7 .	Share-based Compensation

Service Vesting-Based Stock Options

The following is a summary of service vesting-based stock option activity for the

nine

month period ended

September 30, 2019

and the status of service vesting-based options outstanding at

September 30, 2019:

	Nine Month Period Ended
	September 30, 2019
				Wtd. Avg.
				Exercise
	Options			Price
Outstanding at beginning of year		2,043,402		$	1.91
Granted		—		$	—
Exercised		(339,237	)	$	1.83
Forfeited		(3,437	)	$	5.69
Expired		—		$	—
Outstanding service vesting-based at September 30, 2019		1,700,728		$	1.92

Service vesting-based options exercisable at September 30, 2019		1,546,830		$	1.89

We recognized stock compensation expense related to service vesting-based options of

$65,000

and

$147,000

during the

three

months ended

September 30, 2019

and

2018,

respectively, and

$305,000

and

$449,000

during the

nine

months ended

September 30, 2019

and

September 30, 2018,

respectively. As of

September 30, 2019,

there was

$25.0

million of aggregate intrinsic value of outstanding service vesting-based stock options, including

$22.8

million of aggregate intrinsic value of exercisable service vesting-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on

September 30, 2019.

This amount will change based on the fair market value of the Company’s stock. Intrinsic value of service vesting-based awards exercised during the

three

months ended

September 30, 2019

and

2018

was

$1.7

million and

$2.1

million, respectively, and during the

nine

months ended

September 30, 2019

and

2018

was

$5.2

million and

$3.1

million, respectively. There were

service based-vesting options granted during the

nine

months ended

September 30, 2019

and

2018.

The weighted average remaining contractual life of service vesting-based options outstanding and exercisable at

September 30, 2019

5.1

years and

5.1

years, respectively. Total unrecognized compensation cost of service vesting-based stock options at

September 30, 2019

$213,000

is expected to be recognized over a weighted average period of

1.2

years.

Performance-based Stock Options

The Company’s Board of Directors implemented a Management Performance Bonus Plan for

2017.

Based on achieving varying levels of specified revenue for the year ended

December 31, 2017,

up to

1,000,000

options to purchase shares of the Company’s common stock could have vested. The options have an exercise price of

$1.64,

and if revenue levels for

2017

were met, would vest

50%

on the release of the Company’s audited financial statements for

2017,

and

50%

one

year thereafter. If the minimum performance targets were

not

achieved,

options would vest. On

February 27, 2018,

the Company’s Board of Directors determined that, subject to the completion of the

2017

audit, the specified revenue target had been achieved. Accordingly,

999,997

options to purchase shares of the Company’s common stock vest as follows:

50%

of the options vested on

March 8, 2018

and the remaining

50%

vested on

March 8, 2019.

The following is a summary of performance-based stock option activity for the

nine

month period ended

September 30, 2019,

and the status of performance-based options outstanding at

September 30, 2019:

	Nine Month Period Ended
	September 30, 2019
				Wtd. Avg.
				Exercise
	Options			Price
Outstanding at beginning of year		964,997		$	1.64
Granted		—		$	—
Exercised		(135,000	)	$	1.64
Outstanding performance-based at September 30, 2019		829,997		$	1.64

Performance-based options exercisable at September 30, 2019		829,997		$	1.64

We recognized stock compensation expense related to performance-based options of

none

and

$128,000

during the

three

month periods ending

September 30, 2019

and

2018,

respectively, and

none

and

$381,000

during the

nine

month periods ending

September 30, 2019

and

2018.

As of

September 30, 2019,

there was

$12.4

million of aggregate intrinsic value of outstanding and exercisable performance-based stock options. Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on

September 30, 2019.

This amount will change based on the fair market value of the Company’s stock. Intrinsic value of performance-based awards exercised during the

three

months and

nine

months ended

September 30, 2019

was

2.3

million and in the

three

and

nine

months ended

September 30, 2018

was

none

and

$285,000,

respectively. The weighted average remaining contractual life of performance-based options outstanding and exercisable at

September 30, 2019,

2.2

years. All compensation cost of performance-based stock options outstanding at

September 30, 2019

has been recognized.

There were

stock options granted to employees and non-employee directors in the

three

and

nine

month periods ended

September 30, 2019

and

2018.

