Stock Compensation

The Company’s stock-based compensation is in accordance with the amended 2015 Incentive Compensation Plan (the “Plan”), pursuant to which the Compensation Committee of the Company is authorized to grant up to 5,150,000 shares to officers and employees of the Company, in the form of equity-based awards, including time or performance based options and restricted stock. In addition, the Company may grant cash-settled awards, including stock-appreciation rights (SARs) and phantom stock awards. As of December 31, 2017, there were 3,339,356 shares available for grant under the Plan.

Total stock-based compensation recorded by the Company for the twelve months ended December 31, 2017 and 2016, for both equity and liability-classified awards was $2.6 million and $3.7 million respectively.

The following table summarizes the components of stock-based compensation expense in the consolidated statements of income (loss) for the twelve months ended December 31, 2017:



(in thousands)	Amount
Cost of sales	$	191
Selling, general, and administrative expenses	$	2,127
Research and development expenses	299
Total	$	2,617

The following table summarizes the components of stock-based compensation expense in the consolidated statements of income (loss) for the twelve months ended December 31, 2016:



(in thousands)	Amount
Cost of sales	$	—
Selling, general, and administrative expenses	$	3,423
Research and development expenses	261
Total	$	3,684

Time-Based Stock Options

During the twelve months ended December 31, 2017 and December 31, 2016, the Company’s compensation committee approved time-based stock options to be granted to officers and employees of the Company, which vest ratably over three years. A summary of the status of the Company’s time-based stock options (“Options”) for the years ended December 31, 2017 and 2016 were as follows:



	Number of Shares Underlying Awards		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2016	1,106,875		$	12.00	9.58	$	—
Granted	167,598		5.37		9.76	—
Exercised	—		—		0	—
Forfeited or expired	(522,500	)	12.00		0	—
Outstanding at December 31, 2016	751,973		10.52		8.91	—
Exercisable at December 31, 2016	—		—		0	—
Vested and expected to vest at December 31, 2016	751,973		$	10.52	8.91	$	—

Outstanding at January 1, 2017	751,973		$	10.52	8.91	$	—
Granted	181,800		4.37			—
Exercised	—		—		0	—
Forfeited or expired	(6,875	)	9.78		0	—
Outstanding at December 31, 2017	926,898		$	8.72	8.18	$	—
Exercisable at December 31, 2017	445,449		3.69		7.91	—
Vested and expected to vest at December 31, 2017	926,898		$	8.72	8.18	$	—

The Options granted during the twelve months ended December 31, 2017 vest over a three year period, one-third on each anniversary of each holder's grant date.

The fair value of each Option was estimated on the date of grant using the Hull-White or Black-Scholes option pricing models with the assumptions described below. For the periods indicated, since the Company has limited historical volatility information available, the expected volatility was based on actual volatility for comparable public companies projected over the expected terms of Options and the actual volatility for the Company since the Business Combination. The Company did not apply a forfeiture rate to the Options as there is not enough historical information available to estimate. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of the grant over the expected term of the Options. The expected life for the Hull-White model was calculated as the average time to achieve the 2.0x strike exercise price in the simulation. The expected life for the Black-Scholes model was estimated using the simplified method.



	Year Ended December 31, 2017	Year Ended December 31, 2016
Weighted average grant date fair value	$2.39	$2.51
Risk-free interest rate	2.08%	1.32%
Expected life (years)	6.00	6.00
Estimated volatility factor	57.14%	48.3%
Expected dividends	None	None

As of December 31, 2017, the Company had unrecognized compensation costs for stock options, totaling $1.055 million that is expected to be recognized over an average period of 2.0 years.

