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

nine

-month periods ended

September 30, 2018

and

2017

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

	Nine Months Ended September 30,
	2018				2017
Risk free interest rate		2.15%	-	2.82%		1.60%	-	1.78%
Expected volatility		37.12%	-	45.61%		41.36%	-	44.30%
Expected life (years)		4.0	-	4.5			4.0
Expected dividend yield			0.00%				0.00%

The Company recorded

$1.2

million and

$1.5

million of stock-based compensation expense for the

three

-month periods ended

September 30, 2018

and

2017,

respectively. The Company recorded

$10.1

million and

$3.9

million of stock-based compensation expense for the

nine

-month periods ended

September 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 September 30,				Nine Months Ended September 30,
	2018		2017		2018			2017
Cost of product revenue	$	39	$	107	$	(205	)	$	306
Research and development		239		177		690			340
Selling, general and administrative		899		1,190		9,579			3,294
Total stock-based compensation expense	$	1,177	$	1,474	$	10,064		$	3,940

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

three

- and

nine

-month periods ended

September 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 stock-based compensation awards granted and exercised during the

three

- and

nine

-month periods ended

September 30, 2018

and

2017:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Grants:
Stock options		18,500		60,609		228,300		470,744
RSAs		-		14,506		64,578		14,506
RSUs		3,624		-		11,754		9,970
Exercises:
Stock options		-		3,329		284,548		12,766
SARs		-		-		-		5,000

During the

three

- and

nine

-month periods ended

September 30, 2018

and

2017,

the Company granted stock-based compensation 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 grants of RSUs to its non-employee directors. 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.