5. Share-based Compensation

Service Vesting Based Stock Options

The following is a summary of service vesting based related stock option activity for the three month period ended March 31, 2017, and the status of stock options outstanding at March 31, 2017:

	Three Month Period Ended
	March 31, 2017
			Wtd. Avg.
			Exercise
	Options		Price
Outstanding at beginning of year		2,513,861	$	1.78
Granted		110,000	$	1.79
Exercised		(107,142)	$	1.12
Forfeited		(47,783)	$	3.59
Expired		(81,352)	$	1.27
Outstanding at March 31, 2017		2,387,584	$	1.79

Stock options exercisable at March 31, 2017		1,257,183	$	1.69

Performance-based Stock Options

The Company’s Board of Directors has implemented a Management Performance Bonus Plan for 2017. Based on achieving varying levels of specified revenue for the year ending December 31, 2017, up to 1,000,000 options to purchase shares of the Company’s common stock may be vested. The options have an exercise price of $1.64, and if revenue levels are met, vest 50% on the release of the Company’s audited financial statements for 2017, and 50% one year thereafter. If the minimum performance targets are not achieved, no options will vest. The Company currently deems it probably the 1,000,000 options will vest and is recognizing stock compensation for these options over the requisite service period.

As of March 31, 2017, there was $1,309,683 of aggregate intrinsic value of outstanding stock options, including $634,677 of aggregate intrinsic value of exercisable 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 March 31, 2017. This amount will change based on the fair market value of the Company’s stock. During the quarters ended March 31, 2017 and 2016 intrinsic value of awards exercised was $70,714 and $4,253, respectively. Weighted average grant date fair value for options granted during the three months ended March 31, 2017 and March 31, 2016 was $1.13 and $1.29 per share, respectively.

The fair value of share-based payments made with stock options to employees and non-employee directors was estimated on the measurement date using the Black-Scholes model using the following weighted average assumptions.

	Three Month Period Ended
	March 31,
	2017			2016
Risk free interest rate		2.07	%		1.65	%
Dividend yield		0.0	%		0.0	%
Expected term (in years)		5.18			7.00
Volatility		75	%		75	%

We recognized stock compensation expense of $295,831 and $47,809, related to stock options for the three months ended March 31, 2017 and March 31, 2016, respectively. As of March 31, 2017, we had approximately $2,343,697 of unrecognized compensation expense related to unvested stock options. We expect to recognize this compensation expense over a weighted average period of approximately 2.1 years.

Restricted Stock

On January 27, 2017 the board granted 207,350 restricted stock awards to non-executive employees under the Amended & Restated 2013 Performance Incentive Plan. The grants vest 25% after the first anniversary with the remainder vesting quarterly for 36 months. The following is a summary of restricted stock activity for the three month period ended March 31, 2017, and the status of unvested restricted stock outstanding at March 31, 2017:

	Three Month Period Ended
	March 31, 2017
	Number of
	Restricted		Grant-Date
	Shares		Fair Value
Unvested outstanding at beginning of year		98,439	$	1.90
Granted		207,350	$	1.76
Vested		(23,439)	$	1.90
Outstanding at March 31, 2017		282,350	$	1.80

The aggregate fair value of the awards granted during the three months ended March 31, 2017 was $364,936 which represents the market value of BioLife common stock on the date that the restricted stock awards were granted. The aggregate fair value of the restricted stock awards that vested was $41,097 and $95,000 for the three months ended March 31, 2017 and March 31, 2016, respectively.

We recognized stock compensation expense of $34,064 and $98,718, related to restricted stock awards for the three months ended March 31, 2017 and March 31, 2016, respectively. As of March 31, 2017, there was $488,396 in unrecognized compensation costs related to restricted stock awards. We expect to recognize those costs over 3.3 years.

We recorded total stock compensation expense for the three month periods ended March 31, 2017 and 2016, as follows:

	Three Month Period Ended
	March 31,
	2017		2016
Research and development costs	$	59,265	$	37,469
Sales and marketing costs		59,619		63,499
General and administrative costs		168,198		77,510
Cost of product sales		42,813		(31,951)
Total	$	329,895	$	146,527

Management adopted ASU 2016-09 on January 1, 2017 and no longer applies an estimated forfeiture rate. As a result, we had a cumulative-effect adjustment to retained earnings and additional paid in capital of $27,908 resulting from adoption. The estimated forfeiture rate derived from historical employee termination data applied for the three month period ended March 31, 2016 was approximately 8.1%.