Stock Awards
We have granted RSUs to our employees, consultants and members of our Board of Directors, and PSUs to certain executives
In February 2016, we granted 547,000 PSUs with certain financial and operational targets. Actual performance,
as measured at the time and prior to the restatement of the 2016 financial statements, resulted in participants
achieving 80% of target. Given the PSUs did not contain explicit or implicit claw back rights, there was no change
to stock-based compensation expense for the impact of the previously disclosed restatement of the 2016 consolidated
financial statements. As of December 31, 2019, 253,203 shares had vested, 200,297 shares had been forfeited, and
the remaining 93,500 shares will vest (as to 80%) in annual tranches through February 2020 subject to continued
service vesting requirements
In October 2018, we granted 464,888 PSUs with certain financial targets. These PSUs will become eligible to
vest at 75% upon the achievement of the performance targets by December 31, 2020, and are subject to service
condition vesting requirements. The remaining 25% of these PSUs will become eligible to vest on the first
anniversary of the initial vesting date. None of these PSUs were vested as of December 31, 2019.
In April 2019, we granted 346,453 PSUs with certain financial targets. These PSUs will become eligible to vest at 75% on the second month following achievement of certain performance targets by December 31, 2021, with the remaining 25% of the PSUs to vest on the first anniversary of the initial vesting date, subject to continued service vesting requirements. None of these PSUs were vested as of December 31, 2019 In April 2019, we granted 346,453 PSUs with certain financial targets. These PSUs will become eligible to vest at 75% on the second month following achievement of certain performance targets by December 31, 2021, with the remaining 25% of the PSUs to vest on the first anniversary of the initial vesting date, subject to continued service vesting requirements. None of these PSUs were vested as of December 31, 2019
In December 2019, we granted 375,000 PSUs with certain market performance-based targets to be achieved
between December 2019 and December 2023. One-third of each tranche of these PSUs will become eligible to vest
on each of the three anniversaries of the date the performance-based target is achieved, subject to continued service
vesting requirements. The grant date fair values of each tranche of these PSUs were estimated to be $4.59, $4.06 and
$3.59 and determined using the Monte Carlo simulation model with the following assumptions: expected term of
4.0 years, expected volatility of 38.45%, risk-free interest rate of 1.7% and expected dividend yield of 0.0%. None
of these PSUs were vested as of December 31, 2019
The following table summarizes our stock award activities and related information:

                                  | Number of Shares (thousands) |       | Weighted-Average Remaining Vesting Term (years)
--------------------------------- | ---------------------------- | ----- | -----------------------------------------------
Nonvested as of December 31, 2018 | 5,974                        | $6.51 |
Granted                           | 3,288                        | $6.74 |
Released                          | (1,774)                      | $6.60 |
Canceled                          | (1,340)                      | $6.57 |
Nonvested as of December 31, 2019 | 6,148                        | $6.59 | 1.81

 granted RSUs employees consultants Board Directors executives
 February 2016, granted 547,000 PSUs financial operational targets. performance
 80% target. PSUs claw back rights no change
 stock-based compensation expense 2016
 financial statements. December 31, 2019 253,203 shares vested 200,297 shares forfeited
 remaining 93,500 shares vest 80% through February 2020
 service vesting requirements
 October 2018 granted,888 PSUs financial targets.
 vest 75% December 31, 2020 subject service
 vesting requirements. remaining 25% vest first
 anniversary vesting. None vested December 31, 2019.
 April 2019 granted 346,453 PSUs targets. vest 75% second month December 31, 2021 remaining 25% vest first anniversary vesting. None vested granted 346,453. vest 75% second month December 31, 2021 remaining 25% vest first anniversary vesting vesting requirements. None vested December 31, 2019
granted 375,000 PSUs performance targets
 2023. One-third eligible
 vesting requirements. grant values estimated $4. 59 $4. 06
 $3. 59 Monte Carlo simulation model term
 4. years volatility 38. 45% risk-free interest rate. 7% dividend yield. 0%.
 PSUs vested December 31, 2019
 table summarizes stock award activities
 Shares Weighted-Average Vesting Term
 Nonvested December 31, 2018 $6. 51
 Granted 3,288 $6. 74
 Released.
 Canceled,340.
 Nonvested December 31, 2019 6,148 $6.


GasLog Ltd. and its Subsidiaries Notes to the consolidated financial statements (Continued) For the years ended December 31, 2017, 2018 and 2019 (All amounts expressed in thousands of U.S. Dollars, except share and per share data)    6. Tangible Fixed Assets and Vessels Under Construction
The movements in tangible fixed assets and vessels under construction are reported in the following table:
Vessels with an aggregate carrying amount of $4,407,156 as of December 31, 2019 (December 31, 2018: $4,304,252) have been pledged as collateral under the terms of the Group’s loan agreements (Note 13).
As of December 31, 2019, a number of increasingly strong negative indicators such as the difference between ship broker estimates of the fair market values and the carrying values of the Group’s Steam vessels, the lack of liquidity in the market for term employment for Steam vessels and reduced expectations for the estimated rates at which such term employment could be secured, together with the continued addition of modern, larger and more fuel efficient LNG carriers to the global fleet, prompted the Group to perform an impairment assessment of its vessels in accordance with the

                                            | Vessels   | Office property and other tangible assets | Total tangible fixed assets | Vessels under construction
------------------------------------------- | --------- | ----------------------------------------- | --------------------------- | --------------------------
Cost                                        |           |                                           |                             |
As of January 1, 2018                       | 4,217,866 | 19,224                                    | 4,237,090                   | 166,655
Additions                                   | 49,036    | 4,678                                     | 53,714                      | 637,046
Transfer from vessels under construction    | 642,776   | —                                         | 642,776                     | (642,776)
Transfer under ‘‘Other non-current assets’’ | —         | —                                         | —                           | (1,650)
Fully amortized fixed assets                | (10,000)  | (192)                                     | (10,192)                    | —
As of December 31, 2018                     | 4,899,678 | 23,710                                    | 4,923,388                   | 159,275
Additions                                   | 26,233    | 1,454                                     | 27,687                      | 450,918
Return of capital expenditures              | (11,224)  | —                                         | (11,224)                    | —
Transfer from vessels under construction    | 406,870   | —                                         | 406,870                     | (406,870)
Fully amortized fixed assets                | (7,209)   | —                                         | (7,209)                     | —
As of December 31, 2019                     | 5,314,348 | 25,164                                    | 5,339,512                   | 203,323
Accumulated depreciation                    |           |                                           |                             |
As of January 1, 2018                       | 460,815   | 3,709                                     | 464,524                     | —
Depreciation                                | 144,611   | 863                                       | 145,474                     | —
Fully amortized fixed assets                | (10,000)  | (192)                                     | (10,192)                    | —
As of December 31, 2018                     | 595,426   | 4,380                                     | 599,806                     | —
Depreciation                                | 156,826   | 875                                       | 157,701                     | —
Impairment loss on vessels                  | 162,149   | —                                         | 162,149                     | —
Fully amortized fixed assets                | (7,209)   | —                                         | (7,209)                     | —
As of December 31, 2019                     | 907,192   | 5,255                                     | 912,447                     | —
Net book value                              |           |                                           |                             |
As of December 31, 2018                     | 4,304,252 | 19,330                                    | 4,323,582                   | 159,275
As of December 31, 2019                     | 4,407,156 | 19,909                                    | 4,427,065                   | 203,323

GasLog Ltd. Subsidiaries consolidated financial statements years December 31, 2017 2018 2019 amounts U. S. Dollars except share data. Tangible Fixed Assets Vessels Construction
 movements assets vessels construction table
 Vessels carrying amount $4,407,156 December 31, 2019 2018: $4,304,252) pledged collateral loan agreements.
 negative indicators difference values lack liquidity term employment reduced expectations rates addition modern fuel efficient LNG carriers Group impairment assessment vessels
 Office property tangible assets Vessels construction
 January 1, 2018 4,217,866  19,224  4,237,090  166,655
 Additions 49,036 4,678 53,714 637,046
 Transfer vessels construction 642,776
 non-current
 Fully amortized fixed assets
 December 31, 2018 4,899,678  23,710 4,923,388 159,275
Additions 26,233 27,687 450,918
 capital expenditures (11,224)
 Transfer vessels 406,870
 amortized assets
 December 31, 2019 5,314,348
 depreciation
 January 1 2018 460,815 3,709 464,524
 144,611,474
 amortized assets
 December 31, 2018 595,426 4,380 599,806
 Depreciation 156,826 157,701
 Impairment loss vessels 162,149
 amortized assets
 December 31, 2019 907,192 5,255 912,447
 Net book value
 December 31, 2018 4,304,252 19,330,323,582 159,275
 December 2019 4,407,156,065 203


The primary components of the deferred tax assets and liabilities are as follows, for the periods indicated below:
We believe that sufficient uncertainty exists regarding the realization of certain deferred tax assets that a valuation allowance is required. We continue to evaluate our taxable position quarterly and consider factors by taxing jurisdiction, including but not limited to factors such as estimated taxable income, any historical experience of losses for tax purposes and the future growth of OpenText.

