Stockholders' Equity

3 Months Ended

Mar. 31, 2020

NOTE 7. STOCKHOLDERS’ EQUITY

Equity Plans

As of March 31, 2020, in total, we had three active equity compensation plans: the 2010 Equity Incentive Plan (“2010 Plan”), the 2010 Outside Director Equity Incentive Plan (“2010 Director Plan”) and the 2010 Employee Stock Purchase Plan (“ESPP”). Pursuant to the terms of the then-in-process Merger Agreement, the ESPP was terminated after the completion of the purchase period ended March 1, 2019. After the merger with Illumina was terminated in January 2020, we began offerings under the ESPP again starting with the offering period beginning on March 1, 2020.

Stock Options

The following table summarizes stock option activity for all our stock option plans for the three months ended March 31, 2020 (in thousands, except per share amounts):



	Stock Options Outstanding
				Weighted
	Number			average
	of shares	Exercise price		exercise price
Balances, December 31, 2019	22,697	$	1.16 – 16.00	$	5.57
Options granted	35		2.45		2.45
Options exercised	(67)		1.16 – 4.25		3.00
Options canceled	(980)		2.54 – 15.77		7.80
Balances, March 31, 2020	21,685	$	1.16 – 16.00	$	5.48

For the three months ended March 31, 2020 and 2019, we recognized compensation expense of $1.7 million and $3.2 million, respectively, related to options.

Restricted Stock Units, or “RSUs”

Time-based RSUs

The following table summarizes the time-based RSUs activity for the three months ended March 31, 2020 (in thousands, except per share amounts):


		Weighted average
	Number	grant date
	of shares	fair value
RSUs outstanding at December 31, 2019	1,086	$	6.12
RSUs granted	4,960		4.41
RSUs released	(850)		6.79
RSUs forfeited	(115)		4.82
Unvested RSUs outstanding at March 31, 2020	5,081	$	4.36

For the three months ended March 31, 2020 and 2019, we recognized compensation expense of $2.2 million and $0.7 million, respectively, related to time-based RSUs.

Performance-based RSUs

The following table summarizes the performance-based RSUs activity for the three months ended March 31, 2020 (in thousands, except per share amounts):


		Weighted average
	Number	grant date
	of shares	fair value
PSUs outstanding at December 31, 2019	138	$	2.63
PSUs granted	—		—
PSUs released	—		—
PSUs forfeited	—		—
Unvested PSUs outstanding at March 31, 2020	138	$	2.63

For the three months ended March 31, 2020 and 2019, we recognized compensation expense of $0 and $7,000, respectively, related to the performance-based RSUs.

In January 2020, an additional 7.7 million shares and 1.5 million shares, respectively, were reserved under the 2010 Plan and the 2010 Director Plan. As of March 31, 2020, we had an aggregate of 26.4 million shares of common stock reserved and available for future issuance under the 2010 Plan and 2010 Director Plan.

ESPP shares

Shares issued under our ESPP were none and 1,306,329 during the three months ended March 31, 2020 and 2019, respectively. In January 2020, an additional 3.1 million shares were reserved under the ESPP. As of March 31, 2020, 6,713,447 shares of our common stock remain available for issuance under our ESPP.

For the three months ended March 31, 2020 and 2019, we recognized compensation expense of $129,000 and $548,000, respectively, related to the ESPP shares.

Stock-Based Compensation

The following table summarizes the stock-based compensation expense for the three months ended March 31, 2020 and 2019, respectively (in thousands):



	Three Months Ended March 31,
	2020		2019
Cost of revenue	$	527	$	512
Research and development		1,759		2,012
Sales, general and administrative		1,746		1,857
Total stock-based compensation expense	$	4,032	$	4,381

We estimated the fair value of employee stock options on the grant date using the Black-Scholes option pricing model. The estimated fair value of employee stock options is amortized on a straight-line basis over the requisite service period of the awards. We did not grant any stock options for the year ended December 31, 2019 due to the then-in-process merger with Illumina.



	Three Months Ended March 31,
Stock Option	2020	2019
Expected term in years	5.1	—
Expected volatility	57%	—
Risk-free interest rate	1.2%	—
Dividend yield	—	—

We estimate the value of employee stock purchase rights on the grant date using the Black-Scholes option pricing model. Pursuant to the terms of the then-in-process merger with Illumina, the ESPP was terminated after the completion of the purchase period ended March 1, 2019 and there were no offerings after March 1, 2019. As such there were no new Black-Scholes calculations performed to calculate the fair value of new purchase rights granted for the year ended December 31, 2019. After the merger with Illumina was terminated in January 2020, we began offerings under the ESPP again starting with the offering period on March 1, 2020.



	Three Months Ended March 31,
ESPP	2020	2019
Expected term in years	0.5-2.0	—
Expected volatility	57%	—
Risk-free interest rate	0.8%-1.0%	—
Dividend yield	—	—