Time-Based Stock Appreciation Rights (SARS)

During the year ended December 31, 2017, the Company’s compensation committee approved time-based stock appreciation rights ("SARs") to be granted to officers and employees of the Company outside of the United States, which vest ratably over three years. A summary of the Company’s time-based SARs as of December 31, 2017 is as follows:



	Number of Awards		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (In thousands)
Outstanding at January 1, 2016	165,000		$	12.00	9.71	$	—
Granted	—		—		0	—
Exercised	—		—		0	—
Forfeited or expired	(6,875	)	12.00		0	—
Outstanding at December 31, 2016	158,125		12.00		8.71	—
Exercisable at December 31, 2016	—		—		0	—
Vested and expected to vest at December 31, 2016	158,125		$	12.00	8.71	$	—

Outstanding at January 1, 2017	158,125		$	12.00	8.71	$	—
Granted	9,350		2.39		0	—
Exercised	—		—		0	—
Forfeited or expired	(91,850	)	10.88		0	—
Outstanding at December 31, 2017	75,625		$	9.83	7.75	$	—
Exercisable at December 31, 2017	—		—		0	—
Vested and expected to vest at December 31, 2017	75,625		$	9.83	7.75	$	—

Holders of these SARs are entitled under the terms of the Plan to receive cash payments calculated based on the excess of the Company’s stock price over the target price in their award; consequently, these awards are accounted for as liability-type awards and the Company measures compensation cost based on their estimated fair value at each reporting date and the number of options expected to vest, net of estimated forfeitures, if any.

Upon issuance, the fair value of each SAR award was estimated using the Hull-White option pricing model with the assumptions described below. For the periods indicated, since the Company has limited historical volatility information available, the expected volatility was based on actual volatility for comparable public companies projected over the expected terms of SAR awards. The Company did not apply a forfeiture rate to the SAR awards as there is not enough historical information available to estimate. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of the grant over the expected term of the SAR awards. The expected life was calculated as the average time to achieve the 2.0x strike exercise price in the simulation. Because the SARs are liability classified, they are revalued at each reporting date. The assumptions used to value the SARs as of their issuance dates and as of December 31, 2017 are presented below:



	As of December 31, 2017			As of December 31, 2016
Fair value of awards	$	2.21		$	0.32
Risk-free interest rate	2.22		%	1.87		%
Expected life (years)	3.95			4.73
Estimated volatility factor	54.5		%	54.5		%
Expected dividends	None			None

As of December 31, 2017, the Company had unrecognized compensation costs for SARs, totaling $29 thousand that is expected to be recognized over an average period of 1.7 years.

Restricted Stock

During the twelve months ended December 31, 2017 and December 31, 2016, the Company’s compensation committee approved equity-classified performance-based and time based restricted stock awards to be granted to officers, employees of the Company, which vest ratably over three years. A summary of the Company’s restricted stock awards as of December 31, 2017 is as follows:



	Number of Shares		Weighted-Average Grant Date Fair Value
Non-vested RSUs at January 1, 2016	596,491		$	6.34
Granted	194,570		5.32
Vested	(354,637	)	6.34
Forfeited or expired	(139,441	)	6.35
Non-vested RSUs at December 31, 2016	296,983		$	5.66

Non-vested RSUs at January 1, 2017	296,983		$	5.66
Granted	513,851		4.32
Vested	(63,744	)	5.46
Forfeited or expired	(302,283	)	6.26
Non-vested RSUs at December 31, 2017	444,807		$	5.35

As of December 31, 2017, Management has concluded that it is not probable that the performance condition for the RSUs issued in 2015 and 2016 will be met and therefore no compensation is expected to be recognized for those RSUs; however, if it becomes probable that those performance conditions will be met, the Company could recognize up to $1.0 million. Unrecognized compensation expense for the unvested time-based restricted shares is $3.13 million, which is expected to be recognized over a weighted average period of 2.2 years.

