8. Common Stock, warrants, stock-based compensation, stock options, restricted stock and restricted stock units

Common stock reserved

The Company reserved the following shares of common stock, on a common stock equivalent basis, for the conversion of shares of preferred stock, the exercise of warrants, the exercise of common stock options, and the vesting of restricted common stock.


	As of December 31,
	2019	2018
Common stock warrants	10,000	76,041
Common stock options and unvested restricted common stock	2,916,991	2,838,402
Shares reserved for future awards under compensation plan	882,715	2,433,999
	3,809,706	5,348,442

Warrants

The following table summarizes the Company’s outstanding warrants as of December 31, 2019, and 2018:


		Weighted
	Issued and	Average
	exercisable	Exercise Price
As of December 31, 2018	76,041	$	10.10
Issued	—
Exercised	(66,041)		10.90
Cancelled	—
As of December 31, 2019	10,000	$	4.83

The Company has an agreement with a vendor (Note 9) where the Company could be obligated to issue warrants to purchase an additional 93,341 shares of common stock to the vendor if the contract is terminated prior to a minimum purchase commitment being met. No shares have been reserved related to these potential obligations to issue warrants in the future. On January 30, 2018, the Company issued a warrant to purchase 10,000 of common stock to a consultation company for services rendered.

On July 2, 2019, 66,041 warrants were exercised by a holder on a net, non-cash, basis. Per terms of the warrant agreement, the Company issued 45,690 shares of common stock after giving effect to the holder’s net excercise.

Stock-based compensation

Share-based compensation expense for all stock awards consists of the following (in thousands):


	December 31,
	2019		2018		2017
Cost of product revenue	$	86	$	55	$	24
Cost of service and other revenue		238		173		52
Research and development		718		513		180
Selling, general, and administrative		5,346		4,143		1,912
Total	$	6,388	$	4,884	$	2,168

In June 2007, the Company adopted the 2007 Stock Option and Grant Plan (the 2007 Plan), under which it could grant incentive stock options, non-qualified options, restricted stock, and stock grants. At December 31, 2016, the 2007 Plan allowed for the issuance of up to 3,229,935 shares of common stock. During the three months ended March 31, 2017, the 2007 Plan was amended to allow for the issuance of an additional 622,227 shares of common stock for a total issuance of up to 3,852,213 shares of common stock at June 30, 2017. During the three months ended September 30, 2017 the 2007 Plan was further amended to allow for the issuance of an additional 497,822 shares of common stock for total issuance of up to 4,350,035 shares of common stock at September 30, 2017. As of December 31, 2017, under the 2007 Plan, options to purchase 2,249,843 shares of the Company’s common stock were outstanding, 571,838 shares of common stock had been issued and were outstanding pursuant to the exercise of options, 1,128,975 shares of common stock had been issued and were outstanding pursuant to restricted or unrestricted stock awards, and 399,379 shares of common stock were available for future awards. In connection with the completion of the IPO, the Company terminated the 2007 Plan. As of December 31, 2019, 1,221,746 shares were outstanding and no shares were available for future grant under the 2007 Plan.

In December 2017, the Company adopted the 2017 Employee, Director and Consultant Equity Incentive Plan (the 2017 Plan), under which it may grant incentive stock options, non-qualified stock options, restricted stock, and other stock-based awards. As of December 31, 2017, the 2017 Plan allowed for the issuance of up to 1,042,314 shares of common stock plus up to 2,490,290 shares of common stock represented by awards granted under the 2007 Plan that are forfeited, expire or are cancelled without delivery of shares or which result in the forfeiture of shares of common stock back to the Company on or after the date the 2017 Plan becomes effective. As of December 31, 2019 and 2018, there were shares available for grant under the 2017 Plan of 270,143 and 4,393, respectively.

In addition, the 2017 Plan contains an "evergreen" provision, which allows for an annual increase in the number of shares of common stock available for issuance under the 2017 Plan on the first day of each fiscal year during the period beginning in fiscal year 2019 and ending in fiscal year 2027. The annual increase in the number of shares shall be equal to the lowest of: 4% of the number of shares of common stock outstanding as of such date; and an amount determined by the Company’s Board of Directors or Compensation Committee. On January 1, 2020, the number of shares of common stock available for issuance under the 2017 plan was automatically increased by 894,761 shares.

In December 2017, the Company adopted the 2017 Employee Stock Purchase Plan (the 2017 ESPP). As December 31, 2018, the 2017 ESPP allowed for the issuance of up to 425,533 shares of common stock. As of December 31, 2019, 612,572 shares were available for grant under the 2017 ESPP.

In addition, the 2017 ESPP contains an "evergreen" provision, which allows for an increase on the first day of each fiscal year beginning with fiscal year 2018. The increase in the number of shares shall be equal to the lowest of: 1% of the number of shares of common stock outstanding on the last day of the immediately preceding fiscal year or an amount determined by the Company’s Board of Directors or Compensation Committee.

The 2017 ESPP provides for six-month option periods commencing on March 1 and ending August 31 and commencing September 1 and ending February 28 of each calendar year. The first offering under the 2017 ESPP began on September 1, 2018.

