STOCK-BASED COMPENSATION

9 Months Ended

Sep. 27, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

We account for stock-based compensation in accordance with the applicable authoritative guidance, which requires the measurement of stock-based compensation on the date of grant based on the fair value of the award, and the recognition of the expense over the requisite service period for the employee. Compensation related to RSUs is the intrinsic value on the date of grant, which is the closing price of our common stock less the employee exercise price, if any. Compensation related to stock options is determined using a stock option valuation model.

Valuation Assumptions

We use the Black-Scholes valuation model to determine the fair value of stock options. The Black-Scholes model requires the input of highly subjective assumptions, which are summarized in the table below for the three and nine months ended September 27, 2015 and September 28, 2014 (assumptions are not applicable for the three months ended September 27, 2015 as there were no stock options granted during that period):



	Three Months Ended		Nine Months Ended
	September 27, 2015	September 28, 2014	September 27, 2015	September 28, 2014
Expected dividend yield	N/A	—	—	—
Expected stock price volatility	N/A	65%	66%	67%
Risk-free interest rate	N/A	1.4%	1.1%	1.3%
Expected life of options in years	N/A	4.0	4.0	4.0

We estimate the expected life of options based on an analysis of our historical experience of employee exercise and post-vesting termination behavior considered in relation to the contractual life of the option. Expected volatility is based on the historical volatility of our common stock; and the risk-free interest rate is the rate on a U.S. Treasury Bill, with a maturity approximating the expected life of the option. We do not currently pay cash dividends on our common stock and do not anticipate doing so in the foreseeable future. Accordingly, the expected dividend yield is zero.

Our stock-based compensation for the periods indicated was as follows (in thousands):



	Three Months Ended				Nine Months Ended
	September 27, 2015		September 28, 2014		September 27, 2015		September 28, 2014
Stock-based compensation by type of award:
Stock options	$	254	$	244	$	765	$	740
Restricted stock units	317		143		890		309
Employee stock purchase plan	5		12		15		36
	$	576	$	399	$	1,670	$	1,085
Stock-based compensation by category of expense:
Cost of goods sold	$	36	$	12	$	109	$	23
Research, development and engineering	60		47		193		135
Selling, general and administrative	480		340		1,368		927
	$	576	$	399	$	1,670	$	1,085

We did not capitalize any stock-based compensation into inventory for the three and nine months ended September 27, 2015 and September 28, 2014, as such amounts were immaterial. As of September 27, 2015, we had $1.5 million in unrecognized stock-based compensation expense, net of estimated forfeitures, related to stock options which will be recognized over a weighted-average period of 2.4 years. As of September 27, 2015, we had $2.7 million in unrecognized stock-based compensation expense, net of estimated forfeitures, related to unvested RSUs which will be recognized over a weighted-average period of 2.7 years.