                                                        | June 30,   |
------------------------------------------------------- | ---------- | ----------
                                                        | 2019       | 2018
Deferred tax assets                                     |            |
Non-capital loss carryforwards                          | $161,119   | $129,436
Capital loss carryforwards                              | 155        | 417
Undeducted scientific research and development expenses | 137,253    | 123,114
Depreciation and amortization                           | 683,777    | 829,369
Restructuring costs and other reserves                  | 17,845     | 17,202
Deferred revenue                                        | 53,254     | 62,726
Other                                                   | 59,584     | 57,461
Total deferred tax asset                                | $1,112,987 | $1,219,725
Valuation Allowance                                     | $(77,328)  | $(80,924)
Deferred tax liabilities                                |            |
Scientific research and development tax credits         | $(14,482)  | $(13,342)
Other                                                   | (72,599)   | (82,668)
Deferred tax liabilities                                | $(87,081)  | $(96,010)
Net deferred tax asset                                  | $948,578   | $1,042,791
Comprised of:                                           |            |
Long-term assets                                        | 1,004,450  | 1,122,729
Long-term liabilities                                   | (55,872)   | (79,938)
                                                        | $948,578   | $1,042,791

deferred tax assets liabilities
 uncertainty valuation allowance. taxable position estimated income future growth OpenText.
 June 30
 Deferred tax assets
 Non-capital loss carryforwards $161,119 $129,436
 Capital loss carryforwards
 Undeducted scientific research expenses 137,253 123,114
 Depreciation amortization 683,777 829,369
 Restructuring costs reserves 17,845
 Deferred revenue 53,254 62,726
 deferred tax asset $1,112,987 $1,219,725
 Valuation Allowance(77,328)(80,924)
 Scientific research development tax credits $(14,482)(13,342
,081),010
 Net deferred tax asset $948,578 $1,042,791
 Long-term assets 1,004,450 1,122,729
 liabilities


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except for share and per share data)
NOTE 12 — Debt
Long-term debt was comprised of the following:
On February 12, 2019, we entered into an amended and restated five-year Credit Agreement with a group of banks (the "Credit Agreement") to extend the term of the facility. The Credit Agreement provides for a revolving credit facility of $300,000, which may be increased by $150,000 at the request of the Company, subject to the administrative agent's approval. This new unsecured credit facility replaces the prior $300,000 unsecured credit facility, which would have expired August 10, 2020. Borrowings of $50,000 under the prior credit agreement were refinanced into the Credit Agreement. The prior agreement was terminated as of February 12, 2019.
The Revolving Credit Facility includes a swing line sublimit of $15,000 and a letter of credit sublimit of $10,000. Borrowings under the Revolving Credit Facility bear interest at the base rate defined in the Credit Agreement. We also pay a quarterly commitment fee on the unused portion of the Revolving Credit Facility. The commitment fee ranges from 0.20% to 0.30% based on our total leverage ratio.
The Revolving Credit Facility requires, among other things, that we comply with a maximum total leverage ratio and a minimum fixed charge coverage ratio. Failure to comply with these covenants could reduce the borrowing availability under the Revolving Credit Facility. We were in compliance with all debt covenants at December 31, 2019. The Revolving Credit Facility requires that we deliver quarterly financial statements, annual financial statements, auditor certifications, and compliance certificates within a specified number of days after the end of a quarter and year. Additionally, the Revolving Credit Facility contains restrictions limiting our ability to: dispose of assets; incur certain additional debt; repay other debt or amend subordinated debt instruments; create liens on assets; make investments, loans or advances; make acquisitions or engage in mergers or consolidations; engage in certain transactions with our subsidiaries and affiliates; and make stock repurchases and dividend payments. Interest rates on the Revolving Credit Facility fluctuate based upon the LIBOR and the Company’s quarterly total leverage ratio.
We have debt issuance costs related to our long-term debt that are being amortized using the straight-line method over the life of the debt. Amortization expense for the twelve months ended December 31, 2019 was approximately $163 and $185 in 2018 and 2017. These costs are included in interest expense in our Consolidated Statement of Earnings.
We use interest rate swaps to convert the revolving credit facility's variable rate of interest into a fixed rate on a portion of the debt as described more fully in Note 13 "Derivatives." These swaps are treated as cash flow hedges and consequently, the changes in fair value were recorded in other comprehensive earnings.

                                    | As of December 31 |
----------------------------------- | ----------------- | --------
                                    | 2019              | 2018
Total credit facility               | $300,000          | $300,000
Balance outstanding                 | $99,700           | $50,000
Standby letters of credit           | $1,800            | $1,940
Amount available                    | $198,500          | $248,060
Weighted-average interest rate      | 3.25%             | 3.10%
Commitment fee percentage per annum | 0.23%             | 0.20%

FINANCIAL STATEMENTS thousands share data
 NOTE 12 Debt
 Long-term debt
 February 12, 2019 five-year Credit Agreement banks extend term facility. revolving credit facility $300,000 increased $150,000 approval. replaces prior $300,000 expired August 10, 2020. Borrowings $50,000 refinanced. terminated February 12, 2019.
 Revolving Credit Facility includes swing line sublimit $15,000 letter of credit sublimit $10,000. Borrowings bear interest base rate. quarterly commitment fee. fee ranges 0. 20% to. 30% leverage ratio.
 requires maximum leverage ratio minimum fixed charge coverage ratio. Failure borrowing availability. compliance debt covenants December 31, 2019. quarterly financial statements annual statements auditor certifications compliance certificates end quarter year. restrictions dispose assets incur additional debt repay amend instruments create liens investments loans advances mergers consolidations transactions stock repurchases dividend payments.Interest rates Revolving Credit Facility fluctuate LIBOR quarterly leverage ratio.
 debt issuance costs long-term amortized straight-line. Amortization expense twelve months 2019 $163 $185 2018 2017. included Consolidated Statement Earnings.
 interest rate swaps convert variable fixed 13. swaps cash flow hedges changes value recorded earnings.
 December 31
 credit facility $300,000
 Balance $99,700
 Standby letters credit $1,800
 $198,500 $248,060
 Weighted-average interest rate. 25%.
 Commitment fee percentage.


Performance Share Awards
In accordance with stockholder-approved equity incentive plans, we grant performance shares to selected executives and other key employees with vesting contingent upon meeting various Company-wide performance goals. The performance goal for one-third of the target number of performance shares for the three-year performance period ending in fiscal 2019 (the "2019 performance period") is based on our fiscal 2017 EBITDA return on capital, subject to certain adjustments. The fiscal 2017 EBITDA return on capital target, when set, excluded the results of Lamb Weston. The performance goal for the final two-thirds of the target number of performance shares granted for the 2019 performance period is based on our diluted EPS compound annual growth rate ("CAGR"), subject to certain adjustments, measured over the two-year period ending in fiscal 2019. In addition, for certain participants, all performance shares for the 2019 performance period are subject to an overarching EPS goal that must be met in each fiscal year of the 2019 performance period before any payout on the performance shares can be made to such participants. The awards actually earned for the 2019 performance period will range from zero to two hundred percent of the targeted number of performance shares for that period.
The performance goal for each of the three-year performance period ending in fiscal 2020 (the "2020 performance period") and the three-year performance period ending in 2021 ("2021 performance period") is based on our diluted EPS CAGR, subject to certain adjustments, measured over the defined performance period. In addition, for certain participants, all performance shares for the 2020 performance period are subject to an overarching EPS goal that must be met in each fiscal year of the 2020 performance period before any payout on the performance shares can be made to such participants. For each of the 2020 performance period and the 2021 performance period, the awards actually earned will range from zero to two hundred percent of the targeted number of performance shares for such performance period.
Awards, if earned, will be paid in shares of our common stock. Subject to limited exceptions set forth in our performance share plan, any shares earned will be distributed after the end of the performance period, and only if the participant continues to be employed with the Company through the date of distribution. For awards where performance against the performance target has not been certified, the value of the performance shares is adjusted based upon the market price of our common stock and current forecasted performance against the performance targets at the end of each reporting period and amortized as compensation expense over the vesting period. Forfeitures are accounted for as they occur.
A summary of the activity for performance share awards as of May 26, 2019 and changes during the fiscal year then ended is presented below:
The compensation expense for our performance share awards totaled $8.2 million, $11.8 million, and $13.3 million for fiscal 2019, 2018, and 2017, respectively. The tax benefit related to the compensation expense for fiscal 2019, 2018, and 2017 was $2.1 million, $3.9 million, and $5.1 million, respectively.
The total intrinsic value of performance shares vested (including shares paid in lieu of dividends) during fiscal 2019, 2018, and 2017 was $15.7 million, $11.2 million, and $2.8 million, respectively.
Based on estimates at May 26, 2019, we had $13.2 million of total unrecognized compensation expense related to performance shares that will be recognized over a weighted average period of 1.7 years.

Performance Shares                                                    | Share Units (in Millions) | Weighted Average Grant-Date Fair Value
--------------------------------------------------------------------- | ------------------------- | --------------------------------------
Nonvested performance shares at May 27, 2018                          | 1.00                      | $33.40
Granted                                                               | 0.45                      | $35.96
Adjustments for performance results attained and dividend equivalents | 0.18                      | $31.03
Vested/Issued .                                                       | (0.43)                    | $31.03
Forfeited .                                                           | (0.05)                    | $34.54
Nonvested performance shares at May 26, 2019                          | 1.15                      | $34.89

Performance Share Awards
 equity incentive plans grant performance shares to executives key employees vesting meeting Company-wide performance goals. performance goal for one-third target performance shares three-year period 2019 based on fiscal 2017 EBITDA return on capital. excluded results Lamb Weston. performance goal for final two-thirds performance shares 2019 based on diluted EPS compound annual growth rate two-year period 2019. certain participants performance shares subject to overarching EPS goal met each fiscal year before payout. awards earned range zero to two hundred percent of targeted performance shares.
 performance goal for three-year period 2020 2021 based on diluted EPS CAGR. certain performance shares subject to overarching EPS goal met each fiscal year before payout. awards earned range zero to two hundred percent of targeted performance shares.
 Awards earned paid in shares common stock. shares earned distributed after end performance period if participant with Company through date distribution.performance certified value adjusted market price stock performance amortized compensation expense vesting period. Forfeitures accounted.
 summary activity performance share awards May 26, 2019 changes
 compensation expense totaled $8. 2 million $11. 8 million $13. 3 million 2019 2018 2017. tax benefit $2. 1 million $3. 9 million $5. 1 million.
 total intrinsic value shares vested $15. 7 million $11. 2 million $2. 8 million.
 estimates May 26, 2019 $13. 2 million unrecognized compensation expense recognized 1. 7 years.
 Shares Units
 Nonvested shares May 27, 2018. $33.
. $35.
 Adjustments performance results dividend equivalents. $31.
 Vested.
 Forfeited. $34.
 Nonvested shares May 26, 2019.


