NOTE 14. EMPLOYEE EQUITY-BASED COMPENSATION

The following table summarizes option activity under all plans during the six-month period ending June 30, 2017:



Stock Option Activity
	Number of Shares		Weighted Average Exercise Price per Share
Options outstanding December 31, 2016	6,857,124		7.72
Granted	1,054,561		24.54
Forfeited	(117,338	)	22.15
Exercised	(288,303	)	9.29
Expired	(1	)	18.07
Options Outstanding June 30, 2017	7,506,043		9.80

The table below summarizes the resulting weighted average inputs used to calculate the estimated fair value of options awarded during the periods shown below:



Black-Scholes Assumptions for Options Granted
	Three Months Ended
	June 30, 2017			June 30, 2016
Expected term (in years)	6.12			6.20
Volatility	75		%	85		%
Expected dividends	—			—
Risk free interest rates	2.02		%	1.45		%
Weighted average fair value	$	16.80		$	9.66

The following table shows summary information for outstanding options and options that are exercisable (vested) as of June 30, 2017:



Stock Option Supplemental Information
	Options Outstanding		Options Exercisable
Number of options	7,506,043		5,070,585
Weighted average remaining contractual term (in years)	6.56		5.60
Weighted average exercise price	$	9.80	$	5.73
Weighted average fair value	$	7.28	$	4.33
Aggregate intrinsic value (in thousands)	$	131,115	$	109,601

The following table summarizes restricted stock unit activity during the six-month period ending June 30, 2017:



Restricted Stock Unit (RSU) Activity
	Number of Shares		Weighted Average Grant Date Fair Value per Share
RSUs Outstanding December 31, 2016	40,250		20.91
Granted	—		—
Forfeited	—		—
Vested/released	(16,100	)	20.91
RSUs outstanding June 30, 2017	24,150		20.91

The expense recognized on the Company’s condensed consolidated statements of operations and comprehensive loss related to options is summarized below:



Equity-Based Compensation Expenses (in thousands)
	Three Months Ended				Six Months Ended
	June 30, 2017		June 30, 2016		June 30, 2017		June 30, 2016
Cost of sales	$	22	$	—	$	22	$	—
Research and development	1,166		462		1,892		664
Sales, general and administrative	3,047		1,773		5,536		3,257
Equity-based compensation expense	$	4,235	$	2,235	$	7,450	$	3,921

As of June 30, 2017, $183,000 and $27,000 of equity-based compensation expense was a component of capitalized inventory and property and equipment respectively.

As of June 30, 2017, unrecognized equity-based compensation cost related to unvested stock options and unvested restricted stock units was $19.4 million and $258,000 respectively. This is expected to be recognized over the years 2017 through 2022.

As discussed in Note 1, we implemented ASU 2016-09, Compensation-Stock Compensation (Topic 718) Improvements to Employee Share-Based Payment Accounting on January 1, 2017. Pursuant to this guidance, we made a policy election to account for forfeitures as they occur rather than on an estimated basis and, therefore, equity based compensation expense for the three and six months ended June 30, 2017 has been calculated based on actual forfeitures in our condensed consolidated statements of operations and comprehensive loss, rather than our previous approach which was net of estimated forfeitures. Share-based compensation expense for the three and six months ended June 30, 2016 is recorded net of estimated forfeitures, which were based on historical forfeitures and adjusted to reflect changes in facts and circumstances, if any. This change was accounted for using the modified retrospective transition method. This election resulted in a cumulative-effect adjustment which increased our accumulated deficit and additional paid-in capital by $655,000 for all outstanding awards as of January 1, 2017. We believe this election simplifies several aspects of the accounting for share-based payment transactions.

This new guidance requires that we record excess tax benefits and tax deficiencies related to the settlement of employee stock-based compensation to the income tax expense line item on our condensed consolidated statements of operations and comprehensive loss. The new guidance also states that previously unrecognized excess tax benefits should be recognized on a modified retrospective basis as of the beginning of the annual period of adoption. At January 1, 2017, we recorded approximately $1.5 million of additional deferred tax assets, which are fully offset by a valuation allowance. Accordingly, the adoption of ASU 2016-09 did not result in an adjustment to retained earnings for the cumulative effect of the tax benefit of the stock compensation.

The new guidance also requires excess tax benefits to be classified as an operating activity in the statement of cash flows rather than as a financing activity. Additionally, ASU 2016-09 requires that the minimum tax withholding paid on behalf of employees for share-based awards be classified as a financing activity in the statement of cash flows. Adoption of ASU 2016-09 did not result in any adjustments to prior period disclosures on the condensed consolidated statement of cash flows.