(

)

Share-Based Compensation

The share-based compensation expense is recorded in cost of goods sold, research and development, and selling, general and administrative expenses based on the employee's respective function.

share-based compensation was capitalized during the periods presented. Share-based compensation expense for the

three

and

nine

months ended

September 30, 2018

and

2017

was recorded as follows (in thousands):

	Three months ended September 30,				Nine months ended September 30,
	2018		2017		2018		2017
Cost of goods sold	$	39	$	33	$	105	$	107
Research and development		250		172		711		498
Selling, general and administrative		441		496		1,267		1,394
Share-based compensation expense	$	730	$	701	$	2,083	$	1,999

The following table summarizes the activity of stock options and related information:

	Number of options outstanding			Weighted average exercise price
Balance, December 31, 2017		4,213,100		$	2.96
Stock options granted		1,698,452			2.41
Stock options exercised		(2,488	)		1.80
Stock options cancelled		(359,958	)		2.93
Balance, September 30, 2018		5,549,106		$	2.80

The weighted average grant-date fair value of options granted during the

nine

months ended

September 30, 2018

was

$1.72

per share.

Employee Share-Based Compensation (Stock Options)

During the

nine

months ended

September 30, 2018,

we granted stock options to certain non-employee directors and employees to purchase

1,698,452

shares of common stock. The fair value of each option grant was estimated on the date of the grant using the Black-Scholes option pricing model with the following assumptions:

Risk-free interest rate	2.66%	-	2.87%
Volatility	81%	-	82%
Dividend yield		None
Expected term (in years)		6.25

Unrecognized share-based compensation for employee options as of

September 30, 2018

was approximately

$5.6

million to be recognized over a remaining weighted average service period of

2.7

years.

Restricted Stock Units (RSUs)

The following summarizes the activity of non-vested RSUs:

	Number of shares			Weighted average grant date fair value per share
Balance, December 31, 2017		97,996		$	8.71
RSUs granted		226,471			1.36
RSUs vested		(57,108	)		7.03
Balance, September 30, 2018		267,359		$	2.84

Unrecognized share-based compensation for employee RSUs granted as of

September 30, 2018

was approximately

$292,000

to be recognized over a remaining weighted average service period of

1.3

years.

Nonemployee Share-Based Compensation

During the

nine

months ended

September 30, 2018,

we did

not

grant any options to purchase shares of common stock to consultants. Options granted to consultants have been granted in exchange for consulting services to be rendered and vest over the term specified in the grant, which correlates to the period the services are rendered. We recorded

$74,000

and

$188,000

for the

three

months ended

September 30, 2018

and

2017,

respectively, and

$150,000

and

$698,000

for the

nine

months ended

September 30, 2018

and

2017,

respectively as nonemployee share-based compensation expense.

We account for share-based compensation arrangements with nonemployees, using the Black-Scholes option pricing model, based on the fair value as these instruments vest. Accordingly, at each reporting date, we revalue the unearned portion of the share-based compensation and the resulting change in fair value is recognized in the consolidated statements of operations over the period the related services are rendered. The following assumptions were used to value the awards for the

nine

months ended

September 30, 2018:

Risk-free interest rate	2.80%	-	2.84%
Volatility	78%	-	85%
Dividend yield		None
Expected term (in years)	7.9	-	8.8