7. ACCOUNTS RECEIVABLES ALLOWANCES
Summarized below is the activity in our accounts receivable allowances including compensation credits and doubtful accounts as follows (in thousands):
The balances at the end of fiscal years 2019, 2018 and 2017 are comprised primarily of compensation credits of $4.5 million, $6.3 million and $8.9 million, respectively.

                            |          | Fiscal Year |
--------------------------- | -------- | ----------- | --------
                            | 2019     | 2018        | 2017
Balance - beginning of year | $6,795   | $9,410      | $3,279
Provision, net              | 11,989   | 15,465      | 29,512
Charge-offs                 | (13,737) | (18,080)    | (23,381)
Balance - end of year       | $5,047   | 6,795       | 9,410

. ACCOUNTS
 activity compensation credits doubtful accounts
 balances 2019 2018 2017 compensation credits $4. 5 million $6. 3 million $8. 9 million.
 $6,795 $9,410 $3,279
 11,989 15,465 29,512
 Charge-offs (13,737 (23,381
 end year $5,047 6,795 9,410


(10) Goodwill
Goodwill consists of the following (in millions):
The increase in Goodwill related to our Compass Analytics acquisition is deductible for tax purposes. For the 2018 increase in Goodwill, $19.7 million is deductible for tax purposes and $3.2 million is not deductible for tax purposes.

                                           | Software Solutions | Data and Analytics | Corporate and Other | Total
------------------------------------------ | ------------------ | ------------------ | ------------------- | --------
Balance, December 31, 2017                 | $2,134.7           | $172.1             | $—                  | $2,306.8
HeavyWater and Ernst acquisitions (Note 3) | 22.9               | —                  | —                   | 22.9
Balance, December 31, 2018                 | 2,157.6            | 172.1              | —                   | 2,329.7
Compass Analytics acquisition (Note 3)     | 31.7               | —                  | —                   | 31.7
Balance, December 31, 2019                 | $2,189.3           | $172.1             | $—                  | $2,361.4

Goodwill
 increase Compass Analytics acquisition deductible tax. 2018 increase $19. 7 million deductible $3. 2 million not deductible.
 Software Data Analytics Corporate
 Balance December 31, 2017 $2,134. $172. $2,306.
 HeavyWater Ernst acquisitions.
 December 31, 2018 2,157. 172. 2,329.
 Compass Analytics acquisition 31.
 December 31, 2019 $2,189. $172. $2,361.


The types of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows (in thousands):
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017.
In connection with the acquisition of Connect First on January 14, 2019, a net deferred tax liability of $3.2 million was established, the most significant component of which is related to the book/tax basis differences associated with the acquired technology and customer relationships. The net deferred tax liability from this acquisition created an additional source of income to realize deferred tax assets. As the Company continues to maintain a full valuation allowance against its deferred tax assets, this additional source of income resulted in the release of the Company’s previously recorded valuation allowance against deferred assets. Consistent with the applicable guidance the release of the valuation allowance of $3.2 million caused by the acquisition was recorded in the consolidated financial statements outside of acquisition accounting as a tax benefit to the Consolidated Statements of Operations.
As of December 31, 2019, the Company has federal net operating loss carryforwards of approximately $782.7 million, of which approximately $272.9 million expire between 2023 and 2037 and the remainder do not expire. As of December 31, 2019, the Company had state net operating loss carryforwards of approximately $675.6 million which will begin to expire in 2021. The Company also has research credit carryforwards for federal and California tax purposes of approximately $20.2 million and $15.7 million, respectively, available to reduce future income subject to income taxes. The federal research credit carryforwards will begin to expire in 2028 and the California research credits carry forward indefinitely
The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (“IRC Section 382”). Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal and state net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions
The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the year ended December 31, 2019, the Company has provided a valuation allowance against the Company’s U.S. net deferred tax assets. The net change in the valuation allowance for the years ended December 31, 2019 and 2018 was an increase of $86.0 million, $18.2 million, respectively

                                             |           | Year ended December 31,
-------------------------------------------- | --------- | -----------------------
                                             | 2019      | 2018
Deferred tax assets                          |           |
Net operating loss and credit carry-forwards | $196,930  | $109,812
Research and development credits             | 24,452    | 16,380
Sales tax liability                          | 157       | 258
Share-based compensation                     | 5,937     | 5,435
Accrued liabilities                          | 6,612     | 5,135
Gross deferred tax assets                    | 234,088   | 137,020
Valuation allowance                          | (180,090) | (94,118)
Total deferred tax assets                    | 53,998    | 42,902
Deferred tax liabilities                     |           |
Convertible debt discount                    | (16,701)  | (21,035)
Deferred sales commissions                   | (28,601)  | (18,253)
Acquired intangibles                         | (3,857)   | (2,670)
Property and equipment                       | (6,731)   | (3,573)
Net deferred tax (liabilities) assets        | $(1,892)  | (2,629)

temporary differences deferred tax assets liabilities
 December 22, 2017 Tax Cuts and Jobs Act 2017 law Internal Revenue Code. corporate tax rate 35% to 21% December 31, 2017 transition. international taxation one-time transition tax repatriation foreign earnings December 31, 2017.
 acquisition Connect First January 14, 2019 net deferred tax liability $3. 2 million book/tax basis differences acquired technology customer relationships. additional income deferred tax assets. valuation allowance tax assets release valuation allowance. allowance $3. 2 million recorded financial statements tax benefit.
 December 31, 2019 federal net operating loss carryforwards $782. 7 million $272. 9 million expire 2023 2037 remainder. state net operating loss carryforwards $675. 6 million 2021. research credit carryforwards federal California tax $20. 2 million $15. 7 million future income. federal carryforwards expire 2028 California credits carry indefinitely
Internal Revenue Code 1986 restrictions net operating losses “ownership. losses Section 382. limitations ownership change 50% three-year period. Utilization federal state net losses ownership change limitations Section 382
 management believes deferred tax assets realized 2019 provided valuation allowance against. net deferred tax assets. net change valuation allowance 2018 increase $86. 0 million, $18. 2 million
 Deferred tax assets
 Net operating loss credit carry-forwards $196,930 $109,812
 Research development credits 24,452,380
 Sales tax liability
 Share-based compensation 5,937
 Accrued liabilities 6,612
 Gross deferred tax assets 234,088 137,020
 Valuation allowance (180,090)
 Total deferred tax assets 53,998 42,902
 liabilities
 Convertible debt discount (16,701) (21,035)
 Deferred sales commissions (28,601) (18,253)
intangibles (3,857)
 Property (6,731) (3,573
 deferred tax


NOTE 9 – OTHER ASSETS
Other assets consist of the following (in thousands):
We have a non-qualified deferred compensation plan in which certain members of management and all nonemployee
directors are eligible to participate. Participants may defer a portion of their compensation until retirement
or another date specified by them in accordance with the plan. We are funding the plan obligations through cash
deposits to a Rabbi Trust that are invested in various equity, bond and money market mutual funds in generally the
same proportion as investment elections made by the participants. The deferred compensation plan liability is included
in Other Non-Current Liabilities in the accompanying consolidated balance sheets.
Our investment in international licensees at February 28, 2019 consists principally of a 12.5% equity interest in
a Mexican licensee of $1.7 million, which became a wholly-owned subsidiary as of March 19, 2019 (see Note 2), as
well as other smaller interests in Benelux and French licensees. Generally, the investments in international licensees
are accounted for using the cost method of accounting and carried at cost as we do not exercise significant influence
over these investees. We have received dividends from our investment in the Mexican licensee in the amount of $0.3
million, $0.3 million and $0.2 million for fiscal years ended February 28, 2019, 2018 and 2017, respectively.
In September 2015, we invested £1,400,000 or approximately $2.2 million for a 49% minority ownership
interest in Smart Driver Club Limited (“Smart Driver Club”), a technology and insurance startup company located in
the United Kingdom. This investment has been accounted for under the equity method since we have significant
influence over the investee. As of February 28, 2019, we had made loans aggregating £5,700,000 or approximately
$7.6 million to Smart Driver Club bearing interest at an annual interest rate of 8%, with all principal and all unpaid
interest due in 2021. Our equity in the net loss of Smart Driver Club amounted to $1.8 million, $1.4 million and $1.3
million in fiscal years ended February 28, 2019, 2018 and 2017, respectively. As of February 28, 2019, we determined
that this equity method investment was subject to other than temporary impairment. This decision was dictated by the
continuing operating losses and deteriorating liquidity position of Smart Driver Club. Accordingly, we recorded an
impairment charge of $5.0 million in the impairment loss and equity in net loss within our consolidated statement of
comprehensive income (loss). Smart Driver Club drew an additional £400,000 of debt on March 26, 2019 under a
fourth amendment to the original agreement dated March 14, 2019
Effective August 24, 2017, we acquired an ownership interest valued at $1.4 million in ThinxNet GmbH, a
company headquartered in Munich, Germany (“ThinxNet”). ThinxNet is an early stage company focused on
commercializing cloud-based mobile device and applications in the automotive sector throughout Europe. This
represents a cost basis investment as we cannot exercise significant influence over the investee. Contemporaneously,
we executed an unsecured convertible note receivable for $1.27 million with an interest rate of 6%, which has a fixed
term of 12 months, after which the loan can be converted into equity in ThinxNet or a loan due on demand at our
option. The equity investment and note receivable were consideration we received in exchange for our outstanding
accounts receivable from ThinxNet. No gain or loss was recorded on this exchange. The assets received in this
exchange are included in Other Assets in the consolidated balance sheet as of February 28, 2019 and 2018.
In August 2018, ThinxNet commenced a subsequent financing transaction to raise additional funds for working capital purposes. In connection with this transaction, we converted approximately $300,000 of outstanding accounts receivable due from ThinxNet into additional ownership interest in an in-kind exchange of assets. Based on the fair value of ThinxNet at the time of conversion, we revalued the initial ownership interest and recorded an impairment charge of $326,000, which is netted within Investment Income in our consolidated statement of comprehensive income (loss). Effective March 2019, we notified ThinxNet that we expect the outstanding loan to be repaid in June 2019.

