Equity Incentive Plan

The Company estimates the fair value of stock options and stock appreciation rights (“SARs”) using the Black-Scholes valuation model. Fair value of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”) are measured by the grant-date price of the Company’s shares. The fair value of each stock option award during the

six

-month periods ended

June 30, 2018

and

2017

was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions:

	Six Months Ended June 30,
	2018			2017
Risk free interest rate	2.15%	-	2.75%	1.65%	-	1.78%
Expected volatility	37.12%	-	40.81%	42.54%	-	44.30%
Expected life (years)	4.0	-	4.5		4.0
Expected dividend yield		0.00%			0.00%

The Company recorded

$1.3

million of stock-based compensation expense for the

three

-month periods ended

June 30, 2018

and

2017

for equity compensation awards. The Company recorded

$8.9

million and

$2.5

million of stock-based compensation expense for the

six

-month periods ended

June 30, 2018

and

2017,

respectively, for stock-based compensation awards. Upon the retirement of the Company’s former Chief Executive Officer on

March 9, 2018,

all of his outstanding stock-based compensation awards vested in full and became exercisable in accordance with their terms, resulting in a

one

-time expense of

$6.2

million that was fully recognized during the

three

-month period ended

March 31, 2018.

The Company presents the expenses related to stock-based compensation awards in the same expense line items as cash compensation paid to each of its employees as follows:

	Three Months Ended June 30,					Six Months Ended June 30,
	2018			2017		2018			2017
Cost of product revenue	$	(28	)	$	102	$	(244	)	$	199
Research and development		241			153		451			163
Selling, general and administrative		1,109			1,029		8,680			2,103
Total stock-based compensation expense	$	1,322		$	1,284	$	8,887		$	2,465

The decrease in stock-based compensation expense within the cost of product revenue line item during the

three

- and

six

-month periods ended

June 30, 2018

is due to forfeitures associated with unvested stock option awards from the resignation of a former executive.

The following table sets forth share information for equity awards granted and exercised during the

three

- and

six

-month periods ended

June 30, 2018

and

2017:

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Grants:
Stock options		17,500		5,500		209,800		410,135
RSAs		-		-		64,578		-
RSUs		-		-		8,130		9,970
Exercises:
Stock options		273,123		3,850		284,548		9,437
SARs		-		-		-		5,000

During the

three

- and

six

-month periods ended

June 30, 2018

and

2017

the Company granted stock option awards to employees the majority of which become exercisable or vest ratably over a

four

-year and

three

-year period, respectively. In addition, the Company executed its annual grant of RSUs to non-employee directors each of which vests over a

one

-year period. On

March 9, 2018,

upon the vesting of certain RSAs,

32,541

shares with a total fair value of

$1.7

million were withheld for taxes and retired.