STOCK-BASED COMPENSATION

Under our stock option plans, our board of directors may grant restricted stock and options to purchase common shares to our key employees, officers, directors and consultants. We account for stock options in accordance with FASB ASC Topic 718, Compensation - Stock Compensation, with stock-based compensation expense amortized over the vesting period based on the trinomial lattice option-pricing model fair value on the grant date, which includes a number of estimates that affect the amount of our expense. In September 2019, the Company registered 2,000,000 shares under our shareholder approved 2019 Share Incentive Plan.

We recognized approximately $543,000 and $2,594,000 in stock-based compensation expense during the three and nine months ended September 30, 2019, respectively, as compared with $489,000 and $1,238,000 for the three and nine months ended September 30, 2018, respectively.

The status of our stock options are summarized as follows:



	Number of options		Weighted average exercise price
Outstanding at December 31, 2018	3,254,779		$	3.18
Granted	1,379,500		7.70
Exercised	(391,135	)	2.84
Canceled and forfeited	(183,500	)	3.41
Outstanding at September 30, 2019	4,059,643		$	4.73

The Company allows employees to exercise stock-based awards by surrendering stock-based awards with a fair value of the stock-based awards exercised, referred to as net settlements. These surrenders are included in stock options exercised in the options rollforward above. For the three months ended September 30, 2019 and 2018, respectively, the Company received 26,572 and 532,477 options as payment in the exercise of 34,928 and 680,388 options. For the nine months ended September 30, 2019 and 2018, respectively, the Company received 118,170 and 576,135 options and warrants as payment in the exercise of 220,879 and 713,980 options and warrants.

Common shares required to be issued upon the exercise of stock options would be issued from our authorized and unissued shares. We calculated the fair value of issued options utilizing a trinomial lattice with an expected life calculated via the simplified method as we do not have sufficient history to determine actual expected life.



	2019 Grants
Option value	$	7.15	-	$	7.91
Risk-free rate	1.7%		-	2.6		%
Expected dividend yield	—
Expected volatility	67.6%		-	69.1		%
Expected term (in years)	6

During September 2019, the Company determined that it had classified grants of 225,922 in restricted stock as stock options in the consolidated financial statements since the grant date. At September 30, 2019, 135,555 of the shares had vested, with the remaining shares vesting through October 2021. At September 30, 2019, the Company has approximately $94,000 of stock-based compensation expense to be recognized through October 2021.