                                                   |         | February 28,
-------------------------------------------------- | ------- | ------------
                                                   | 2019    | 2018
Deferred compensation plan assets                  | $6,413  | $5,641
Investment in international licensees              | 2,263   | 2,349
Equity investment in and loan to ThinxNet GmbH     | 2,650   | 2,674
Equity investment in and loan to Smart Driver Club | -       | 3,814
Deferred product cost                              | 10,094  | 3,523
Other                                              | 1,090   | 828
                                                   | $22,510 | $18,829

9 ASSETS
 non-qualified deferred compensation plan management
 directors. defer compensation until retirement
. funding cash
 deposits Rabbi Trust equity bond mutual funds
 elections. deferred compensation plan liability
 Non-Current Liabilities balance sheets.
 investment international licensees 12. 5% equity interest
 Mexican licensee $1. 7 million wholly-owned subsidiary March 19, 2019
 interests Benelux French licensees. investments
 accounted cost
. received dividends Mexican licensee $0. 3
 million. 3 million. 2 million years 2019 2018 2017.
 September 2015, invested £1,400,000 $2. 2 million 49% minority ownership
 Smart Driver Club technology insurance startup
. accounted equity method
. loans £5,700,000
 $7. 6 million Smart Driver Club annual interest rate 8% unpaid
 due 2021. equity net loss Smart Driver Club $1. 8 million $1. 4 million $1. 3
 million fiscal years 2019 2018 2017.
equity investment subject impairment. decision dictated by
 losses deteriorating liquidity Smart Driver Club. recorded
 impairment charge $5. 0 million loss net loss
. Smart Driver Club drew additional £400,000 debt March 26, 2019
 fourth amendment agreement
 August 24, 2017 acquired ownership interest $1. 4 million ThinxNet GmbH
 Munich. early stage
 cloud-based mobile device applications automotive.
 cost basis investment investee.
 executed unsecured convertible note receivable $1. 27 million interest rate 6% fixed
 term 12 months converted into equity ThinxNet demand
. equity investment receivable
 accounts receivable ThinxNet. No gain loss. assets
 included balance sheet February 28, 2019.
 August 2018 ThinxNet financing transaction capital. converted $300,000 accounts receivable into ownership interest exchange. revalued interest recorded impairment charge $326,000. ThinxNet outstanding loan repaid June 2019.

 Deferred compensation plan $6,413 $5,641
 licensees 2,263 2,349
 ThinxNet 2,650
 Smart Driver Club
 Deferred product cost 10,094 3,523
 $22,510 $18,829


VMware and Pivotal Stock Options
The following table summarizes stock option activity for VMware and Pivotal since February 3, 2017 (shares in thousands):
(1) The weighted-average exercise price of options outstanding as of February 1, 2019 reflects the adjustments to the options as a result of the Special Dividend.
(2) Stock option granted under the VMware equity plan includes 0.6 million options issued for unvested options assumed as part of the Pivotal acquisition.
(3) Stock options forfeited under the Pivotal equity plan includes 6.2 million options converted to VMware options as part of the Pivotal acquisition, using a conversion ratio of 0.1.
(4) Stock options exercised under the Pivotal equity plan includes 22.4 million of vested options that were settled in cash as part of the Pivotal acquisition.
The above table includes stock options granted in conjunction with unvested stock options assumed in business combinations. As a result, the weighted-average exercise price per share may vary from the VMware stock price at time of grant
The stock options outstanding as of January 31, 2020 had an aggregate intrinsic value of $239 million based on VMware’s closing stock price as of January 31, 2020.

                                 |                  | VMware Stock Options                        |                  | Pivotal Stock Options
-------------------------------- | ---------------- | ------------------------------------------- | ---------------- | -------------------------------------------
                                 | Number of Shares | Weighted-Average Exercise Price (per share) | Number of Shares | Weighted-Average Exercise Price (per share)
Outstanding, February 3, 2017    | 1,991            | $69.38                                      | 39,361           | $6.72
Granted                          | 745              | 13.79                                       | 20,323           | 9.73
Forfeited                        | (36)             | 55.44                                       | (2,380)          | 8.13
Expired                          | (3)              | 93.87                                       | (1,290)          | 6.24
Exercised                        | (1,050)          | 53.50                                       | (1,626)          | 5.99
Outstanding, February 2, 2018    | 1,647            | 54.63                                       | 54,388           | 7.82
Granted                          | 574              | 16.07                                       | 2,832            | 14.03
Special Dividend adjustment      | 348              | n/a                                         | n/a              | n/a
Forfeited                        | (31)             | 24.44                                       | (2,028)          | 9.35
Expired                          | —                | —                                           | (273)            | 7.02
Exercised                        | (569)            | 46.73                                       | (9,018)          | 6.89
Outstanding, February 1, 2019(1) | 1,969            | 36.50                                       | 45,901           | 8.31
Granted(2)                       | 1,571            | 73.19                                       | —                | —
Forfeited(3)                     | (149)            | 52.83                                       | (10,822)         | 10.65
Expired                          | —                | —                                           | (128)            | 10.10
Exercised(4)                     | (776)            | 39.94                                       | (34,951)         | 7.59
Outstanding, January 31, 2020    | 2,615            | 56.58                                       | —                | —

VMware Pivotal Stock Options
 table summarizes option activity since February 3 2017
 weighted-average price options February 1, 2019 reflects adjustments Special Dividend.
 Stock option granted VMware equity plan includes. 6 million options unvested.
 Stock options forfeited. 2 million options converted to VMware conversion ratio. 1.
. 4 million vested options settled cash.
 includes options granted unvested stock options business combinations. weighted-average exercise price per share may vary VMware stock price grant
 stock options outstanding January 31, 2020 value $239 million closing stock price.
 VMware Pivotal Stock Options
 Weighted-Average Price
 February 3, 2017 1,991 $69. 39,361. 72
 Granted 13. 20.
 Forfeited 55. (2,380).
 Expired.
 Exercised 53.
 February 2, 2018 1,647 54.63 54,388. 82
 Granted 16. 2,832 14.
 Dividend adjustment
 Forfeited 24. 44 (2,028).
 Expired.
 Exercised. 73 (9,018.
 Outstanding February 1, 1,969 36. 50 45,901.
 1,571 73. 19
. 83 (10,822).
 Expired.
 (776). 94 (34,951).
 Outstanding January 31, 2020 2,615 56. 58


ADJUSTED EBITDA
(1) Fiscal 2019 average foreign exchange rate used for translation was 1.3255 USD/CDN.
(2) Fiscal 2018 was restated to comply with IFRS 15 and to reflect a change in accounting policy as well as to reclassify results from Cogeco Peer 1 as discontinued operations. For further details, please consult the "Accounting policies" and "Discontinued operations" sections.
(3) Fiscal 2019 actuals are translated at the average foreign exchange rate of fiscal 2018 which was 1.2773 USD/CDN.
Fiscal 2019 adjusted EBITDA increased by 10.0% (8.5% in constant currency) as a result of: • an increase in the American broadband services segment mainly as a result of strong organic growth combined with the impact of the MetroCast and FiberLight acquisitions; and • an increase in the Canadian broadband services segment resulting mainly from a decline in operating expenses.
For further details on the Corporation’s adjusted EBITDA, please refer to the "Segmented operating and financial results" section.

Years ended August 31,                        | 2019 (1)  | 2018 (2)  | Change | Change in constant currency (3) | Foreign exchange impact (3)
--------------------------------------------- | --------- | --------- | ------ | ------------------------------- | ---------------------------
(in thousands of dollars, except percentages) | $         | $         | %      | %                               | $
Canadian broadband services                   | 688,681   | 681,020   | 1.1    | 1.3                             | (1,102)
American broadband services                   | 465,645   | 369,200   | 26.1   | 21.5                            | 16,911
Inter-segment eliminations and other          | (46,386)  | (43,402)  | 6.9    | 6.8                             | (12)
                                              | 1,107,940 | 1,006,818 | 10.0   | 8.5                             | 15,797

ADJUSTED EBITDA
 Fiscal 2019 average foreign exchange rate. 3255 USD/CDN.
 Fiscal 2018 restated IFRS 15 change accounting policy reclassify Cogeco Peer 1 discontinued operations. consult "Accounting policies "Discontinued operations sections.
 Fiscal 2019 translated average foreign exchange rate. 2773 USD/CDN.
 2019 EBITDA increased 10. 0%. 5% constant currency increase American broadband services growth MetroCast FiberLight acquisitions Canadian broadband services decline operating expenses.
 "Segmented operating financial results section.
 Years ended August 31, 2019 2018 constant currency Foreign exchange impact
 thousands
 Canadian broadband services,681 681,020.
 American broadband services 465,645 369,200.
 Inter-segment eliminations (46,386.
 1,107,940 1,006,818.


