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

The Company estimates the fair value of stock options on the date of grant (measurement date) using the Black-Scholes option pricing model. The Company recognizes the fair value of stock option awards on a straight-line basis over the vesting period of the award.

The following inputs are used in the Black-Scholes option pricing model to estimate the fair value of stock options:

Stock Price. The stock price represents the fair market value of the Company’s common stock on the date of the grant.

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 a service period of three years and have a contractual term 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,
	2020			2019
Stock price	$	15.36		$	39.54
Expected life (years)		3.25			3.20
Expected volatility		70.91	%		58.68	%
Risk-free interest rate		0.25	%		1.51	%
Expected dividend yield		0	%		0	%

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

The fair value of restricted stock unit (“RSU”) awards, which vest upon meeting a service condition, is based on the fair market value of the Company’s common stock on the date of the grant (measurement date) and is recognized on a straight-line basis over the service period of the award, which is generally 3 years.

The fair value of performance restricted stock unit (“PRSU”) awards, which vest upon meeting both a market condition, such as exceeding a target stock price in the future, and a service condition, is determined on the date of grant (measurement date) using the Monte Carlo Simulation model. The Company recognizes the fair value of the award on a straight-line basis over the service period of the award, which is generally 3 years.

The following inputs are used in the Monte Carlo Simulation model to estimate the fair value of PRSUs:

Stock Price. The stock price represents the fair market value of the Company’s common stock on the date of the grant.

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 term of the award.

	Year Ended			Year Ended
	December 31,			December 31,
	2020			2019
Stock price	$	16.49		$	—
Expected volatility		72.50	%		—
Risk-free interest rate		0.14	%		—

	Year Ended		Year Ended
	December 31,		December 31,
	2020		2019
Stock-based compensation:
Cost of revenue	$	745	$	669
Sales and marketing		2,152		1,928
Research, development and engineering		1,890		1,466
General and administrative		4,328		4,151
Stock-based compensation expense		9,115		8,214
Capitalized to software and patent costs		158		174
Total stock-based compensation	$	9,273	$	8,388

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

	Year Ended		Year Ended
	December 31,		December 31,
	2020		2019
Total unrecognized compensation costs	$	14,416	$	13,535

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, 2020 for stock options, restricted stock and restricted stock unit awards over weighted average periods through December 31, 2024 as follows:

	Stock	Restricted
	Options	Stock	RSUs	PRSUs
Weighted average period	1.35 years	1.36 years	1.75 years	2.00 years