Stock Based Compensation

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Employee Stock Purchase Plan Stock Options and Warrants

Stock-Based Compensation. Stock-based compensation expense before income tax expense for the three and nine-month periods ended September 30, 2017 and 2016, consisted of the following (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016
Cost of goods sold	$	189	$	105	$	453	$	369
Research and development	110		51		262		147
Selling, general, and administrative	893		347		2,168		1,397
Stock-based compensation expense before taxes	$	1,192	$	503	$	2,883	$	1,913

As of September 30, 2017, the total remaining unrecognized compensation cost related to non-vested stock options, net of expected forfeitures, was approximately $16.3 million and is expected to be recognized over a weighted average period of 3.66 years.

During the three and nine-month periods ended September 30, 2017, we granted stock-based awards representing 20,000 and approximately 1.3 million shares of our common stock, respectively. During the three and nine-month periods ended September 30, 2016, we granted stock-based awards representing 21,000 and 805,375 shares of our common stock, respectively. We use the Black-Scholes methodology to value the stock-based compensation expense for options. In applying the Black-Scholes methodology to the options granted during the nine-month periods ended September 30, 2017 and 2016, the fair value of our stock-based awards granted was estimated using the following assumptions for the periods indicated below:

	Nine Months Ended September 30,
	2017	2016
Risk-free interest rate	1.77% - 1.83%	1.15% - 1.40%
Expected option life	5.0 years	5.0 years
Expected dividend yield	—%	—%
Expected price volatility	33.81% - 34.07%	36.30% - 37.06%

For the purpose of the foregoing analysis, the average risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of grant, based on the expected term of the stock option. We determine the expected term of the stock options using the historical exercise behavior of employees. The expected price volatility was determined using a weighted average of daily historical volatility of our stock price over the corresponding expected option life and implied volatility based on recent trends of the daily historical volatility. For options with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period.