NOTE 13 – INCOME TAX
The domestic and foreign components of loss before income taxes from operations for the years ended December 31, 2019, 2018 and 2017 are as follows:

         |           | For the Years Ended December 31, |
-------- | --------- | -------------------------------- | -------
         | 2019      | 2018                             | 2017
         |           | (in thousands)                   |
Domestic | $(22,708) | $29,110                          | $17,120
Foreign  | —         | (320)                            | (469)
         | $(22,708) | $28,790                          | $16,651

13 INCOME TAX
 domestic foreign components loss taxes December 31, 2019 2018 2017
 2019 2018
 thousands
 Domestic $(22,708 $29,110 $17,120
 Foreign
(22,708 $28,790 $16,651


Recently Adopted Accounting Guidance
On May 28, 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers, Topic 606, requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Topic 606 also includes Subtopic 340-40, Other Assets and Deferred Costs - Contracts with Customers, which requires the capitalization of incremental costs to obtain a contract with a customer. The new revenue standard replaces most existing revenue recognition guidance in GAAP and permits the use of either the full retrospective or modified retrospective transition method.
On December 1, 2018, the beginning of our fiscal year 2019, we adopted the requirements of the new revenue standard utilizing the modified retrospective method of transition. Prior period information has not been restated and continues to be reported under the accounting standard in effect for those periods. We applied the new revenue standard to contracts that were not completed as of the adoption date, consistent with the transition guidance. Further, adoption of the new revenue standard resulted in changes to our accounting policies for revenue recognition and sales commissions as detailed below.
We recognized the following cumulative effects of initially applying the new revenue standard as of December 1, 2018
Below is a summary of the adoption impacts of the new revenue standard:
We capitalized $413.2 million of contract acquisition costs comprised of sales and partner commission costs at adoption date (included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion), with a corresponding adjustment to retained earnings. We are amortizing these costs over their respective expected period of benefit.
Revenue for certain contracts that were previously deferred would have been recognized in periods prior to adoption under the new standard. Upon adoption, we recorded the following adjustments to our beginning balances to reflect the amount of revenue that will no longer be recognized in future periods for such contracts: an increase in unbilled receivables (included in trade receivables, net) of $24.8 million, an increase in contract assets (included in prepaid expenses and other current assets for the current portion and other assets for the long-term portion) of $46.4 million and a decrease in deferred revenue of $52.8 million, with corresponding adjustments to retained earnings.
We recorded an increase to our opening deferred income tax liability of $82.8 million, with a corresponding adjustment to retained earnings, to record the tax effect of the above adjustments.
Further, we had other impacts to various accounts which resulted to an immaterial net reduction to our retained earnings.

(in thousands)                                             | As of November 30, 2018 | Topic 606 Adoption Adjustments | As of December 1, 2018
---------------------------------------------------------- | ----------------------- | ------------------------------ | ----------------------
Assets                                                     |                         |                                |
Trade receivables, net of allowances for doubtful accounts | $1,315,578              | $43,028                        | $1,358,606
Prepaid expenses and other current assets                  | 312,499                 | 186,220                        | 498,719
Other assets                                               | 186,522                 | 273,421                        | 459,943
Liabilities and Stockholders’ Equity                       |                         |                                |
Accrued expenses                                           | 1,163,185               | 30,358                         | 1,193,543
Deferred revenue, current                                  | 2,915,974               | (52,842)                       | 2,863,132
Deferred income taxes                                      | 46,702                  | 82,834                         | 129,536
Retained earnings                                          | $11,815,597             | $442,319                       | $12,257,916

Adopted Accounting Guidance
 May 28, 2014, Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09 Revenue Contracts Customers Topic 606 recognize revenue transfer promised goods services customers. Topic 606 includes Subtopic 340-40 Other Assets Deferred Costs Contracts Customers capitalization incremental costs contract. new revenue standard replaces revenue recognition guidance GAAP permits full retrospective or modified retrospective transition method.
 December 1, 2018 2019 adopted new revenue standard modified retrospective. Prior information not restated reported accounting standard. applied new revenue standard contracts not completed. changes accounting policies revenue recognition sales commissions.
 recognized cumulative effects new revenue standard December 1, 2018
 adoption impacts
 capitalized $413. 2 million contract acquisition costs retained earnings. amortizing costs expected period benefit.
 Revenue contracts deferred recognized. recorded adjustments balances increase unbilled receivables $24.contract assets $46. 4 million decrease deferred revenue $52. 8 million adjustments earnings.
 deferred income tax liability $82. 8 million earnings.
 impacts reduction retained earnings.
 November 30 2018 Adjustments December 1, 2018
 Trade receivables $1,315,578 $43,028 $1,358,606
 Prepaid expenses assets 312,499 186,220
 Other assets 186,522 273,421 459,943
 Liabilities Stockholders’ Equity
 Accrued expenses 1,163,185 1,193,543
 Deferred revenue 2,915,974
 Deferred income taxes 46,702,834
 Retained earnings $11,815,597 $442,319,257,916


4. Profit before tax
The following items have been charged in arriving at profit before tax:

                                                                      |       | 2019      | 2018
--------------------------------------------------------------------- | ----- | --------- | ---------
                                                                      | Notes | $ million | $ million
Employee benefit costs                                                | 8     | 220.5     | 208.9
Costs of inventories recognised as an expense                         |       | 81.6      | 79.8
Write-down of inventories to net realisable value                     | 19    | 1.6       | 0.1
Amortisation of intangible assets                                     | 13    | 2.1       | 4.3
Depreciation of property, plant and equipment                         | 14    | 14.7      | 16.5
Depreciation of right-of-use assets                                   | 15    | 7.5       | –
Amortisation of assets recognised from costs to obtain a contract     | 21    | 0.5       | 0.6
Operating leases – minimum lease payments                             |       | –         | 8.5
Expenses relating to short-term leases and leases of low-value assets | 26    | 0.3       | –
Product development costs                                             |       | 96.5      | 96.9
Net foreign exchange loss                                             |       | 0.6       | 0.6

. Profit before tax
 items charged
 2019 2018
 $ million
 Employee benefit costs 220. 208.
 Costs inventories 81. 79.
 Write-down inventories net realisable value 19.
 Amortisation intangible assets 13.
 Depreciation property plant equipment 14.
 Depreciation right-of-use assets.
 Amortisation assets contract 21.
 Operating leases minimum lease payments.
 Expenses short-term leases low assets 26.
 Product development costs 96. 96.
 Net foreign exchange loss. 6.


The pre-tax discount rate used within the recoverable amount calculations was 8.5% (2018: 8.0%) and is based upon the weighted average cost of capital reflecting specific principal risks and uncertainties. The discount rate takes into account the risk-free rate of return, the market risk premium and beta factor reflecting the average beta for the Group and comparator companies which are used in deriving the cost of equity.
The same discount rate has been applied to both CGUs as the principal risks and uncertainties associated with the Group, as highlighted on pages 30 to 33, would also impact each CGU in a similar manner. The Board acknowledges that there are additional factors that could impact the risk profile of each CGU, which have been considered by way of sensitivity analysis performed as part of the annual impairment tests.
Key drivers to future growth rates are dependent on the Group’s ability to maintain and grow income streams whilst effectively managing operating costs. The level of headroom may change if different growth rate assumptions or a different pre-tax discount rate were used in the cash flow projections. Where the value-in-use calculations suggest an impairment, the Board would consider alternative use values prior to realising any impairment, being the fair value less costs to dispose.
The key assumptions used for value-in-use calculations are as follows:
Having completed the 2019 impairment review, no impairment has been recognised in relation to the CGUs (2018: no impairment). Sensitivity
analysis has been performed in assessing the recoverable amounts of goodwill. There are no changes to the key assumptions of growth rate or
discount rate that are considered by the Directors to be reasonably possible, which give rise to an impairment of goodwill relating to the CGUs.

                                       | 2019 | 2018
-------------------------------------- | ---- | ----
Annual growth rate (after plan period) | 3.0% | 3.0%
Risk free rate of return               | 3.0% | 3.0%
Market risk premium                    | 5.0% | 4.9%
Beta factor                            | 0.83 | 0.79
Cost of debt                           | 3.3% | 3.3%

pre-tax discount rate recoverable calculations 8. 5% (2018. 0% based weighted average cost capital principal risks uncertainties. discount rate risk-free rate return market risk premium beta factor Group comparator companies.
 same discount rate applied CGUs principal risks uncertainties 30 to 33 impact CGU. Board additional factors risk profile considered analysis annual impairment tests.
 future growth rates income operating costs. headroom may change different growth rate assumptions pre-tax discount rate cash flow projections. value-in-use calculations suggest impairment Board alternative use values impairment fair.
 key assumptions
 2019 impairment review no impairment recognised CGUs (2018. Sensitivity
 analysis recoverable goodwill. no changes assumptions growth rate
 discount rate impairment goodwill CGUs.
 Annual growth rate period 3. 0%.
 Risk free rate return.
 Market risk premium.
 Beta factor.
 Cost of debt. 3%.


