Stock-based compensation

6 Months Ended

Jun. 30, 2017

Stock-based compensation

Stock-based compensation

Note 12. Stock-based compensation

The following table summarizes the stock-based compensation expense recognized in the three and six months ended June 30, 2017 and 2016 (in thousands):

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Cost of goods sold	$	324	$	719	$	471	$	1,308
Research and development		511		556		1,173		1,527
Sales and marketing		313		365		777		1,252
General and administrative		738		590		1,337		1,582
	$	1,886	$	2,230	$	3,758	$	5,669

The vesting of stock options covering approximately 1.1 million shares of the Company’s common stock and stock appreciation units (“SAUs”) of approximately 0.2 million shares with a market-based vesting condition were accelerated in September 2016 as the market-based condition of these stock options and SAUs was satisfied when the average closing price of the Company’s common stock over a period of 20 consecutive trading days was equal to or exceeded $15.00 per share and the recipients remained in the continuous service with the Company. Outstanding SAUs are re-measured each reporting period at fair value until settlement.  

Determining Fair Value

The Company estimated the fair value of certain stock-based awards using a Black-Scholes-Merton valuation model with the following assumptions:  

	Three Months Ended		Six Months Ended
	June 30,		June 30,
Stock options	2017	2016	2017	2016
Weighted-average expected term (years)	5.99	5.25	5.99	5.20
Weighted-average volatility	65%	63%	65%	63%
Risk-free interest rate	2.08%	1.21%-1.38%	2.08%	1.21%-1.76%
Expected dividends	—  %	—  %	—  %	—  %
Stock appreciation units
Weighted-average expected term (years)	2.33	2.84	2.39	2.94
Weighted-average volatility	71%	62%	71%	62%
Risk-free interest rate	0.76%-1.50%	0.59%-0.95%	0.51%-1.50%	0.59%-1.47%
Expected dividends	—  %	—  %	—  %	—  %
ESPP
Weighted-average expected term (years)	0.68	0.70	0.68	0.70
Weighted-average volatility	55%	70%	55%	70%
Risk-free interest rate	0.45%-0.91%	0.08%-0.39%	0.45%-0.91%	0.08%-0.39%
Expected dividends	—  %	—  %	—  %	—  %

Stock Options and Restricted Stock Units (RSUs)

The following table summarizes the Company’s stock option and RSU activity during the six months ended June 30, 2017:

	Stock Options			Restricted Stock Units
		Weighted			Weighted
		Average			Average
	Number of	Exercise		Number of	Grant Date
	Shares	Price		Units	Fair Value
Balance at December 31, 2016	4,301,340	$	5.18	2,089,473	$	10.15
Granted	45,126		9.20	183,177		9.48
Exercised/Converted	(402,977)		3.76	(516,478)		7.89
Cancelled/Forfeited	(44,977)		9.15	(89,926)		10.65
Balance at June 30, 2017	3,898,512	$	5.33	1,666,246	$	10.75

Stock appreciation units

SAUs are liability classified share-based awards. The Company did not grant any SAUs during the three and six months ended June 30, 2017 or 2016. As of June 30, 2017 and December 31, 2016, there were 264,755 and 286,768 SAUs outstanding, respectively, and related SAU liabilities were $1.2 million and $2.0 million, respectively.

Employee Stock Purchase Plan (“ESPP”)

As of June 30, 2017, there was $0.2 million of unrecognized stock-based compensation expense for employee stock purchase rights that will be recognized over the remaining offering period through November 2017.