Stock-Based Compensation

3 Months Ended

Mar. 31, 2017

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Note 4. Stock-Based Compensation

In the first quarter of 2017, the Company elected to adopt ASU 2016-09, Improvement to Employee Share-based Payment, which simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as equity or liabilities, an option to recognize gross share compensation expense with actual forfeitures recognized as they occur, as well as certain classifications on the statement of cash flows. The Company elected to account for forfeitures as they occur and therefore, share-based compensation expense for the three months ended March 31, 2017 has been calculated based on actual forfeitures, rather than our previous approach which was net of estimated forfeitures. The Company’s adoption of ASU 2016-09 in the first quarter of 2017 did not have a material impact on its financial statements.

As of March 31, 2017, the Company has three stock-based compensation plans. The stock-based compensation cost that has been included in the statements of comprehensive loss is shown as below (in thousands):

	Three months ended March 31,
	2017		2016
Cost of product revenues	$	28	$	27
Research and development		369		353
Selling, general and administrative		268		330
Total stock-based compensation	$	665	$	710

As of March 31, 2017 and December 31, 2016, $14,000 of stock-based compensation cost was capitalized in inventory on the Company’s balance sheets.

The Company uses the Black-Scholes option pricing model to value its stock options. The expected life computation is based on historical exercise patterns and post-vesting termination behavior. The Company considered its historical volatility in developing its estimate of expected volatility.

The Company used the following assumptions to estimate the fair value of stock options granted (including fully vested options issued in January 2017 and January 2016) and shares purchased under its employee stock purchase plan for the three and nine months ended March 31, 2017 and 2016:

	Stock Options				Employee Stock Purchase Plan
	Three months ended March 31,				Three months ended March 31,
	2017		2016		2017		2016
Risk-free rate	2.2-2.5%		1.6-1.9%			0.6%		0.3%
Expected dividend yield		—		—		—		—
Expected life of option (in years)	6.8-10.0		6.5-9.3		0.5		0.5
Volatility	75-82%		77-83%			81%		68%

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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