NOTE 5 – PROPERTY AND EQUIPMENT
The Company owned equipment recorded at cost, which consisted of the following as of December 31, 2019 and 2018:
Depreciation expense was $80,206 and $58,423 for the years ended December 31, 2019 and 2018, respectively

                              | 2019     | 2018
----------------------------- | -------- | --------
Computer equipment            | $137,763 | $94,384
Furniture and fixtures        | 187,167  | 159,648
Subtotal                      | 324,930  | 254,032
Less accumulated depreciation | 148,916  | 104,702
Property and equipment, net   | $176,014 | $149,330

PROPERTY EQUIPMENT
 Company owned equipment 2019
 Depreciation $80,206 $58,423
 Computer equipment $137,763 $94,384
 Furniture fixtures 187,167 159,648
 324,930 254,032
 accumulated depreciation 148,916 104,702
 $176,014 $149,330


Restricted Stock Units
The following table summarizes RSU activity in the fiscal years ended September 30, 2019, 2018, and 2017:
The cost of RSUs is determined using the fair value of the Company’s Common Stock on the award date, and the compensation expense is recognized ratably over the vesting period. The Company recognized $6.8 million, $5.9 million, and $4.0 million in stock-based compensation expense related to outstanding RSUs in the fiscal years ended September 30, 2019, 2018, and 2017, respectively. As of September 30, 2019, the Company had approximately $12.2 million of unrecognized compensation expense related to outstanding RSUs expected to be recognized over a weighted-average period of approximately 2.3 years.

                                  | Number of Shares | Fair Value Per Share
--------------------------------- | ---------------- | --------------------
Outstanding at September 30, 2016 | 2,046,169        | $4.90
Granted                           | 1,249,224        | $6.61
Settled                           | (707,174)        | $4.81
Canceled                          | (231,198)        | $4.93
Outstanding at September 30, 2017 | 2,357,021        | $5.65
Granted                           | 1,184,906        | $8.54
Settled                           | (745,197)        | $5.26
Canceled                          | (216,554)        | $7.39
Outstanding at September 30, 2018 | 2,580,176        | $6.92
Granted                           | 1,147,976        | $9.67
Settled                           | (881,420)        | $6.53
Canceled                          | (494,245)        | $7.70
Outstanding at September 30, 2019 | 2,352,487        | 8.26

Stock Units
 table summarizes RSU activity years 2018
 cost determined fair value Common Stock compensation expense recognized vesting period. recognized $6. million $5. 9 million $4. million stock-based compensation expense RSUs 2018 2017. 30 2019 $12. 2 million unrecognized compensation expense 2. years.
 Fair Value Per Share
 30 2016 2,046,169 $4.
 1,249,224 $6. 61
 $4.
 $4.
 2017 2,357,021 $5.
 1,184,906 $8. 54
 $5.
 $7.
 2018 2,580,176 $6.
 1,147,976 $9. 67
 $6.
 $7.
 30 2019 2,352,487.


2 Alternative performance measures continued
Cash generation
Cash generation is one of the Group’s key performance indicators used by the Board to monitor the performance of the Group and measure the successful implementation of our strategy. It is one of three financial measures on which Executive Directors’ variable remuneration is based.
Cash generation is adjusted operating profit after adding back depreciation and amortisation (excluding IFRS 16 depreciation), less cash payments to pension schemes in excess of the charge to operating profit, equity settled share plans and working capital changes.

                                                              | 2019   | 2018
------------------------------------------------------------- | ------ | ------
                                                              | £m     | £m
Adjusted operating profit                                     | 282.7  | 264.9
Depreciation and amortisation (excluding IFRS16 depreciation) | 34.3   | 32.9
Cash payments to pension schemes in excess of charge to P&L   | (5.2)  | (4.6)
Equity settled share plans                                    | 6.2    | 5.7
Working capital changes                                       | (21.4) | (22.5)
Cash generation                                               | 296.6  | 276.4

performance measures
 Cash generation
 key performance. three financial measures Executive Directors’ variable remuneration.
 adjusted operating profit depreciation amortisation less cash payments pension schemes equity settled share plans working capital changes.
 Adjusted operating profit 282. 264.
 Depreciation amortisation 34. 32.
 Cash payments pension schemes (5.
 Equity settled share plans 6. 5
 Working capital changes (21. (22.
 Cash generation 296. 276.


The Company’s contractual obligations as of December 31, 2019, consist of our obligations as borrower under our 2019 Senior Secured Credit Facility, our obligations related to financing of our three 2018 Newbuildings.
The following table sets out financial, commercial and other obligations outstanding as of December 31, 2019.
Notes:
(1) Refers to obligation to repay indebtedness outstanding as of December 31, 2019.
(2) Refers to estimated interest payments over the term of the indebtedness outstanding as of December 31, 2019. Estimate based on applicable interest rate and drawn amount as of December 31, 2019.
(3) Refers to obligation to repay indebtedness outstanding as of December 31, 2019 for three 2018 Newbuildings.
(4) Refers to estimated interest payments over the term of the indebtedness outstanding as of December 31, 2019. Estimate based on applicable interest as of December 31, 2019 for the financing of the three 2018 Newbuildings.
(5) Refers to the future obligation as of December 31, 2019 to pay for operating lease liabilities at nominal values.
*The new five-year senior secured credit facility for $306.1 million is amortizing with a twenty-year maturity profile, carries a floating LIBOR interest rate plus a margin and matures in February 2024. Further, the agreement contains a discretionary excess cash amortization mechanism for the lender that equals 50% of the net earnings from the collateral vessels, less capex provision and fixed amortization.

Contractual Obligations in $’000s       | Total   | Less than 1 year   | 1-3 years   | 3-5 years   | More than 5 years
--------------------------------------- | ------- | ------------------ | ----------- | ----------- | -----------------
Senior Secured Credit Facility (1)*     | 291,798 | 18,749             | 30,610      | 242,439     | -
Interest Payments (2)                   | 82,255  | 21,690             | 39,624      | 20,941      | -
Financing of 2018 Newbuildings (3)      | 119,867 | 7,630              | 16,287      | 17,849      | 78,101
Interest Payments 2018 Newbuildings (4) | 47,517  | 7,674              | 13,739      | 11,526      | 14,578
Operating Lease Liabilities (5)         | 1,937   | 500                | 638         | 587         | 212
Total                                   | 543,374 | 56,243             | 100,898     | 293,342     | 92,891

contractual obligations December 31, 2019 2019 Senior Secured Credit Facility financing three 2018 Newbuildings.
 table financial commercial obligations 2019.
 repay indebtedness.
 estimated interest payments.
 2018 Newbuildings.
 (4) interest payments.
 (5) future obligation operating lease liabilities.
 five-year senior secured credit facility $306. 1 million amortizing twenty-year maturity floating LIBOR interest rate margin matures February 2024. agreement excess cash amortization 50% net earnings collateral capex provision fixed amortization.
 Contractual Obligations $’000s Less 1 year 1-3 years 3-5 years More 5 years
 Senior Secured Credit Facility (1) 291,798  18,749  30,610  242,439
 Interest Payments (2) 82,255 21,690 39,624 20,941
 Financing 2018 Newbuildings (3) 119,867  16,287 17,849 78,101
Newbuildings 47,517 7,674 13,739 11,526
 Lease Liabilities 1,937
,374 56,243 100,898 293,342


3.3 Fair value estimation The table below analyses the Group’s financial instruments carried at fair value as at 31 December 2019 by level of the inputs to valuation techniques used to measure fair value. Such inputs are categorised into three levels within a fair value hierarchy as follows:
Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); and
Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) (level 3).
The fair value of financial instruments traded in active markets is determined with reference to quoted market prices at the end of the reporting period. A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis. These instruments are included in level 1.
The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. These valuation techniques maximise the use of observable market data where it is available and rely as little as possible on entity specific estimates. If all significant inputs required for evaluating the fair value of a financial instrument are observable, the instrument is included in level 2.
If one or more of the significant inputs are not based on observable market data, the instrument is included in level 3.
Specific valuation techniques used to value financial instruments mainly include: • Dealer quotes for similar instruments; • The fair value of interest rate swaps is calculated as the present value of the estimated future cash flows based on observable yield curves; and • Other techniques, such as discounted cash flow analysis, are used to determine fair value for financial instruments.

                            | Level 1     | Level 2     | Level 3     | Total
--------------------------- | ----------- | ----------- | ----------- | -----------
                            | RMB’Million | RMB’Million | RMB’Million | RMB’Million
As at 31 December 2019      |             |             |             |
FVPL                        | 14,766      | 5,091       | 116,079     | 135,936
FVOCI                       | 74,707      | –           | 7,014       | 81,721
OFA                         | –           | 375         | –           | 375
Other financial liabilities | –           | 523         | 1,873       | 2,396
As at 31 December 2018      |             |             |             |
FVPL                        | 10,875      | 5,009       | 81,993      | 97,877
FVOCI                       | 41,578      | –           | 1,941       | 43,519
OFA                         | –           | 2,032       | –           | 2,032
Other financial liabilities | –           | 40          | 4,466       | 4,506

. Fair value estimation table analyses Group’s financial instruments fair value 31 December 2019 by inputs valuation techniques. inputs categorised into three levels
 Quoted prices in active markets for (level
 Inputs other (level
 Inputs not unobservable (level 3).
 fair value of financial instruments traded in active markets determined quoted market prices reporting period. market active if quoted prices available represent actual market transactions. instruments included in level 1.
 fair value of instruments not traded in active market determined valuation techniques. maximise observable market data rely little on entity specific estimates. If all inputs observable included in level 2.
 If not included in level 3.
 valuation techniques include Dealer quotes for instruments fair value of interest rate swaps calculated as value estimated future cash flows yield curves Other techniques discounted cash flow analysis.
 Level 1 2 3
RMB’Million
 31 December 2019
 14,766 5,091 116,079 135,936
 FVOCI 74,707 7,014 81,721
 375
 liabilities 1,873 2,396
 31 December 2018
 10,875 5,009 81,993 97,877
 FVOCI 41,578 1,941 43,519
 2,032
 financial liabilities 4,466


Property and equipment consisted of the following:
Depreciation and amortization expense related to property and equipment was $86.5 million, $97.4 million and $88.8 million during 2019, 2018 and 2017, respectively.
Property and Equipment
Property and equipment is stated at cost. Depreciation is recorded over the shorter of the estimated useful life or the lease term of the applicable assets using the straight-line method beginning on the date an asset is placed in service. We regularly evaluate the estimated remaining useful lives of our property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are charged to expense as incurred.

