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Share Based Awards

6 Months Ended

Jun. 30, 2020

10.	Share Based Awards

2008 Stock Plan

Our 2008 Stock Plan, or 2008 Plan, which expired on June 12, 2014, provided for the grant of incentive and nonstatutory stock options to employees, nonemployee directors and consultants of the Company. Options granted under the 2008 Plan generally become exercisable within three to four years following the date of grant and expire 10 years from the date of grant.

Our 2008 Plan was terminated following the date our 2014 Equity Incentive Plan, or our 2014 Plan, became effective. Any outstanding stock awards under our 2008 Plan will continue to be governed by the terms of our 2008 Plan and applicable award agreements.

2014 Equity Incentive Plan

Our 2014 Plan provides for the grant of incentive stock options, or ISOs, within the meaning of Section 422 of the Internal Revenue Code, or the Code, to our employees and our parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, or NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards, and other forms of equity compensation to our employees, directors and

consultants. Additionally, our 2014 Plan provides for the grant of performance cash awards to our employees, directors and consultants.

The initial number of shares of our common stock available to be issued under our 2014 Plan was 8,142,857, which number of shares will be increased by any shares subject to stock options or other stock awards granted under the 2008 Stock Plan that would have otherwise returned to our 2008 Stock Plan (such as upon the expiration or termination of a stock award prior to vesting), not to exceed 16,312,202.

The number of shares of our common stock reserved for issuance under our 2014 Plan automatically increase on January 1 of each year, beginning on January 1, 2015 and continuing through and including January 1, 2024, by 5% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our board of directors. On January 1, 2020, we increased the number of shares of common stock reserved for issuance under our 2014 Plan by 5,636,269 shares, which was 5% of the total number of shares of common stock outstanding at December 31, 2019.

Amended and Restated 2015 Inducement Plan

On December 20, 2015, our board of directors adopted our 2015 Inducement Plan, or the Inducement Plan, to reserve 1,600,000 shares of our common stock to be used exclusively for grants of awards to individuals that were not previously employees or directors of the Company. The terms and conditions of the Inducement Plan are substantially similar to our stockholder-approved 2014 Plan. On January 5, 2016, our board of directors approved the amendment and restatement of the Inducement Plan to increase the share reserve under the Inducement Plan to 1,970,000 shares of our common stock. As of June 30, 2020, there were 646,876 stock options and restricted stock units outstanding under the Inducement Plan.

2014 Employee Stock Purchase Plan

The purpose of our 2014 Employee Stock Purchase Plan, or ESPP, is to secure the services of new employees, to retain the services of existing employees and to provide incentives for such individuals to exert maximum efforts toward our success and that of our customers, other partners, and shareholders. Our ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. Our ESPP permits eligible employees to purchase our common stock through payroll deductions, which may not exceed 15% of the employee’s base compensation. Stock may be purchased under the plan at a price equal to 85% of the fair market value of our common stock on either the first day of the offering or the last day of the applicable purchase period, whichever is lower.

As of June 30, 2020 and December 31, 2019, approximately 943,545 and 378,525 shares of common stock were available for future issuance under our ESPP, respectively. The number of shares of our common stock reserved for issuance under our ESPP increase automatically each year, beginning on January 1, 2015 and continuing through and including January 1, 2024, by the lesser of (i) 1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year; (ii) 2,142,857 shares of common stock; or (iii) such lesser number as determined by our board of directors. Shares subject to purchase rights granted under our ESPP that terminate without having been exercised in full will not reduce the number of shares available for issuance under our ESPP. On January 1, 2020, we increased the number of shares available for issuance under the ESPP by 1,127,253 shares, which was 1% of the total number of shares of our common stock outstanding as of December 31, 2019.

Restricted Stock Units and Performance Stock Units

We grant restricted stock units (“RSUs”) and, beginning in our first quarter of 2020, performance stock units (“PSUs”) under our 2014 Plan. For stock-based compensation expense, we measure the value of the RSUs and PSUs based on the fair value of our common stock on the date of grant. Our RSU grants are subject to service conditions and we expense the fair value of those shares on a straight-line basis over their vesting periods. Our PSU grants are subject to performance and service conditions and we expense the fair value of those shares on an accelerated-graded basis over the employee’s requisite service period. The PSU expense may be adjusted each quarter based on our forecast of the Company’s performance relative to the annual recurring revenue metrics that determine the number of PSUs that will

vest. To the extent that updated estimates of PSU expense differ from original estimates, the cumulative effect on current and prior periods of those changes is recorded in the period in which those estimates are revised.

Our RSU activity for the six months ended June 30, 2020 was as follows:


	Restricted Stock Units
		Weighted-
		Average
	Number of	Grant Date
	Shares	Fair Value
Unvested, December 31, 2019	12,639,066	$	5.20
Granted	6,998,715		4.46
Vested	(4,439,725)		4.72
Forfeitures	(825,068)		5.00
Unvested, June 30, 2020	14,372,988	$	5.00

Our PSU activity for the six months ended June 30, 2020 was as follows:


	Performance Stock Units
		Weighted-
		Average
	Number of	Grant Date
	Shares	Fair Value
Unvested, December 31, 2019	—	$	n/a
Granted	1,005,000		3.27
Vested	—		n/a
Forfeitures	—		n/a
Unvested, June 30, 2020	1,005,000	$	3.27

Bonus Plans

The 2018 Non-Executive and Executive Bonus Plans provided for the issuance of shares of unrestricted common stock to employees based on the achievement of certain 2018 Company metrics. We issued 1,338,220 shares of unrestricted common stock in the first quarter of 2019, after withholding 832,635 shares to cover employee payroll taxes which we paid in cash totaling $4.1 million.

