STOCKHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION EXPENSE

At the Market Offering

On November 18, 2014, the Company entered into a sales agreement with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”) to offer shares of its common stock, $0.01 par value per share, from time to time through Cantor Fitzgerald, as the Company’s sales agent for the offer and sale of the shares. The Company may offer and sell shares for an aggregate offering price of up to $50.0 million. The Company pays a commission equal to 3% of the gross proceeds from the sale of shares of its common stock under the sales agreement. The Company intends to use the net proceeds from this offering for general corporate purposes, including capital expenditures, debt repayments and working capital. The Company may also use a portion of the net proceeds from this offering to acquire or invest in complementary businesses, technologies, product candidates or other intellectual property, although there are no present commitments or agreements to do so. The Company is not obligated to make any sales of shares of common stock under the sales agreement. As of March 31, 2015, the Company has sold a total of 2.2 million shares of common stock at an average price of $11.80 through its “at-the-market” offering, for total net proceeds of $25.3 million.

Share-based Compensation Plans

The Company has a share-based compensation program, most recently the 2000 Amended and Restated Equity Incentive Plan (the “Plan”), that provides the Board of Directors broad discretion in creating equity incentives for employees, officers, directors and consultants. This program includes incentive and non-qualified stock options and non-vested stock awards (also known as restricted stock) granted under various stock plans. As of March 31, 2015, the Company had approximately 4.6 million shares of common stock reserved for future issuance under its share-based compensation plans. New shares are issued as a result of stock option exercises, restricted stock units vesting and restricted stock award grants.

The Company recognized share-based compensation expense in the accompanying Condensed Consolidated Statements of Operations for the three months ended March 31, 2015 and 2014 as follows (in thousands):



	Three Months Ended March 31,
	2015		2014
Costs of product sales	$	695	$	537
Research and development	514		507
Selling, general and administrative	2,854		2,101
Total share-based compensation expense	$	4,063	$	3,145

As of March 31, 2015, $16.4 million of total unrecognized share-based compensation expense related to non-vested awards is expected to be recognized over the respective vesting terms of each award through 2018. The weighted‑average terms of the unrecognized share-based compensation expense are 2.3 years for stock options and 2.0 years for restricted stock.

Performance-Based Awards

The Company's share-based awards program includes performance-based restricted stock awards ("PRSUs") that vest based upon the achievement of certain performance criteria and a service vesting criteria following the achievement of performance criteria. Performance criteria include various operational criteria of the Company such as revenues, earnings before interest, taxes, depreciation and amortization, earnings per share, and similar criteria, either on a Company-wide or business unit specific basis. The service vesting criteria ranges from two to four years. The Company recognizes the fair value of these awards to the extent the achievement of the related performance criteria is estimated to be probable. If a performance criteria is subsequently determined to not be probable of achievement, any related expense is reversed in the period such determination is made. Conversely, if a performance criteria is not currently expected to be achieved but is later determined to be probable of achievement, a “catch-up” entry is recorded in the period such determination is made for the expense that would have been recognized had the performance criteria been probable of achievement since the grant of the award.

During the first quarter of 2015, the Compensation Committee granted certain PRSUs associated with performance criteria referred to as the 2015 Program. The purpose of the 2015 Program is to retain key employees. The measurement period for the 2015 Program is the twelve month period ended December 31, 2015 and the awards granted under the 2015 Program were granted in the form of performance shares pursuant to the terms of our 2000 Plan. Based on the achievement of the performance conditions, shares of stock would vest in equal installments over three years. The level of achievement of 2015 financial performance will be assessed during the first quarter of 2016 after which the shares of stock will be issued to the participants, contingent upon the recipient’s continued service to the Company. In 2015, the Company awarded 243,000 PRSUs under the 2015 Program at a grant date fair value of $11.88 per PRSU.

As of March 31, 2015, there were 931,600 PRSUs outstanding with an average grant date fair value of $8.24 per PRSU. The Company expects that it is probable that 823,600 of these PRSUs will vest and that the related unrecognized stock compensation expense of $2.7 million will be recognized over the next three years. Changes in the Company’s assessment of the probability of achievement of performance criteria could have a material effect on the results of operations in future periods. There were no material changes in estimate related to the probability of vesting or recognition of expense related to PRSUs during either of the periods ended March 31, 2015 or 2014.

For additional information concerning the Company's share-based compensation plans, including performance-based awards programs, see Note 13, "Stockholders' Equity and Share-Based Compensation Expense", to the consolidated financial statements in Part II, Item 8 of the Company's 2014 Annual Report on Form 10-K.