Stock-Based Compensation

Equity Incentive Plans

As of December 31, 2018, the Company’s approved equity incentive plans included the 2015 Equity Incentive Plan (“2015 Plan”), the 2013 Equity Incentive Plan (“2013 Plan”), and the 2008 Equity Incentive Plan (“2008 Plan”). These plans are administered by the Board of Directors and permit the granting of stock options, stock appreciation rights, restricted stock, restricted stock units and dividend equivalent rights (“DERs”) to employees, officers, directors and consultants of the Company.

The Company has certain stock option and restricted stock awards outstanding under each of its equity incentive plans but, upon adoption of the 2015 Plan, no longer grants new equity awards under its 2008 and 2013 Plans. The Company adopted its 2015 Plan in June 2015 and subsequently amended the plan in April 2017 to increase the common stock reserved for issuance under the plan to an aggregate 5,755,277 shares.

Stock-based compensation expense recognized in the consolidated statements of operations is summarized below:



	Year Ended December 31,
(in thousands)	2018		2017		2016
Cost of goods sold	$	1,140	$	1,692	$	359
Sales and marketing	1,244		640		339
General and administrative	4,990		2,964		1,438
Research and development	1,344		632		388
Total stock-based compensation expense	$	8,718	$	5,928	$	2,524

Stock Options

Stock option awards under the 2015 Plan are granted with an exercise price equal to the fair value of the Company’s common stock at the date of grant. All option awards have a ten-year contractual term.

A summary of option activity for 2018 is presented below:



	Total Stock Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value
Balance at January 1, 2018	565,425		$	13.65
Options granted	—		$	—
Options exercised	(192,550	)	$	5.98
Options cancelled and expired	(15,800	)	$	20.44
Outstanding at December 31, 2018	357,075		$	17.50	4.4	535,427
Vested and expected to vest at December 31, 2018	357,075		$	17.50	4.4	535,427
Exercisable at December 31, 2018	353,049		$	17.56	4.4	522,423

During the years ended December 31, 2018, 2017 and 2016, 192,550, 465,232 and 40,976 options were exercised having aggregate intrinsic values of $2.4 million, $5.1 million and $0.2 million, respectively.

Restricted Stock

A summary of restricted stock awards and restricted stock units activity for 2018 is presented below:



	Shares		Weighted- Average Grant Date Fair Value Per Share
Nonvested balance at January 1, 2018	1,765,262		$	5.72
Granted	647,850		$	15.46
Vested	(672,345	)	$	6.37
Forfeited	(232,228	)	$	11.87
Nonvested balance at December 31, 2018	1,508,539		$	9.51

As of December 31, 2018, there was $9.5 million of unrecognized compensation expense related to outstanding restricted stock, which is expected to be recognized over a weighted-average period of 2.2 years.

Performance Restricted Stock Awards

Performance awards vest based on the requisite service period subject to the achievement of specific financial performance targets. The Company monitors the probability of achieving the performance targets on a quarterly basis and may adjust periodic stock compensation expense accordingly. The performance targets include the achievement of internal performance targets only.

A summary of performance restricted stock award activity for 2018 is presented below:



	Shares		Weighted- Average Grant Date Fair Value Per Share
Nonvested balance at January 1, 2018	291,172		$	16.70
Granted	—		$	—
Vested	—		$	—
Forfeited	(49,292	)	$	16.62
Nonvested balance at December 31, 2018	241,880		$	16.71

As of December 31, 2018, there was $2.9 million of unrecognized compensation expense related to outstanding performance restricted stock which is expected to be recognized over a weighted-average period of 1.2 years.

Total Stockholder Return Restricted Stock Awards (“TSR Awards”)

During the year ended December 31, 2018, the Company granted total stockholder return (“TSR”) Awards that include a three-year market condition where the performance measurement period is three years. Vesting of the TSR Awards is based on the Company’s level of attainment of specified TSR targets relative to the percentage appreciation of a specified index of companies for the respective three-year period and is also subject to the continued employment of the grantees. The number of shares that are earned over the performance period ranges from 0% to 200% of the initial award. The fair value of these awards are based on a Monte Carlo Simulation valuation model with the following assumptions:



	Year Ended December 31,
	2018
Expected volatility	84.3	%
Risk-free interest rate	2.4	%
Expected life (in years)	2.8
Expected dividend yield	—

A summary of TSR Award activity for 2018 is presented below:



	Shares		Weighted- Average Grant Date Fair Value Per Share
Nonvested balance at January 1, 2018	—		$	—
Granted	206,896		$	22.76
Vested	—		$	—
Forfeited	(26,983	)	$	22.76
Nonvested balance at December 31, 2018	179,913		$	22.76

As of December 31, 2018, there was $3.1 million of unrecognized compensation expense related to outstanding performance restricted stock which is expected to be recognized over a weighted-average period of 2.2 years.

Modifications

During the years ended December 31, 2018 and 2017, the Company recognized approximately $0.3 million and $1.3 million, respectively, of stock-based compensation expense associated with the modification of awards. The modification of these awards affected the vesting terms of the awards.

Employee Stock Purchase Plan

In April 2017, the Company’s stockholders approved the 2017 Employee Stock Purchase Plan (“2017 ESPP”), which authorized the issuance of up to 250,000 shares of common stock thereunder. Under the terms of the 2017 ESPP, eligible U.S. employees can elect to acquire shares of the Company’s common stock through periodic payroll deductions during a series of six month offering periods, which will generally begin in March and September of each year. Purchases under the 2017 ESPP are effected on the last business day of each offering period at a 15% discount to the closing price on that day. The 2017 ESPP was implemented, subject to stockholder approval, on March 10, 2017, and the first purchases thereunder were made on September 13, 2017.