In March 2019, the Compensation Committee of our board of directors approved the 2019 Non-Executive Bonus Plan and the 2019 Executive Bonus Plan, or collectively, the 2019 Bonus Plans. The 2019 Bonus Plans provided for the issuance of shares of unrestricted common stock to employees based on the achievement of certain 2019 Company metrics. We issued 1,061,165 shares of unrestricted common stock in the first quarter of 2020, after withholding 669,517 shares to cover employee payroll taxes which we paid in cash totaling $2.9 million.

In April 2020, the Compensation Committee of our board of directors approved the 2020 Non-Executive Bonus Plan and the 2020 Executive Bonus Plan, or collectively, the 2020 Bonus Plans. The 2020 Bonus Plans provide for the issuance of shares of unrestricted common stock to employees based on the achievement of certain 2020 Company metrics as determined by the Compensation Committee.

Shares issued under the aforementioned Bonus Plans are issued from our 2014 Plan and reduce the 2014 Plan shares available for issuance.

We record stock-based compensation expense related to the Bonus Plans over the service period of eligible employees based on forecasted performance relative to the Company target metrics. To the extent that updated estimates of bonus expense differ from original estimates, the cumulative effect on current and prior periods of those changes is recorded in the period those estimates are revised.

In the six months ended June 30, 2020, we recorded $757,000 of stock-based compensation expense under the 2019 Bonus Plans. In both the three and six months ended June 30, 2020, we recorded $5.7 million of stock-based compensation expense under the 2020 Bonus Plans. Because the 2020 Bonus Plans were not approved until the second quarter of 2020, we recognized cumulative expense for the service period from January 1, 2020 to June 30, 2020 in the second quarter of 2020. In the six months ended June 30, 2019, we recorded $1.1 million of stock-based compensation expense under the 2018 Bonus Plans. In the three and six months ended June 30, 2019, we recorded $2.2 million and $4.9 million, respectively, of stock-based compensation expense under the 2019 Bonus Plans.

Stock Options

Stock option activity under the 2008 Plan, 2014 Plan and 2015 Inducement Plan for the six months ended June 30, 2020 was as follows:


		Options Outstanding
						Weighted-
	Number of					Average	Aggregate
	Shares		Weighted-			Remaining	Intrinsic
	Available	Number of	Average		Contractual		Value
	for Issuance	Shares	Exercise Price			Term (Years)	(In thousands)
Balance—December 31, 2019	1,301,881	2,898,977	$	5.17		4.89	$	1,556
Authorized	5,636,269	—
Stock options granted	—	—
Issuance of shares under Bonus Plans	(1,730,682)	—
Shares withheld from net settlement of restricted stock units	815,527
Restricted stock units granted	(5,268,033)	—
Performance stock units granted(1)	(1,005,000)	—
Exercised	—	(142,300)		3.51
Stock options canceled	83,813	(83,813)		5.53
Restricted stock units forfeited	825,068	—
Balance—June 30, 2020	658,843	2,672,864	$	5.25		4.12	$	1,424
Vested and exercisable—June 30, 2020		2,352,550	$	5.34		3.80	$	1,308
Vested and expected to vest(2)—June 30, 2020		2,625,187	$	5.26		4.08	$	1,408

(1)

Performance stock units granted are reflected in the table as a decrease in the number of shares available for issuance at target achievement for tracking and reporting purposes but do not technically reduce shares available for issuance until earned.

(2)

Options expected to vest reflect an estimated forfeiture rate.

Our stock-based compensation expense was recorded in the following cost and expense categories (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2020		2019
Cost of revenue	$	1,898	$	1,266	$	2,796	$	2,807
Research and development		5,284		3,625		8,343		7,736
Sales and marketing		3,389		2,064		5,462		4,338
General and administrative		2,935		1,902		4,478		4,266
Total	$	13,506	$	8,857	$	21,079	$	19,147

We used the Black-Scholes Model to estimate the fair value of our stock options granted to employees with the following assumptions:


	Six Months Ended
	June 30,
	2020	2019
Expected dividend yield	n/a	—
Risk-free interest rate	n/a	2.5%
Expected volatility	n/a	50%
Expected life (in years)	n/a	6.1

No stock options were granted in the three and six months ended June 30, 2020 or the three months ended June 30, 2019.

We used the Black-Scholes Model to estimate the fair value of our Employee Stock Purchase Plan awards with the following assumptions:


	Six Months Ended
	June 30,
	2020	2019
Expected dividend yield	—	—
Risk-free interest rate	1.5%	2.5%
Expected volatility	45%	42%
Expected life (in years)	1.3	1.3

No ESPP offering periods began in the three months ended June 30, 2020 or 2019.

As required by Topic 718 Compensation—Stock Compensation, we estimate expected forfeitures and recognize compensation costs only for those equity awards expected to vest.

As of June 30, 2020, unrecognized stock-based compensation expense and its remaining weighted-average recognition period was as follows:


	Unrecognized		Remaining
	Stock-based		Weighted-Average
	Compensation		Recognition
	Expense		Period
	(in millions)		(in years)
Stock options	$	0.6	2.1
Restricted stock units		53.8	2.8
Performance stock units		2.9	1.9
ESPP		2.4	1.6
Total	$	59.7