STOCK-BASED COMPENSATION

We recognize stock-based compensation expense in our condensed consolidated statement of operations related to all share-based awards, including grants of stock options, based on the grant date fair value of such share-based awards.

In March 2016, the FASB issued ASU No. 2016-09, Compensation: Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for employee share-based payment transactions, including the income tax consequences, classification of awards, and classification on the statement of cash flows. This guidance is effective for us in the first quarter of fiscal 2018. Pursuant to the adoption of ASU No. 2016-09, we elected to record forfeitures when they occur. This change in accounting principle with regards to forfeitures was adopted using a modified retrospective approach. With the adoption of this guidance we recorded an adjustment of $0.3 million in our accumulated deficit and additional paid-in capital during the first quarter of fiscal 2018.

The amounts included in cost of revenues and operating expenses for stock-based compensation were as follows:



	Three Months Ended						Six Months Ended
	December 30, 2017			December 31, 2016			December 30, 2017			December 31, 2016
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	755		$	462		$	1,193		$	751
Research and development	858			526			1,725			983
Selling, general and administrative	2,326			1,601			4,220			3,298
	$	3,939		$	2,589		$	7,138		$	5,032
Stock-based compensation by type of award:
Stock options	$	30		$	32		$	62		$	70
Restricted stock awards	3,966			2,612			7,430			5,203
Inventory adjustment to cost of revenues	(57		)	(55		)	(354		)	(241		)
	$	3,939		$	2,589		$	7,138		$	5,032

Included in stock-based compensation for three and six months ended December 30, 2017 is approximately $0.5 million and $1.3 million, respectively, in stock-based compensation cost related to the issuance of PSUs. Included in stock-based compensation for three and six months ended December 31, 2016 is approximately $0.6 million and $1.2 million, respectively, in stock-based compensation cost related to the issuance of PSUs. The amount of stock-based compensation expense recognized in any one period related to PSUs can vary based on the achievement or anticipated achievement of the performance conditions. If the performance conditions are not met or not expected to be met, no compensation cost would be recognized on the shares underlying the PSUs, and any previously recognized compensation expense related to those PSUs would be reversed. As of December 30, 2017, we determined that the achievement of the performance conditions associated with the PSUs issued in August 2017 was not probable.

During the three and six months ended December 30, 2017, we capitalized stock-based compensation of $0.1 million and $0.4 million, respectively, into inventory. During the three and six months ended December 31, 2016, we capitalized stock-based compensation of $0.1 million and $0.2 million, respectively, into inventory. As of December 30, 2017 and July 1, 2017, we had capitalized a total of $0.9 million and $0.6 million of stock-based compensation, respectively, into inventory.

As of December 30, 2017, we had less than $0.1 million in unrecognized stock-based compensation expense related to unvested stock options, that will be recognized over a weighted-average period of 0.7 years, and $35.5 million in unrecognized stock-based compensation expense related to unvested time-based restricted stock awards, net of estimated forfeitures, that will be recognized over a weighted-average period of 2.4 years.