Stock-based compensation includes expense charges for all stock-based awards to employees and directors. These awards include stock option grants and restricted stock awards.

Stock-based compensation expense related to internal labor is capitalized to software and patent costs based on direct labor hours charged to capitalized software and patent costs.

Valuation and Amortization Method. The Company estimates the fair value of stock options on the date of grant (measurement date) using the Black-Scholes option valuation model. The Company amortizes the fair value of all awards on a straight-line basis over the requisite service periods, which are generally the vesting periods.

Expected Life. The expected life of awards granted represents the period of time that they are expected to be outstanding. The Company determines the expected life based on historical experience with similar awards, giving consideration to the contractual terms and vesting schedules of the awards. Stock options granted generally vest over three years and have contractual terms of ten years.

Expected Volatility. The Company estimates the volatility of its common stock at the date of grant based on the historical volatility of its common stock based on historical prices over the most recent period commensurate with the expected life of the award.

Risk-Free Interest Rate. The Company determines the risk-free interest rate using current U.S. treasury yields for bonds with a maturity commensurate with the expected life of the award.

Expected Dividend Yield. The expected dividend yield is derived by the Company’s expected annual dividend rate over the expected term divided by the fair value of the Company’s common stock at the grant date.

	Year Ended			Year Ended
	December 31,			December 31,
	2018			2017
Expected life (years)		4.50			4.50
Expected volatility		57.11	%		57.24	%
Risk-free interest rate		2.77	%		1.77	%
Expected dividend yield		0	%		0	%

The fair value of restricted stock awarded is based on the fair market value of the Company’s common stock on the date of the grant (measurement date), and is recognized over the vesting period of the award using the straight-line method. Restricted stock awards granted generally vest over three to four years for employee grants and one to three years for director grants.

	Year Ended		Year Ended
	December 31,		December 31,
	2018		2017
Stock-based compensation:
Cost of revenue	$	613	$	663
Sales and marketing		1,649		1,440
Research, development and engineering		1,361		1,359
General and administrative		3,386		2,974
Intellectual property		289		321
Stock-based compensation expense		7,298		6,757
Capitalized to software and patent costs		170		197
Total stock-based compensation	$	7,468	$	6,954

The following table sets forth total unrecognized compensation cost related to non-vested stock-based awards granted under all equity compensation plans:

	Year Ended		Year Ended
	December 31,		December 31,
	2018		2017
Total unrecognized compensation costs	$	14,055	$	13,669

Total unrecognized compensation costs will be adjusted for any future forfeitures if and when they occur.

The Company expects to recognize the total unrecognized compensation costs as of December 31, 2018 for stock options and restricted stock over weighted average periods through December 31, 2022 as follows: