, “Stock-Based Compensation,” in our 2019 10-K for further information regarding these plans. Most of our equity grants are awarded on an annual basis.

Effective March 17, 2020, the performance-vesting conditions for all outstanding options to purchase shares of common stock and restricted stock units (“RSUs”) subject to both service and performance vesting requirements that were granted in 2017, 2018, and 2019 were eliminated. The performance modification resulted in the immediate issuance of 186,139 shares of common stock, corresponding to the portion of RSUs for which service-vesting dates had previously elapsed.

For the nine month period ended September 30, 2020, options to purchase 4,140,378 shares of common stock were granted, 38,383 options to purchase shares of common stock were exercised, options to purchase 71,008 shares of common stock were forfeited and options to purchase 2,929,350 shares of common stock expired. In addition, pursuant to an option exchange program that closed on June 12, 2020, we accepted for exchange, in the aggregate, eligible options (which excluded options granted for service by non-executive members of our board of directors) to purchase 6,664,773 shares of common stock. The surrendered eligible options were cancelled, and we granted replacement options to purchase an aggregate of 2,896,383 shares of our common stock in exchange for the tendered eligible options.

The stock-based compensation expense resulting from the option exchange program was less than $1.0 million, and the amount will be recorded on a straight-line basis through December 31, 2022.

For the nine month period ended September 30, 2020, 3,033,702 RSUs were granted, 2,146,750 RSUs vested (of which 193,154 were RSUs that vested in connection with the performance modification) and 549,493 RSUs were forfeited.

For the nine month period ended September 30, 2020, 25,977 restricted shares vested and no shares were cancelled. These shares are deemed issued as of the date of grant, but not outstanding until they vest.

For the nine month period ended September 30, 2020, 192,702 Deferred Stock Units were granted and 26,508 vested.

For the nine month period ended September 30, 2020, 327,085 shares of common stock were issued under the ESPP.

In August 2020, we communicated to employees that the 2020 annual bonus, which historically has been paid in cash, is expected to be paid in shares of Gogo common stock. The bonus payment amount will be determined based upon our performance against established goals and as a result, the value of the shares of Gogo common stock expected to be distributed is classified as a liability as of September 30, 2020. In August 2020, we announced two new bonus plans. One is related to and contingent upon the closing of the Transaction and is expected to be paid in cash. This bonus has not been accrued as of September 30, 2020. The other is related to a reorganization of the business undertaken to prepare for the Transaction and is expected to be paid in shares of Gogo common stock. The payment of the reorganization bonus plan is fixed and as a result, the value of the shares of Gogo common stock expected to be distributed is classified as a liability as of September 30, 2020. The 2020 annual bonus and the reorganization bonus are treated as stock-based compensation in our unaudited condensed consolidated financial statements as they are expected to be paid in shares of Gogo common stock. Our compensation committee reserves the discretion to change the method of payment for any of the three bonus plans from cash to stock or vice versa.

The following is a summary of our stock-based compensation expense by operating expense line in the unaudited condensed consolidated statements of operations (in thousands):

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
	2020		2019		2020		2019
Cost of service revenue	$	179	$	27	$	239	$	90
Cost of equipment revenue		203		60		338		211
Engineering, design and development		584		158		902		439
Sales and marketing		413		386		938		1,189
General and administrative		3,301		1,641		5,866		4,802
Total stock-based compensation expense	$	4,680	$	2,272	$	8,283	$	6,731

401(k) Plan — Under our 401(k) plan, all employees who are eligible to participate are entitled to make tax-deferred contributions, subject to Internal Revenue Service limitations. We match 100% of the employee’s first 4% of contributions made, subject to annual limitations. Our matching contributions were $0.3 million and $0.9 million, respectively, during the three and nine month periods ended September 30, 2020 and $0.3 million and $1.0 million, respectively, for the prior-year periods.