STOCK-BASED COMPENSATION EXPENSE

Equity Incentive Plans

As of June 30, 2018, a total of 7,768,360 shares were available for the issuance of stock options or other stock-based awards under our stock option and incentive plans.

Stock Options

The following table summarizes stock option activity for the six months ended June 30, 2018:



	Number of shares		Weighted average exercise price
Outstanding at December 31, 2017	11,967,815		$	6.73
Granted	980,000		4.11
Exercised	(204,521	)	3.80
Forfeited or Expired	(1,699,249	)	5.85
Outstanding at June 30, 2018	11,044,045		$	6.68
Vested and expected to vest at June 30, 2018	8,917,383		$	6.93
Exercisable at June 30, 2018	5,809,968		$	8.00

Upon the exercise of stock options, we issue new shares of our common stock. As of June 30, 2018, 3,177,500 options issued to employees are unvested, performance-based options.

Restricted Stock

Certain employees and directors have been awarded restricted stock under our equity incentive plans. The time-vesting restricted stock awards vest primarily over a period of three years. The following table summarizes restricted share activity for the six months ended June 30, 2018:



	Number of shares		Weighted average grant date fair value
Outstanding at December 31, 2017	1,884,297		$	6.39
Granted	1,523,650		4.45
Vested	(598,170	)	5.62
Forfeited	(487,267	)	4.90
Outstanding at June 30, 2018	2,322,510		$	5.63

As of June 30, 2018, 310,000 shares of restricted stock issued to employees are unvested, performance-based shares.

Stock-Based Compensation Expense

We incurred $5.0 million and $3.7 million of stock-based compensation expense related to equity incentive grants during the three months ended June 30, 2018 and 2017, respectively, and $8.7 million and $7.3 million during the six months ended June 30, 2018 and 2017, respectively. The following table reflects stock-based compensation expense for the three and six months ended June 30, 2018 and 2017:



	Three months ended June 30,				Six months ended June 30,
(in thousands)	2018		2017		2018		2017
Cost of goods sold	$	25	$	28	$	43	$	88
Research and development	570		483		1,312		1,061
Selling, general and administrative	4,377		3,161		7,298		6,187
Total stock-based compensation expense	$	4,972	$	3,672	$	8,653	$	7,336

Stock-based compensation costs capitalized as part of inventory were immaterial for the three and six months ended June 30, 2018 and 2017.

The fair value of stock options granted is estimated at the date of grant using the Black-Scholes pricing model. The expected term of options granted is derived from historical data, the expected vesting period and the full contractual term. Expected volatility is based on the historical volatility of our common stock. The risk-free interest rate is based on the U.S. Treasury Yield for a period consistent with the expected term of the option in effect at the time of the grant. We have assumed no expected dividend yield, as dividends have never been paid to stock or option holders and will not be paid for the foreseeable future.

The weighted average grant date fair value of stock options granted during the three months ended June 30, 2018 and 2017 was $2.42 and $4.65 per share, respectively, and during the six months ended June 30, 2018 and 2017 was $2.87 and $3.86 per share, respectively. We use historical information to estimate forfeitures of stock-based awards. As of June 30, 2018, there was $9.2 million and $8.1 million of total unrecognized compensation cost related to non-vested stock options and restricted stock, respectively, which is expected to be recognized over weighted-average periods of 2.2 years and 1.9 years, respectively. These amounts do not include 3,177,500 unvested options and 310,000 shares of unvested restricted stock as of June 30, 2018 which are performance-based and vest upon achievement of certain corporate milestones. Stock-based compensation for these awards will be measured and recorded if and when it is probable that the milestone will be achieved.