                                                | Estimated Useful Lives                        | December 31, |
----------------------------------------------- | --------------------------------------------- | ------------ | -------
                                                |                                               | 2019         | 2018
Computer equipment                              | 3 years                                       | $ 434.8      | $ 417.6
Software                                        | 3 years                                       | 55.9         | 40.5
Land                                            | Indefinite                                    | 9.0          | 9.0
Buildings, including improvements               | 5-40 years                                    | 145.5        | 175.0
Leasehold improvements                          | Lesser of useful life or remaining lease term | 99.4         | 70.8
Other                                           | 1-20 years                                    | 25.7         | 27.0
Total property and equipment                    |                                               | 770.3        | 739.9
Less: accumulated depreciation and amortization |                                               | (511.7)      | (440.9)
Property and equipment, net                     |                                               | $ 258.6      | $ 299.0

Property equipment
 Depreciation amortization $86. 5 million $97. 4 million $88. 8 million 2019 2018 2017.
 cost. Depreciation recorded shorter estimated useful life lease term straight-line method service. evaluate lives revision. Maintenance repairs charged.
 Estimated Lives December 31,
 2019
 Computer equipment 3 years $. $ 417.
 3 55. 40.
 Indefinite 9.
 Buildings improvements 5-40 years 145. 175.
 Leasehold improvements life lease term 99. 70.
 1-20 years 25. 27.
 property equipment 770. 739.
 accumulated depreciation amortization (511. (440.
 equipment $ 258. $ 299.


Film and Electrolytic
The table below sets forth net sales, operating income (loss) and operating income (loss) as a percentage of net sales for our Film and Electrolytic reportable segment for the fiscal years 2018 and 2017 (amounts in thousands, except percentages):
(1) Fiscal years ending March 31, 2018 and 2017 adjusted due to the adoption of ASC 606
Net Sales
Film and Electrolytic net sales of $202.0 million in fiscal year 2018 increased $19.7 million or 10.8% from $182.2 million in fiscal year 2017. The increase in net sales was primarily driven by an increase in net sales in the distributor channel across all the APAC and EMEA regions of $13.7 million, a $3.3 million increase in net sales in the OEM channel of the EMEA region and a $4.2 million increase in the EMS channel across the Americas, EMEA, and APAC regions. These increases were partially offset by a decrease in net sales of $1.2 million in the OEM channel across the Americas, APAC, and JPKO regions. In addition, there was a favorable impact of $7.6 million from foreign currency exchange primarily due to the change in the value of the Euro compared to the U.S. dollar.
Reportable Segment Operating Income (Loss)
Segment operating income of $3.6 million in fiscal year 2018 improved $12.7 million from $9.0 million of operating loss in fiscal year 2017. The improvement was primarily attributable to a $4.3 million increase in gross margin driven by higher net sales, as well as the benefit of completed restructuring activities. The increase was also attributed to an $11.7 million improvement in (gain) loss on the write down and disposal of long-lived assets. These improvements were partially offset by a $2.1 million increase in restructuring charges, a $0.7 million increase in SG&A expenses, and a $0.6 million increase in R&D expenses.

                                    | For the Fiscal Years Ended |                |                |
----------------------------------- | -------------------------- | -------------- | -------------- | --------------
                                    | March 31, 2018             |                | March 31, 2017 |
                                    | Amount                     | % to Net Sales | Amount         | % to Net Sales
Net sales (1)                       | $201,977                   |                | $182,228       |
Segment operating income (loss) (1) | 3,622                      | 1.8%           | (9,028)        | (5.0)%

Film Electrolytic
 table net sales operating income years 2018 2017
 years 2018 2017 adjusted ASC 606
 $202. 0 million 2018 increased $19. 7 million. 8% from $182. 2 million 2017. increase driven distributor channel APAC EMEA $13. 7 million $3. 3 million increase OEM $4. 2 million EMS channel. offset decrease $1. 2 million OEM channel Americas APAC JPKO. favorable impact $7. 6 million foreign currency exchange change Euro. dollar.
 Segment Operating Income
 $3. 6 million 2018 improved $12. 7 million from $9. million 2017. $4. 3 million increase gross margin sales restructuring activities. $11. 7 million improvement loss write down disposal long-lived assets. offset by $2. 1 million increase restructuring charges $0. 7 million SG&A expenses $0. 6 million R&D expenses.
 Fiscal Years
 March 31, 2018 2017
% Net Sales
 $201,977 $182,228
 Segment operating income (loss 3,622. 8% (9,028).


Financials
1. EBITDA is a non-IFRS term, defined as earnings before interest, tax, depreciation and amortisation, and excluding net foreign exchange gains (losses).
2. NPATA is a non-IFRS term, defined as net profit after tax, excluding tax-effected amortisation of acquired intangibles. This is used to determine EPSa as disclosed here and in the audited Remuneration Report.
3. Underlying EBITDA, underlying NPAT and underlying NPATA exclude separately disclosed items, which represent the transaction and other restructuring costs associated with the Sigma acquisition (2018: Enoro acquisition) and the exiting of a premises lease in the Americas. Further details of the separately disclosed items are outlined in Note 4 to the Financial Report.
Operating revenue for FY19 was $231.3 million, $0.5 million up on FY18. With Sigma contributing $5.0 million of revenue in June (the first month since acquisition), revenues for the remainder of Hansen excluding Sigma were $4.5 million lower. This decline was a result of lower non-recurring revenues, due primarily to both lower one-off licence fees and reduced project work following the large body of work completed in the first half of FY18 associated with implementing Power of Choice in Australia. Conversely, recurring revenues grew to represent 63% of total operating revenue.
Underlying EBITDA for the year was $55.8 million, 7.0% down on the $60.0 million in FY18. This resulted in an underlying EBITDA margin decline to 24.1% from 26.0% in FY18. Sigma only contributed a modest $0.1 million of EBITDA in June, which we do not see as representative of the business going forward. Excluding Sigma, the underlying EBITDA margin was 24.6%. This reduced margin was the direct result of the lower non-recurring revenue, as we were able to maintain operating expenses at the same level as FY18, even after the investment in the Vietnam Development Centre.

A$ Million                                    | FY19  | FY18  | Variance %
--------------------------------------------- | ----- | ----- | ----------
Operating revenue                             | 231.3 | 230.8 | 0.2%
Underlying EBITDA 1, 3                        | 55.8  | 60.0  | (7.0%)
Underlying NPAT 3                             | 24.0  | 29.5  | (18.7%)
Underlying NPATA 2, 3                         | 33.7  | 38.7  | (12.9%)
Basic EPS based on underlying NPATA (cents) 2 | 17.1  | 19.8  | (13.6%)

. EBITDA non-IFRS earnings before interest tax depreciation amortisation foreign exchange gains.
. NPATA non-IFRS net profit after tax amortisation intangibles. EPSa Remuneration Report.
. EBITDA NPAT exclude items transaction restructuring costs Sigma acquisition exiting premises lease Americas. Note 4.
 Operating revenue FY19 $231. 3 million $0. 5 million up FY18. Sigma $5. 0 million June $4. 5 million lower. lower non revenues lower licence fees reduced project work Choice. recurring revenues 63% operating revenue.
 EBITDA $55. 8 million. 0% $60. million FY18. EBITDA margin 24. 1% 26. 0%. Sigma contributed $0. 1 million EBITDA June. Excluding Sigma EBITDA margin 24. 6%. lower non-recurring revenue operating expenses FY18 Vietnam Development Centre.
Million FY19 FY18 Variance %
 Operating revenue 231. 230. 2%
 EBITDA 55. 60. (7. 0%
 NPAT 24. 29. 7%
 NPATA 33. 38. 9%)
 EPS 17. 19. 6%


Proofpoint, Inc. Notes to Consolidated Financial Statements (Continued) (dollars and share amounts in thousands, except per share amounts)
of the transaction price to each performance obligation based on a relative standalone selling price, or SSP, basis.
• Recognition of revenue when, or as, the Company satisfies a performance obligation - The Company recognizes revenue when control of the services or products are transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services or products. The Company records its revenue net of any value added or sales tax.
The Company generates sales directly through its sales team and, to a growing extent, through its channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted

The Company generates sales directly through its sales team and, to a growing extent, through its channel partners. Sales to channel partners are made at a discount and revenues are recorded at this discounted price once all revenue recognition criteria are met. Channel partners generally receive an order from an end-customer prior to placing an order with the Company, and these partners do not carry any inventory of the Company’s products or solutions. Payment from channel partners is not contingent on the partner’s success in sales to end-customers. In the event that the Company offers rebates, joint marketing funds, or other incentive programs to a partner, recorded revenues are reduced by these amounts accordingly.
Payment terms on invoiced amounts are typically 30 to 45 days.
Disaggregation of Revenue Disaggregation of Revenue
The Company derives its revenue primarily from: (1) subscription service revenue; (2) subscription software revenue, and (3) hardware and services, which include professional service and training revenue provided to customers related to their use of the platform.
The following table presents the Company’s revenue disaggregation:
Subscription service revenue
Subscription service revenue is derived from a subscription-based enterprise licensing model with contract terms typically ranging from one to three years, and consists of (1) subscription fees from the licensing of the Company’s security-as-a-service platform and it’s various components, (2) subscription fees for software with support and related future updates where the software updates are critical to the customers’ ability to derive benefit from the software due to the fast changing nature of the technology. These function together as one performance obligation, and (3) subscription fees for the right to access the Company’s customer support services for software with significant standalone functionality and support services for hardware. The hosted on-demand service arrangements do not provide customers with the right to take possession of the software supporting the hosted services. Support revenue is derived from ongoing security updates, upgrades, bug fixes, and maintenance. A time-elapsed method is used to measure progress because the Company transfers control evenly over the contractual period. Accordingly, the fixed consideration related to subscription service revenue is generally recognized on a straight-line basis over the contract term beginning on the date access is provided, as long as other revenue recognition criteria have been met. Most of the Company’s contracts are non-inate their contract for cause if the

