Note 15. Stock-Based Compensation

Warrants

We typically issue warrants to purchase shares of our common stock to investors as part of a financing transaction or in connection with services rendered by placement agents and consultants. Our outstanding warrants expire on various dates through November 2021. A summary of warrant activity is as follows:


				Weighted-
		Weighted-		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price/Share		Term (Years)	Value (1)
Outstanding — December 31, 2017	5,141,112	$	4.09
Issued	—		—
Exercised	(3,062,739)		3.58
Expired	(28,839)		31.78

Outstanding — December 31, 2018	2,049,534	$	4.03
Issued	—		—
Exercised	(1,027,546)		3.95
Expired	(20,960)		17.78

Outstanding — December 31, 2019	1,001,028	$	3.83	0.5	$	12,644,200

Vested (exercisable) — December 31, 2019	1,001,028	$	3.83	0.5	$	12,644,200

(1)

Aggregate intrinsic value represents the difference between the exercise price of the warrant and the closing market price of the Company’s common stock on December 31, 2019, which was $16.46 per share.

The following table summarizes information with respect to warrants outstanding and exercisable at December 31, 2019:


		Weighted-
		Average
		Remaining	Weighted-			Weighted-
	Number	Contractual	Average		Number	Average
Exercise Price	Outstanding	Life (Years)	Exercise Price		Exercisable	Exercise Price
$3.57	894,439	0.5	$	3.57	894,439	$	3.57
$6.00	106,589	0.2	$	6.00	106,589	$	6.00
	1,001,028				1,001,028

During the year ended December 31, 2019, the Company issued 985,626 shares of common stock in connection with the exercise of warrants for proceeds of $3.4 million. In addition, during the year ended December 31, 2019, the Company issued 117,663 shares of common stock in connection with the cashless exercise of warrants to purchase 159,583 shares of common stock.

During the year ended December 31, 2018, the Company issued 1,179,784 shares of common stock in connection with the exercise of warrants for proceeds of $4.5 million. In addition, during the year ended December 31, 2018, the Company issued 155,886 shares of common stock in connection with the cashless exercise of warrants to purchase 302,567 shares of common stock.

The total intrinsic value of warrants exercised during the years ended December 31, 2019 and 2018 was $12.4 million and $21.5 million, respectively.

Stock Options

We have five stock incentive plans: the 2002 Stock Incentive Plan (the “2002 Plan”), the 2009 Stock Incentive Plan (the “2009 Plan”), the 2011 Stock Incentive Plan (the “2011 Plan”), the 2015 Omnibus Equity Incentive Plan (the “2015 Plan”), and the 2018 Omnibus Equity Incentive Plan (the “2018 Plan”), (collectively, the “Plans”). The 2002 Plan, the 2009 Plan, the 2011 Plan and the 2015 Plan (the “Prior Plans”) have been superseded by the 2018 Plan. In May 2018, the stockholders approved the 2018 Plan for issuance up to 3,730,179 shares. The Prior Plans will remain in effect until all awards granted under such Prior Plans have been exercised, forfeited, cancelled, or have otherwise expired or terminated in accordance with the terms of such awards, but no awards will be made pursuant to the Prior Plans after the effectiveness of the 2018 Plan. As of December 31, 2019, the Company had 2,653,409 shares available for future awards under the 2018 Plan.

During the years ended December 31, 2019 and 2018, we granted stock options at exercise prices equal to or greater than the quoted market price of our common stock on the grant date. The fair value of each option grant was estimated on the date of grant using Black-Scholes with the following assumptions:


	December 31,		December 31,
	2019		2018
Expected life (years)	5.2 – 6.2		5.3 – 7.0
Risk-free interest rate	1.42% - 2.57	%	2.59% - 3.07	%
Volatility	70.6% - 99.2	%	97.7% - 110	%
Dividend yield	0	%	0	%

The expected option life assumption is estimated based on the simplified method. Accordingly, the Company has utilized the average of the contractual term of the options and the weighted average vesting period for all options to calculate the expected option term. The risk-free interest rate assumption is based upon observed interest rates appropriate for the expected term of our employee stock options. The expected volatility is based on the historical volatility of our stock commensurate with the expected life of the stock-based award. We do not anticipate paying dividends on the common stock in the foreseeable future.

We recognize stock-based compensation cost on a straight-line basis over the vesting period. Stock-based compensation expense is recognized only for those awards that ultimately vest.

Total stock-based compensation expense related to our share-based payment awards is comprised of the following:


	Year Ended December 31,
	2019		2018
Cost of revenues	$	1,479,448	$	244,239
General and administrative		9,430,279		3,756,820
Sales and marketing		4,515,654		1,178,115
Engineering and development		1,098,125		299,451
	$	16,523,506	$	5,478,625

For the year ended December 31, 2019, we recognized expense of $9.6 million due to the accelerated vesting under the terms of certain outstanding stock option grants as a result of the Company meeting certain financial performance criteria defined in such grants. Of this amount, $383,800, $5.0 million, $3.4 million, and $873,000 are included in cost of revenues, general and administrative, sales and marketing, and engineering and development, respectively.

A summary of stock option activity is as follows:


				Weighted-
		Weighted-		Average
		Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price/Share		Term (Years)	Value (1)
Outstanding — December 31, 2017	5,322,858	$	4.16
Granted (weighted-average fair value of $7.78 per share)	1,123,100		9.48
Exercised	(445,989)		3.38
Forfeited	(213,142)		6.79
Expired	(29,522)		5.10

Outstanding — December 31, 2018	5,757,305	$	5.16
Granted (weighted-average fair value of $13.55 per share)	1,544,850		13.55
Exercised	(544,565)		3.91
Forfeited	(78,009)		10.66

Outstanding — December 31, 2019	6,679,581	$	7.14	6.9	$	62,681,100
Vested (exercisable) — December 31, 2019	5,895,891	$	6.25	6.5	$	60,273,300
Expected to vest after December 31, 2019 (unexercisable)	783,690	$	13.78	9.3	$	2,409,400

(1)

Aggregate intrinsic value represents the difference between the exercise price of the option and the closing market price of the common stock on December 31, 2019, which was $16.46 per share.

The following table summarizes information with respect to stock options outstanding and exercisable at December 31, 2019:


		Weighted-
		Average	Weighted-			Weighted-
		Remaining	Average			Average
	Number	Contractual	Exercise		Number	Exercise
Exercise Price	Outstanding	Life (Years)	Price		Exercisable	Price
$1.08 – 3.07	1,059,176	5.8	$	2.27	1,059,176	$	2.27
$3.18 – 3.44	977,670	5.7	$	3.30	977,670	$	3.30
$4.56 – 4.92	768,358	5.4	$	4.77	768,358	$	4.77
$5.00 – 7.67	855,328	5.6	$	5.04	854,803	$	5.04
$7.80 – 8.65	1,180,040	7.2	$	8.32	1,109,650	$	8.30
$9.29 – 12.79	1,271,242	9.0	$	11.90	910,178	$	11.74
$13.37 – 22.68	567,767	9.4	$	16.05	216,056	$	15.56
	6,679,581				5,895,891

As of December 31, 2019, there was unrecognized compensation expense of $6.7 million related to unvested stock options, which we expect to recognize over a weighted average period of 2.0 years.

The total intrinsic value of options exercised during the years ended December 31, 2019 and 2018 was $6.5 million and $3.7 million, respectively.