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STOCKHOLDERS’ EQUITY
 3 Months Ended
Mar. 31, 2023
Share-Based Payment Arrangement [Abstract]  
STOCKHOLDERS’ EQUITY STOCKHOLDERS’ EQUITY
Underwritten Public Equity Offering
In January 2023, we entered into an underwriting agreement, relating to the public offering of 17.5 million shares of our common stock, $0.001 par value per share, at a price to the public of $10.00 per share. Under the terms of the underwriting agreement, we also granted the underwriters a 30-day option to purchase up to an additional 2.6 million shares of our common stock, which was subsequently exercised in full, and the offering, including the sale of shares of common stock subject to the underwriters' option, closed in January 2023. In total, we sold 20.1 million shares of our common stock. We paid a commission equal to 5.75% of the gross proceeds from the sale of shares of our common stock. The total net proceeds to us from the offering after deducting the underwriting discount were approximately $189.7 million, excluding approximately $0.5 million of offering expenses.
Refer to Note 10 – Stockholders' Equity, in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2022 for more information on the Company's underwritten public equity offerings and private placement of common stock.
Equity Plans
At March 31, 2023, the Company had share-based compensation awards outstanding under the 2020 Equity Incentive Plan (the “2020 Plan”), the 2020 Inducement Equity Incentive Plan (the “Inducement Plan”), the 2021 adopted Omniome Equity Incentive Plan of Pacific Biosciences of California, Inc. (the “Omniome Plan”) and the 2010 Employee Stock Purchase Plan, from which we issued equity awards and employee stock.
As of March 31, 2023, we had 12.8 million shares remaining and available for future issuance under the 2020 Plan, Inducement Plan, and the Omniome Plan.
Refer to Note 10 – Stockholders' Equity, in Part II, Item 8 of the Annual Report on Form 10-K for the year ended December 31, 2022 for more information on the Company's equity plans.
Stock Options
Time-based Stock Options
The following table summarizes stock option activity for time-based awards (shares in thousands):
Number
of shares		Weighted
average
exercise price
Outstanding at December 31, 202214,618$10.60 
Granted — — 
Exercised (250)3.75 
Canceled (362)17.16 
Outstanding at March 31, 202314,006$10.55 
Performance-based Stock Options
The following table summarizes stock option activity for performance-based awards (shares in thousands):
Number
of shares		Weighted
average
exercise price
Outstanding at December 31, 2022258$4.71 
Granted —— 
Exercised (230)4.71 
Canceled (4)4.71 
Outstanding at March 31, 202324$4.71 
Restricted Stock Units (“RSU”) and Performance Stock Units ("PSU")
We issue RSUs for which the respective shares vest when the requisite service period is achieved. We issue PSUs for which the number of shares issuable in the third year of the performance period based on performance relative to specified revenue targets and continued employment through the vesting period. The following table summarizes the time-based RSUs and PSUs activity (shares in thousands):
Restricted Stock Units (RSU)Performance Stock Units (PSU)Weighted average grant date
fair value
RSUPSU
Outstanding at December 31, 20228,535— $15.16 $— 
Granted6,3415649.47 9.43 
Vested(1,640)— 16.47 — 
Forfeited(465)— 17.80 — 
Outstanding at March 31, 202312,771564$12.07 $9.43 
Employee Stock Purchase Plan (“ESPP”)
Shares issued under our ESPP were 1,052,908 and 1,316,923 during the three months ended March 31, 2023 and 2022, respectively. In February 2023, an additional 4.0 million shares were reserved under the ESPP. As of March 31, 2023, 12.9 million shares of our common stock remain available for issuance under our ESPP.
Share-Based Compensation
The following table summarizes share-based compensation expense (in thousands):
Three Months Ended March 31,
20232022
Cost of revenue$1,949 $1,758 
Research and development 6,705 8,965 
Sales, general and administrative9,299 11,980 
Total share-based compensation expense$17,952 $22,703 
Determining Fair Value
We estimate the fair value of stock options granted using the Black-Scholes valuation method and a single option award approach. When determining the current share prices underlying the stock options for calculating the grant-date fair value, we reference the observable market prices of our stock. This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. The fair market value of RSUs and PSUs granted is the closing price of our shares on the date of grant and is generally recognized as compensation expense on a straight-line basis over the respective vesting
period. For shares purchased under our ESPP, we estimate the grant-date fair value, and the resulting share-based compensation expense, using the Black-Scholes option-pricing model. We estimate forfeitures of stock options, RSUs and shares purchased under our ESPP which is utilized to determine the compensation expense to be recorded over the requisite service period.
•Expected Term - The expected term used in the Black-Scholes valuation method represents the period that the stock options are expected to be outstanding and is determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock options and vesting schedules.
•Expected Volatility - The expected volatility used in the Black-Scholes valuation method is derived from the implied volatility related to our share price over the expected term.
•Expected Dividend - We have never paid dividends on our shares and, accordingly, the dividend yield percentage is zero for all periods.
•Risk-Free Interest Rate - The risk-free interest rate used in the Black-Scholes valuation method is the implied yield currently available on U.S. Treasury constant maturities issued with a term equivalent to the expected terms.
For the three months ended March 31, 2023, there were no employee stock options granted. The fair value of employee stock options was estimated using the following assumptions:
Three Months Ended March 31,
2022
Expected term in years4.60
Expected volatility 70%
Risk-free interest rate 1.76%
Dividend yield —
Weighted average grant date fair value per share$6.66

The fair value of shares to be issued under the ESPP was estimated using the following assumptions:
Three Months Ended March 31,
20232022
Expected term in years
0.5 — 2.0
0.5 — 2.0
Expected volatility 97%70%
Risk-free interest rate
4.89% — 5.20%
0.60% — 1.31%
Dividend yield ——
Weighted average grant date fair value per share$5.00$5.42