Stockholders' Equity

6 Months Ended

Jun. 30, 2020

NOTE 7. STOCKHOLDERS’ EQUITY

Equity Plans

As of June 30, 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. Our 2010 Equity Incentive Plan (“2010 Plan”) and 2010 Outside Director Equity Incentive Plan (“2010 Director Plan”) expired on July 29, 2020.

On August 4, 2020, stockholders at the 2020 Annual Meeting approved a new 2020 Equity Incentive Plan and the 2010 Equity Incentive Plan and 2010 Outside Director Equity Incentive Plan were terminated. A description of the 2020 Equity Incentive Plan can be found in the Company’s Proxy Statement for the 2020 Annual Meeting of Stockholders, dated June 24, 2020.

Stock Options

The following table summarizes stock option activity for all our stock option plans for the six months ended June 30, 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	(341)		1.16 – 4.25		2.43
Options canceled	(1,906)		2.54 – 15.77		7.39
Balances, June 30, 2020	20,485	$	1.16 – 16.00	$	5.45

For the three and six months ended June 30, 2020, we recognized stock-based compensation expense of $1.1 million and $2.9 million, respectively, related to options.

Restricted Stock Units, or “RSUs”

Time-based RSUs

The following table summarizes the time-based RSUs activity for the six months ended June 30, 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	5,280		4.34
RSUs released	(858)		6.78
RSUs forfeited	(399)		4.47
Unvested RSUs outstanding at June 30, 2020	5,109	$	4.30

For the three and six months ended June 30, 2020, we recognized stock-based compensation expense of $1.6 million and $3.8 million, respectively, related to time-based RSUs.

Performance-based RSUs

The following table summarizes the performance-based RSUs activity for the six months ended June 30, 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 June 30, 2020	138	$	2.63

For the three and six months ended June 30, 2020, we recognized stock-based compensation expense of $0 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 June 30, 2020, we had an aggregate of 27.2 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 six months ended June 30, 2020 and 2019, respectively. In January 2020, an additional 3.1 million shares were reserved under the ESPP. As of June 30, 2020, 6,713,447 shares of our common stock remain available for issuance under our ESPP.

For the three and six months ended June 30, 2020, we recognized stock-based compensation expense of $408,000 and $537,000, respectively, related to the ESPP shares.

Stock-Based Compensation

The following table summarizes the stock-based compensation expense for the three and six months ended June 30, 2020 and 2019, respectively (in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Cost of revenue	$	452	$	444	$	979	$	956
Research and development		1,433		1,918		3,192		3,930
Sales, general and administrative		1,349		1,727		3,095		3,584
Total stock-based compensation expense	$	3,234	$	4,089	$	7,266	$	8,470

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 three months ended June 30, 2020. 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 June 30,		Six Months Ended June 30,
Stock Option	2020	2019	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 June 30,		Six Months Ended June 30,
ESPP	2020	2019	2020	2019
Expected term in years	0.5-2.0	—	0.5-2.0	—
Expected volatility	0.6	—	0.6	—
Risk-free interest rate	0.8% -1.0%	—	0.8% -1.0%	—
Dividend yield	—	—	—	—