Stock options

Under the 2007 and 2017 Plans, stock options may not be granted with exercise prices of less than fair market value on the date of the grant. Options generally vest ratably over a four-year period with 25% vesting on the first anniversary and the remaining 75% vesting ratably on a monthly basis over the remaining three years. These options expire ten years after the grant date. Activity under the 2007 Plan and the 2017 Plan were as follows:


		Weighted-average		Remaining contractual	Aggregate intrinsic value
	Options	exercise price		life (in years)	(in thousands)
Outstanding at December 31, 2018	2,476,911	$	9.65	7.73	$	22,108
Granted	882,959	$	24.20
Exercised	(414,672)	$	6.80
Cancelled	(438,136)	$	14.37
Outstanding at December 31, 2019	2,507,062	$	14.41	7.58	$	24,870
Vested and expected to vest at December 31, 2019	2,507,062	$	14.41	7.58	$	24,870
Exercisable at December 31, 2019	1,284,900	$	8.70	6.46	$	19,239

Using the Black-Scholes option pricing model, the weighted-average fair value of options granted to employees and directors during the years ended December 31, 2019, 2018, and 2017 was $9.09, $7.19, and $4.52 per share, respectively. The expense related to stock options granted to employees was $3.7 million, $2.7 million, and $1.5 million for the years ended December 31, 2019, 2018, and 2017, respectively. The intrinsic value of stock options exercised was $6.9 million, $5.3 million, and $1.1 million, for the years ended December 31, 2019, 2018, and 2017, respectively. Activity related to non-employee awards was not material to the years ended December 31, 2019, 2018, and 2017.

At December 31, 2019, there was $8.7 million of total unrecognized compensation cost related to unvested stock options, which is expected to be recognized over the remaining weighted-average vesting period of 2.77 years.

Restricted stock awards

In December 2014, the Company issued 78,912 shares of restricted common stock to a director of the Company under the 2007 Plan. Under the terms of the agreement, shares of common stock issued are subject to a four year vesting schedule. Vesting occurs periodically at specified time intervals and specified percentages. In January 2015, the Company issued 781,060 shares of restricted common stock to an executive of the Company under the 2007 Plan. The majority of these shares were issued subject to a four year vesting schedule with 25% vesting on the first anniversary and the remaining vesting 75% ratably on a monthly basis over the remaining three years, while another portion was issued subject to performance based vesting. The vesting of performance based awards is dependent upon achievement of specified financial targets of the Company. The majority of the performance criteria were achieved during the years ended December 31, 2016 and 2015 and the remaining unvested awards with performance conditions are not material. No restricted stock awards were granted during the years ended December 31, 2019, 2018, or 2017. As of December 31, 2019, the Company had 39,806 shares of unvested restricted common stock with a weighted average grant date fair value of $3.12 per share.

The expense related to restricted stock awards granted to employees and non-employees was $0.0 million, $0.4 million, and $0.6 million for the years ended December 31, 2019, 2018, and 2017, respectively.

At December 31, 2019, there was no unrecognized compensation cost related to unvested restricted stock.

The aggregate fair value of restricted stock awards that vested during the years ended December 31, 2019, 2018, and 2017, based on estimated fair values of the stock underlying the restricted stock awards on the day of vesting, was $0.0 million, $2.4 million and $1.9 million, respectively.

Restricted stock units

Restricted stock units (RSUs) represent the right to receive shares of common stock upon meeting specified vesting requirements. In the fiscal year ended December 31, 2019, the Company issued 246,588 RSUs to employees of the Company under the 2017 Plan. Under the terms of the agreements, 135,058 of the RSUs issued are subject to a four year vesting schedule with 25% vesting on the first anniversary and the remaining vesting 75% ratably on a monthly basis over the remaining three years, 40,846 of the RSUs are subject to a four year vesting schedule with 25% vesting on each anniversary, 15,890 of the RSUs vested on December 31, 2019, 10,194 of the RSUs vested with respect to 5/48th of the shares on the date of grant with the rest vesting ratably over the remaining 43 months; 31,732 of the RSUs vested with respect to 1,983 shares vesting on the grant date with the rest vesting ratably over the remaining 45 months; 4,540 of the RSUs vest equally over three years on the anniversary of the vesting start date; 3,000 of the RSUs vest upon the one year anniversary of the grant date; and 5,328 vested immediately upon grant. A summary of RSU activity is as follows:


		Weighted-average
		grant date
		fair value
	Shares	per share
Unvested RSUs as of December 31, 2018	321,662	$	15.84
Granted	246,588	$	24.22
Vested	(136,062)	$	17.11
Cancelled	(62,065)	$	18.82
Unvested RSUs as of December 31, 2019	370,123	$	20.48

The expense related to RSU awards granted to employees and directors was $2.7 million for the fiscal year ended December 31, 2019.

At December 31, 2019, there was $6.9 million of total unrecognized compensation cost related to unvested restricted stock, which is expected to be recognized over the remaining weighted-average vesting period of 2.78 years.