STOCK INCENTIVE AND OTHER BENEFIT PLANS | NOTE 10 — STOCK INCENTIVE AND OTHER BENEFIT PLANS 2007 Equity Incentive Plan In 2007, the Company’s Board of Directors adopted, and the Company’s stockholders approved, the 2007 Equity Incentive Plan (the “2007 Plan”). The 2007 Plan permits the Company to grant stock options, RSUs, PSUs, PSOs and other stock-based awards to employees, non-employee directors and consultants. In April 2020, the Company’s Board of Directors approved, and in June 2020, the Company’s stockholders approved, the Sixth Amended and Restated 2007 Equity Incentive Plan (the “Sixth Amended 2007 Plan”). The Sixth Amended 2007 Plan included an increase of 7,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan. As of December 31, 2020, 7,459 shares were available for future grants under the Sixth Amended 2007 Plan. Performance-based equity awards The Compensation Committee of the Company’s Board of Directors (the “Compensation Committee”) has awarded PSOs and/or PSUs to the Company’s executives and certain other employees. These performance-based awards are subject to the achievement of specified annual performance goals. They become eligible to vest only if the applicable performance goals are achieved and will vest only if the grantee remains employed with the Company through each applicable vesting date. The number of shares that may vest depend on the extent to which the Company achieves the specified annual performance goals. The fair value of these awards is estimated on the date of grant. The PSOs have a contractual term of 10 years. If the performance goals are not met as of the end of the performance period, no compensation expense is recognized, and any previously recognized expense is reversed. The expected cost is based on the awards that are probable to vest and is recognized over the service period. 2007 Employee Stock Purchase Plan In 2007, the Company’s Board of Directors adopted and the Company’s stockholders approved, the 2007 Employee Stock Purchase Plan (the “2007 Purchase Plan”). The Company initially reserved 667 shares of its common stock for issuance under the 2007 Purchase Plan. The 2007 Purchase Plan permits eligible employees, including employees of certain of the Company’s subsidiaries, to purchase common stock at a discount through payroll deductions during defined offering periods. The price at which the stock is purchased is equal to the lower of 85% of the fair market value of the common stock at the beginning of an offering period or after a purchase period ends. In April 2017, the Company’s Board of Directors approved, and in June 2017, the Company’s stockholders approved the Amended and Restated 2007 Employee Stock Purchase Plan (the “Amended 2007 Purchase Plan”). The Amended 2007 Purchase Plan includes an increase of 4,000 shares in the aggregate number of shares of common stock authorized for issuance under the plan and removal of the expiration date of the plan. As of December 31, 2020, 2,003 shares were available for issuance under the 2007 Purchase Plan. 2018 Equity Inducement Plan In April 2018, the Compensation Committee of the Company’s Board of Directors adopted the 2018 Equity Inducement Plan (the “2018 Plan”). The 2018 Plan replaced the Company’s 2008 Equity Inducement Plan that expired by its terms in March 2018, and is intended to augment the shares available for issuance under the Sixth Amended 2007 Plan. The Company did not seek stockholder approval for the 2018 Plan. As such, awards under the 2018 Plan will be granted in accordance with Nasdaq Listing Rule 5635(c)(4) and only to persons not previously considered an employee or director of the Company, or following a bona fide period of non-employment, as an inducement material to such individuals entering into employment with the Company. The Company initially reserved 400 shares of common stock for issuance under the 2018 Plan. As of December 31, 2020, 194 shares were reserved for future grants under the 2018 Plan. RSU Activity A summary of the Company’s RSU activity is as follows: Weighted Weighted Number of Average Average Remaining Aggregate Units Grant Date Contractual Intrinsic Outstanding Fair Value Term (Years) Value Awarded and unvested, December 31, 2017 5,812 $ 2.96 Granted 278 $ 5.90 Vested (2,648) $ 3.24 Forfeited (421) $ 2.71 Awarded and unvested, December 31, 2018 3,021 $ 3.01 Granted 2,936 $ 6.84 Vested (1,688) $ 3.27 Forfeited (318) $ 4.17 Awarded and unvested, December 31, 2019 3,951 $ 5.66 Granted (1) 4,635 $ 7.29 Vested (1,832) $ 