10. Stockholders’ equity:

Stock-based compensation

During the three months ended March 31, 2019, a total of 2,031,033 options to purchase Common Stock, with an aggregate fair market value of approximately $4.1 million, were granted to employees and officers of the Company. Options have a term of 10 years from the grant date. Options granted to employees vest ratably over a three-year period and options granted to members of the Board of Directors vest ratably through 2022. The fair value of each option is amortized as compensation expense evenly through the vesting period.

The fair value of each option award is estimated on the grant date using the Black-Scholes valuation model that uses assumptions for expected volatility, expected dividends, expected term, and the risk-free interest rate. Expected volatilities are based on implied volatilities from historical volatility of the Common Stock, and other factors estimated over the expected term of the options.

Expected term of options granted is derived using the “simplified method” which computes expected term as the average of the sum of the vesting term plus contract term. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant for the period of the expected term.

The key assumptions used in determining the fair value of options granted during the three months ended March 31, 2019 follows:


Expected price volatility		61.83%-62.04%
Risk-free interest rate		2.41%-2.66%
Weighted average expected life in years		6 years
Dividend yield		—

Option activity during the three months ended March 31, 2019 was as follows:


	Number of shares			Weighted average exercise price per share		Aggregate intrinsic value
Outstanding at January 1, 2019		4,406,004		$	3.19	$	4,172

Granted in 2019:
Officers and Directors		1,113,516			3.88
Employees		917,517			4.51
Exercised		(150,275	)		3.14
Forfeitures		(10,423	)		2.18

Outstanding at March 31, 2019		6,276,399		$	3.50	$	12,209

During the three months ended March 31, 2019, a cumulative total of 481,898 options were granted in excess of the Company’s 2011 Equity Incentive Plan, as amended (the “EIP”) available number of shares under the plan. These options are subject to shareholder approval at the Company’s 2019 Annual Shareholder’s Meeting.

As of March 31, 2019, options exercisable totaled 1,780,405. There are approximately $10.6 million of unrecognized compensation cost related to non-vested share-based compensation awards, including options and restricted stock units (“RSUs”) granted. These costs will be expensed through 2022.

Restricted stock units

During the three months ended March 31, 2019, a cumulative total of 270,250 RSUs were granted to the Company’s executive officers, members of senior management and a former officer with a fair market value of approximately $1.2 million. The fair value of restricted units is determined using quoted market prices of the Common Stock and the number of shares expected to vest. These RSUs were issued under the EIP.

RSU grants are time-based, all of which generally vest over a three-year period. The RSU grant to the former officer vested on his retirement date April 30, 2019.

Restricted stock activity during the three months ended March 31, 2019 was as follows:


	Number of restricted shares			Weighted average fair market value per RSU
Outstanding at January 1, 2019		2,166,102		$	2.59
Granted:
Executive officers		223,250			4.44
Employees		47,000			4.67
Vested		(500,366	)		4.90

Outstanding at March 31, 2019		1,935,986		$	2.98

Preferred Stock

During the three months ended March 31, 2019, 700 shares of Series B Preferred Stock (“Series B”) were converted into 3,888,888 shares of Common Stock. As of March 31, 2019, 2,400 shares of Series B are outstanding. As of March 31, 2019, 2,093,155 shares of Series A Preferred Stock (“Series A”) are outstanding. There were no conversions of Series A during the three months ended March 31, 2019.

Earnings Per Share

During the three months ended March 31, 2019 and 2018, outstanding stock options, RSUs, warrants and preferred shares of 24,743,605 and 10,243,260 , respectively, were not included in the computation of diluted earnings per common share, because to do so would have had an antidilutive effect.