Phantom Stock Awards

During the twelve months ended December 31, 2017 and December 31, 2016, the Company’s compensation committee approved phantom stock awards to be awarded to officers and employees of the Company located outside of the United States, which vest ratably over three years. These awards will be settled in cash upon vesting and are therefore liability-classified, requiring remeasurement at each balance sheet date. A summary of the Company’s Phantom Stock Awards as of December 31, 2017 is as follows:



	Number of Awards		Weighted-Average Grant Date Fair Value
Non-vested phantom stock awards at January 1, 2016	154,502		$	6.34
Granted	10,500		6.11
Vested	(49,655	)	6.34
Forfeited or expired	(5,538	)	6.34
Non-vested phantom stock awards at December 31, 2016	109,809		$	6.32

Non-vested phantom stock awards at January 1, 2017	109,809		$	6.32
Granted	90,000		4.35
Vested	—		—
Forfeited or expired	(121,009	)	6.34
Non-vested phantom stock awards at December 31, 2017	78,800		$	5.91

As of December 31, 2017, Management concluded that it is not probable that the performance condition for the phantom shares issued in 2015 and 2016 will be met and therefore no compensation is expected to be recognized for those phantom shares; however, if it becomes probable that those performance conditions will be met, the Company could recognize up to $0.3 million of additional compensation expense. Unrecognized compensation expense for the unvested time-based phantom shares is $0.4 million, which is expected to be recognized over a weighted average period of 2.2 years.

Director Shares

On January 31, 2014, 20,125 founder shares were transferred to each of Boulevard’s three independent directors (“Director Shares”), adjusted for the effect of stock dividends in February 2014 (for a total of 60,375 founder shares). On March 13, 2014, the underwriters exercised a portion of the over-allotment option from the Public Offering, resulting in a portion of the Director Shares being forfeited. As a result, the Director Shares were adjusted ratably resulting in each director holding 18,375 Director Shares (for a total of 55,125 Director Shares) at December 31, 2017.

The Director Shares were effectively subject to achievement of two performance conditions — the Company completing its initial public offering (IPO) and a business combination within 21 months of the IPO. Additionally 25% (13,781 shares in the aggregate) are subject to forfeiture if the Company’s stock price does not trade at or above $13 for any 20 days of a 30 day period commencing on the Closing date through July 31, 2020 (5 years).

The grant date fair value of the Director Shares with performance conditions was estimated as of their deemed grant date of January 31, 2014. The aggregate fair value of the Director Shares of $0.4 million was recognized as an expense upon consummation of the Business Combination, at which point the performance conditions had been achieved.

The fair value of the Director Shares was estimated using a Monte Carlo Simulation Model that used the following assumptions:



Risk-free interest rate	1.96%
Expected life (years)	6.47
Estimated volatility factor	31.16%
Expected dividends	None

As of December 31, 2017, the Company had unrecognized compensation costs for the Director Shares of $2 thousand that is expected to be recognized over an average period of 1.0 year.

Board of Director Grants

Certain directors receive shares of restricted stock subject to the terms, provisions and restrictions of the 2015 Incentive Compensation Plan. The shares granted during the five months ended December 31, 2015 vest over a three year period, one-third on each anniversary of each holder’s grant date, provided the Director is still serving as a director of the Company. The shares granted during the twelve months ended December 31, 2017 and 2016, vest over a one year period on the one year anniversary of each holder's grant date, provided the Director is still serving as a director of the Company. Upon termination of directorship for any reason, the Director immediately forfeits any unvested shares without payment. A summary of the Company’s time-based restricted stock awarded to the Board of Directors for the twelve months ended December 31, 2017 is as follows:



	Number of Shares		Weighted-Average Grant Date Fair Value
Non-vested time-based restricted stocks at January 1, 2016	26,387		$	6.34
Granted	69,539		5.08
Vested	(76,802	)	5.22
Forfeited or expired	(4,600	)	6.34
Non-vested time-based restricted stock at December 31, 2016	14,524		$	6.22

Non-vested time-based restricted stock at January 1, 2017	14,524		$	6.22
Granted	96,853		5.42
Vested	(104,115	)	5.40
Forfeited or expired
Non-vested time-based restricted stock at December 31, 2017	7,262		$	5.48

As of December 31, 2017, the Company had unrecognized compensation costs for the Director shares of $0.2 million that is expected to be recognized over an average period of 1.5 years.