4.92 Forfeited (486) $ 6.15 Awarded and unvested, December 31, 2020 6,268 $ 7.04 1.62 $ 56,478 (1) As of December 31, 2020, granted awards included 293 unvested RSUs with an intrinsic value of $2,638, for which the Company and certain employees reached mutual understanding of the awards key terms and conditions in February 2021. Such awards were legally granted in November 2020. PSU Activity The following table summarizes the Company’s PSU activity: Weighted Weighted Number of Average Average Remaining Aggregate Units Grant Date Contractual Intrinsic Outstanding Fair Value Term (Years) Value Awarded and unvested, December 31, 2017 661 $ 3.59 Granted 2,909 $ 5.85 Forfeited (40) $ 4.03 Awarded and unvested, December 31, 2018 3,530 $ 5.45 Granted 2,780 $ 6.46 Vested (700) $ 4.59 Forfeited (193) $ 6.14 Awarded and unvested, December 31, 2019 5,417 $ 6.06 Granted (1) 1,432 $ 9.53 Vested (1,509) $ 5.64 Forfeited (1,436) $ 6.78 Awarded and unvested, December 31, 2020 3,904 $ 7.22 1.38 $ 35,178 PSUs expected to vest as of December 31, 2020 749 $ 6.37 0.79 $ 6,748 (1) As of December 31, 2020, granted awards included 444 unvested PSUs with an intrinsic value of $3,997, for which the Company and certain employees reached mutual understanding of the awards key terms and conditions in February 2021. Such awards were legally granted in November 2020. PSO Activity The following table summarizes the Company’s PSO activity: Weighted Weighted Number of Average Average Remaining Aggregate Shares Exercise Contractual Intrinsic Outstanding Price Term (Years) Value Balance as of December 31, 2017 4,170 $ 3.59 Granted 2,737 $ 5.87 Forfeited (151) $ 3.59 Balance as of December 31, 2018 6,756 $ 4.51 Exercised (173) $ 3.59 Balance as of December 31, 2019 6,583 $ 4.54 Canceled (1,377) $ 6.18 Exercised (1,133) $ 3.61 Balance as of December 31, 2020 4,073 $ 4.24 7.04 $ 19,422 PSOs expected to vest as of December 31, 2020 992 $ 4.93 7.30 $ 4,054 PSOs exercisable at December 31, 2020 2,615 $ 3.59 6.80 $ 14,162 Stock Option Activity The following table summarizes the Company’s stock option activity: Options Outstanding Weighted Weighted Number Average Average Remaining Aggregate of Exercise Contractual Intrinsic Shares Price Term (Years) Value Balances at December 31, 2017 16,932 $ 2.78 Options granted 6,092 $ 4.82 Options canceled (1,213) $ 3.54 Options exercised (3,320) $ 2.88 Balances at December 31, 2018 18,491 $ 3.39 Options granted 815 $ 7.58 Options canceled (1,219) $ 4.73 Options exercised (1,799) $ 2.81 Balances at December 31, 2019 16,288 $ 3.56 Options granted 210 $ 9.00 Options canceled (489) $ 4.77 Options exercised (4,818) $ 3.23 Balances at December 31, 2020 11,191 $ 3.75 6.51 $ 58,842 Options exercisable at December 31, 2020 8,897 $ 3.35 6.28 $ 50,343 The Company has computed the aggregate intrinsic value amounts disclosed in the above table based on the difference between the original exercise price of the options and the fair value of the Company’s common stock of $9.01 per share at December 31, 2020. The total intrinsic value of awards exercised during the years ended December 31, 2020, 2019, and 2018 was $23,991, $7,806, and $10,957, respectively. Stock-Based Compensation The Company recognizes stock-based compensation expense in accordance with ASC 718, and has estimated the fair value of each option award on the grant date using the Black-Scholes option valuation model and the weighted average assumptions noted in the following tables. Performance Stock Options Year Ended December 31, 2020 2019 2018 Dividend yield — % — % — % Risk-free interest rate — % — % 2.89 % Expected volatility — % — % 60.2 % Expected term (years) — — 5.98 Stock Options Year Ended December 31, 2020 2019 2018 Dividend yield — % — % — % Risk-free interest rate 0.28 % 1.88 % 2.63 % Expected volatility 69.3 % 57.2 % 57.9 % Expected term (years) 4.00 4.00 4.00 The expected term of stock options gave consideration to early exercises, post-vesting cancellations and the options’ contractual term ranging from 6 to 10 years. The Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term for the PSOs as the Company has not granted such awards in the past. As a result, the Company used the simplified method to calculate the expected term estimate based on the vesting and contractual terms of the PSOs. Under the simplified method, the expected term is equal to the average of the stock-based awards vesting period and their contractual term. The PSOs have a contractual term of 10 years. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury Constant Maturity Rate as of the date of grant. The Company based its expected volatility on its own historical volatility for the year ended December 31, 2020, 2019, and 2018, respectively. The weighted-average fair value of stock options granted during the year ended December 31, 2020, 2019, and 2018 was $4.63, $3.44, and $2.25 per share, respectively. The Company did not grant any PSOs in the year ended December 31, 2020 and 2019, respectively. The weighted average fair value of the PSOs granted during the year ended December 31, 2018 was $3.38. The cost of RSUs and PSUs are determined using the fair value of the Company’s common stock based on the quoted closing price of the Company’s common stock on the date of grant. RSUs typically vest and are settled over approximately a four-year period with 25% of the shares vesting on or around the one-year anniversary of the grant date and the remaining shares vesting quarterly thereafter. Compensation cost for RSUs is amortized on a straight-line basis over the requisite service period. Compensation cost for PSUs is amortized on an accelerated attribution basis over the requisite service period of the award. The following table summarizes the consolidated stock-based compensation expense by line items in the consolidated statement of operations: Year Ended December 31, 2020 2019 2018 Research and development $ 19,942 $ 10,466 $ 12,807 Sales and marketing 3,904 1,700 2,795 General and administrative 7,963 5,217 8,990 Total stock-based compensation expense $ 31,809 $ 17,383 $ 24,592 (1) For the year ended December 31, 2020, stock-based compensation expense recorded in research and development includes $739 from PSUs classified as liabilities. (2) Stock-based compensation expense for the year ended December 31, 2019 included a reversal of previously accrued expense of $2,455 due to a decrease in the vesting probability of certain performance-based equity awards. The following table summarizes total compensation expense related to unvested awards not yet recognized as of December 31, 2020: Unrecognized Compensation Expense for Unvested Awards Stock options $ 5,050 RSUs 36,789 PSUs 3,677 PSOs 325 Total unrecognized compensation expense $ 45,841 (1) The unrecognized compensation expense for PSUs vesting in FY2023 and FY2024 is not included in the table above as the Company does not have a reasonable basis upon which to estimate the vesting probability of such awards in those future periods. The unrecognized compensation expense related to stock options and RSUs will be recognized over a weighted average period of 1.26 years and 3.20 years, respectively. The unrecognized stock compensation expense related to unvested PSUs and PSOs will be recognized over a weighted average period of 0.52 and 0.13 years, respectively. Stock-based compensation expense in the year ended December 31, 2020, was approximately $31,809 (comprising approximately $6,068 related to stock options, $12,732 related to performance-based awards, $11,177 related to RSUs and $1,832 related to the 2007 Purchase Plan). Stock-based compensation expense in the year ended December 31, 2019, was approximately $17,383 (comprising approximately $7,043 related to stock options, $2,421 related to performance-based awards, $6,559 related to RSUs and $1,360 related to the 2007 Purchase Plan). Stock-based compensation expense in the year ended December 31, 2018, was approximately $24,592 (comprising approximately $6,386 related to stock options, $9,195 related to performance-based awards, $8,084 related to RSUs and $927 related to the 2007 Purchase Plan). Cash proceeds, net of taxes, from option exercises were $19,463, $3,305, and $5,643 for the years ended December 31, 2020, 2019, and 2018, respectively. The Company realized no significant income tax benefit from stock option exercises during the year ended December 31, 2020, 2019, and 2018. As permitted by ASC 718, the Company has deferred the recognition of its excess tax benefit from non-qualified stock option exercises. 401(k) Defined Contribution Plan The Company sponsors a 401(k) defined contribution plan covering certain eligible employees. In 2019, the Company started matching a portion of the contribution made by participants who met certain employment criteria. For the years ended December 31, 2020 and 2019, t he matching contributions made by the Company were not material. The Company did not match the contributions made by its employees for the year ended December 31, 2018. |