Subscription service revenue is derived from a subscription-based enterprise licensing model with contract terms typically ranging from one to three years, and consists of (1) subscription fees from the licensing of the Company’s security-as-a-service platform and it’s various components, (2) subscription fees for software with support and related future updates where the software updates are critical to the customers’ ability to derive benefit from the software due to the fast changing nature of the technology. These function together as one performance obligation, and (3) subscription fees for the right to access the Company’s customer support services for software with significant standalone functionality and support services for hardware. The hosted on-demand service arrangements do not provide customers with the right to take possession of the software supporting the hosted services. Support revenue is derived from ongoing security updates, upgrades, bug fixes, and maintenance. A time-elapsed method is used to measure progress because the Company transfers control evenly over the contractual period. Accordingly, the fixed consideration related to subscription service revenue is generally recognized on a straight-line basis over the contract term beginning on the date access is provided, as long as other revenue recognition criteria have been met. Most of the Company’s contracts are non-cancelable over the contract term. Customers typically have the right to terminate their contract for cause if the Company fails to perform in accordance with the contractual terms. Some of the Company’s customers have the option to purchase additional subscription services at a stated price. These options are evaluated on a case-by-case basis but generally do not provide a material right as they are priced at or above the Company’s SSP and, as such, would not result in a separate performance obligation.

                              | Year Ended December 31, |          |
----------------------------- | ----------------------- | -------- | --------
                              | 2019                    | 2018     | 2017
Subscription service revenue  | $849,267                | $681,138 | $489,274
Subscription software revenue | 25,739                  | 23,262   | 17,081
Hardware and services         | 13,184                  | 12,594   | 13,326
Total revenue                 | $888,190                | $716,994 | $519,681

Proofpoint, Inc. Notes Consolidated Financial Statements (dollars share amounts thousands per share
 transaction price each performance obligation standalone selling price.
 Recognition revenue Company satisfies performance obligation recognizes revenue control services products transferred to customers consideration. records revenue net value added sales tax.
 generates sales directly team channel partners. Sales partners discount revenues recorded discounted
. discount revenues recorded revenue recognition criteria met. Channel partners receive order carry inventory products solutions. Payment not contingent on success. Company offers rebates joint marketing funds incentive programs revenues reduced.
 Payment terms invoiced amounts 30 to 45 days.
 Disaggregation of Revenue
 derives revenue from subscription service revenue software revenue hardware services professional service training.
 table revenue disaggregation
 Subscription service revenue
Subscription service revenue from subscription-based enterprise licensing model contract terms one to three years subscription fees security platform subscription fees for software with support future updates. performance obligation (3) subscription fees for access customer support services for software standalone functionality hardware. hosted on-demand service arrangements provide right possession software. Support revenue derived from security updates upgrades bug fixes maintenance. time-elapsed method progress transfers control. fixed consideration revenue recognized straight-line over contract term date access provided revenue recognition criteria met. contracts non-inate
 Subscription service revenue contract terms one to three years subscription fees subscription fees for software with support future updates. performance obligation (3) subscription fees for right access customer support services for software standalone functionality hardware. hosted on-demand service arrangements provide right possession software. Support revenue derived from security updates upgrades bug fixes maintenance. time-elapsed method progress transfers control.fixed subscription service revenue recognized contract term criteria met. contracts non-cancelable. Customers terminate contract if fails. purchase additional services stated price. options evaluated case-by-case provide material right priced SSP separate performance obligation.
 Year Ended December 31,
 2019 2018 2017
 Subscription service revenue $849,267  $681,138  $489,274
 Subscription software revenue 25,739 23,262 17,081
 Hardware services 13,184 12,594
 Total revenue $888,190 $716,994 $519,681


Stock Options with Market-based Vesting Criteria
We grant NQs that are subject to vesting only upon the market price of our underlying public stock closing above a certain price target withins even years of the date of grant. Share-based compensation expense is recognized regardless of the number of awards that are earned based on the market condition and is recognized on a straight-line basis over the estimated service period of approximately three years.
If the required service period is not met for these options, then the share-based compensation expense would be reversed. In the event that our common stock achieves the target price per share based on a 30-day trailing average prior to the end of the estimated service period, any remaining unamortized compensation cost will be recognized.
Stock options with market-based vesting criteria granted for fiscal years 2019, 2018 and 2017 were 585,000, 325,000 and 320,000, respectively, at weighted average grant date fair values of $7.47, $15.52 and $13.18 per share, or total grant date fair value $2.4 million, $5.0 million and $4.3 million, respectively.
These NQs with market-based vesting criteria were valued using a Monte Carlo simulation model. The weighted average Monte Carlo input assumptions used for calculating the fair value of these market-based stock options are as follows:
During our fiscal first quarter of 2019, we canceled 1,122,500 performance-based stock options with a concurrent grant of 748,328 PRSUs for 13 employees, which was accounted for as a modification. The incremental compensation cost resulting from the modification was $8.2 million, and was being recognized as share-based compensation expense over the requisite service period of three years for the new PRSU awards.
As a result of subsequent actions that resulted in forfeitures, the remaining compensation expense associated with this modification as of September 27, 2019 is $2.8 million.

                        |        | Fiscal Years |
----------------------- | ------ | ------------ | ------
                        | 2019   | 2018         | 2017
Risk-free interest rate | 2.8%   | 2.3%         | 1.9%
Expected term (years)   | 3.9    | 3.4          | 7.0
Expected volatility     | 51.9%  | 45.8%        | 32.3%
Target price            | $53.87 | $98.99       | $67.39

Stock Options Market-based Vesting Criteria
 grant NQs market price public stock above target grant. Share-based compensation expense recognized awards estimated service period three years.
 If compensation expense reversed. common stock achieves target price remaining unamortized compensation cost recognized.
 Stock options granted 2019 2018 2017 585,000 325,000 320,000 grant date fair values $7. 47 $15. 52 $13. 18 per share total grant date fair value $2. 4 million $5. 0 million $4. 3 million.
 NQs valued Monte Carlo simulation model. assumptions
 2019 canceled 1,122,500 performance-based stock options 748,328 PRSUs for 13 employees. incremental compensation cost $8. 2 million recognized share-based compensation expense three years awards.
 remaining compensation expense September 27, 2019 $2. 8 million.
 Fiscal Years
 Risk-free interest rate. 8%. 3%.
term 3. 7.
 volatility 51. 45. 3%
 price $53. $98. $67.


ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) 1. Financial Statements
Reference is made to Item 8 for a list of all financial statements and schedules filed as a part of this Report.
2. Financial Statement Schedules
QuickLogic Corporation
Valuation and Qualifying Accounts
(in thousands)
All other schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or notes hereto.

                                   | Balance at Beginning of Period | Charged to Costs and Expenses | Write-offs | Balance at End of Period
---------------------------------- | ------------------------------ | ----------------------------- | ---------- | ------------------------
Allowance for Doubtful Accounts:   |                                |                               |            |
Fiscal Year 2019                   | $—                             | $—                            | $5         | $—
Fiscal Year 2018                   | $—                             | $—                            | $—         | $—
Fiscal Year 2017                   | $—                             | $—                            | $—         | $—
Allowance for Deferred Tax Assets: |                                |                               |            |
Fiscal Year 2019                   | $54,913                        | $3,227                        | $—         | $58,140
Fiscal Year 2018                   | $55,931                        | $—                            | $(1,018)   | $54,913
Fiscal Year 2017                   | $79,150                        | $—                            | $(23,219)  | $55,931

ITEM 15. EXHIBITS FINANCIAL STATEMENT SCHEDULES
. Financial Statements
 Reference Item 8 financial statements schedules Report.
. Financial Statement Schedules
 QuickLogic Corporation
 Valuation Qualifying Accounts
 other schedules omitted not applicable financial statements.
 Balance Beginning Period Costs Expenses Write-offs End Period
 Allowance Doubtful Accounts
 Fiscal Year 2019
 Fiscal Year 2018
 Year 2017
 Allowance Deferred Tax Assets
 Fiscal Year 2019 $54,913 $3,227
 Fiscal Year 2018 $55,931
 Year 2017 $79,150


M. Property and Equipment, Net
Property and equipment, net, as of the periods presented consisted of the following (table in millions):
As of January 31, 2020, construction in progress primarily represented various buildings and site improvements that had not yet been placed into service.
Depreciation expense was $234 million, $211 million and $206 million during the years ended January 31, 2020, February 1, 2019 and February 2, 2018, respectively.

                                  | January 31, 2020 | February 1, 2019
--------------------------------- | ---------------- | ----------------
Equipment and software            | $1,404           | $1,448
Buildings and improvements        | 1,088            | 991
Furniture and fixtures            | 120              | 116
Construction in progress          | 106              | 56
Total property and equipment      | 2,718            | 2,611
Accumulated depreciation          | (1,438)          | (1,449)
Total property and equipment, net | $1,280           | $1,162

. Property Equipment
 January 31, 2020 construction buildings improvements.
 Depreciation expense $234 million $211 million $206 million January 31, 2020 February 1 2019 2 2018.
 Equipment software $1,404 $1,448
 Buildings improvements 1,088
 Furniture fixtures
 Construction progress 106
 property equipment 2,718 2,611
 Accumulated depreciation (1,438)
 $1,280 $1