Restricted Stock

Service vesting-based restricted stock

The following is a summary of service vesting-based restricted stock activity for the

nine

month period ended

September 30, 2019,

and the status of unvested service vesting-based restricted stock outstanding at

September 30, 2019:

	Nine Month Period Ended
	September 30, 2019
Service vesting-based restricted stock	Number of Restricted Shares			Grant-Date Fair Value
Outstanding at beginning of year		279,919		$	5.00
Granted		224,218		$	17.68
Vested		(106,683	)	$	4.65
Forfeited		(26,354	)	$	11.60
Outstanding at September 30, 2019		371,100		$	12.29

The aggregate fair value of the service vesting-based awards granted during the

three

months ended

September 30, 2019

and

2018

was

$802,000

and

$148,000,

respectively, and during the

nine

months ended

September 30, 2019

and

2018

was

$4.0

million and

$1.3

million, respectively, which represents the market value of our common stock on the date that the restricted stock awards were granted. The aggregate fair value of the service vesting-based awards that vested during the

three

months ended

September 30, 2019

and

2018

was

$368,000

and

$393,000,

respectively and during the

nine

months ended

September 30, 2019

and

2018

was

$1.6

million and

$874,000,

respectively.

We recognized stock compensation expense of

$303,000

and

$108,000

related to service vesting-based awards for the

three

months ended

September 30, 2019

and

2018,

respectively and

$777,000

and

$301,000

related to service vesting-based awards for the

nine

months ended

September 30, 2019

and

2018,

respectively. As of

September 30, 2019,

there was

$4.0

million in unrecognized compensation costs related to service vesting-based awards. We expect to recognize those costs over

3.3

years.

Performance-based restricted stock

2019,

we engaged an independent executive compensation firm, FW Cook, to review current compensation practices and make updated recommendations to the Compensation Committee and the full Board of Directors. With consideration to the recommendations of FW Cook, including an evaluation of the compensation practices of a like-situated peer group of public life science companies, our Compensation Committee recommended and our Board of Directors approved a compensation program which included apportioning a portion of management’s equity compensation to performance-based restricted stock awards. Specifically, our executive officers were granted service-based restricted stock awards (

94,247

shares of restricted stock in the aggregate vesting over

four

years) and performance-based restricted stock awards (

94,247

shares of restricted stock in the aggregate). The performance-based restricted stock awards will vest as to between

and

200%

of the number of restricted shares granted to each recipient based on our total shareholder return during the period beginning on

January 1, 2019

through

December 31, 2020

as compared to the total shareholder return of

of our peers (such peers having been determined by our Compensation Committee with assistance of FW Cook immediately prior to the grant date). The

94,247

performance-based restricted stock awards will be awarded if we are in the

50th

percentile of total shareholder return versus the peer group. The maximum number of performance-based restricted stock awards that

may

be granted (

188,494

shares in the aggregate) will be awarded if we are in the

80th

percentile of total shareholder return versus the peer group and

units will be awarded for less than

30th

percentile of total shareholder return versus the peer group. We granted an additional

29,604

performance based awards on

April 1, 2019

two

newly hired employees from the Astero acquisition.

	Nine Month Period Ended
	September 30, 2019
Performance-based restricted stock	Number of Restricted Shares		Grant-Date Fair Value
Outstanding at beginning of year		—	$	—
Expected to vest		123,851	$	17.79
Vested		—	$	—
Outstanding at September 30, 2019		123,851	$	17.79

For the period ended

September 30, 2019,

the aggregate grant date fair value of the performance-based restricted stock awards expected to vest was

$2.2

million. We recognized stock compensation expense of

$286,000

and

$825,000

for the

three

and

nine

months ended

September 30, 2019,

respectively. As of

September 30, 2019,

there was

$1.4

million in unrecognized non-cash compensation costs related to performance-based restricted stock awards expected to vest. We expect to recognize those costs over

1.3

years.

Total Stock Compensation Expense

We recorded total stock compensation expense for the

three

and

nine

month periods ended

September 30, 2019

and

2018,

as follows:

	Three Month Period Ended				Nine Month Period Ended
	September 30,				September 30,
(In thousands)	2019		2018		2019		2018
Research and development costs	$	122	$	65	$	327	$	195
Sales and marketing costs		141		64		438		202
General and administrative costs		338		195		1,016		577
Cost of revenue		53		59		126		157
Total	$	654	$	383	$	1,907	$	1,131