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Share-Based Compensation
 6 Months Ended
Jul. 03, 2022
Share-Based Payment Arrangement [Abstract]  
Share-Based Compensation Share-Based Compensation
2021 Equity Incentive Plan
In connection with our IPO, we adopted the 2021 Equity Incentive Plan (the “2021 Equity Plan”). The 2021 Equity Plan became effective upon the consummation of the IPO. As of July 3, 2022, the 2021 Equity Plan provides for the issuance of up to 5,150,000 shares of common stock to eligible individuals in the form of options, stock appreciation rights, restricted stock, restricted stock units, deferred stock units, unrestricted stock, dividend equivalent rights, other equity-based awards and cash bonus awards. The share reserve of the 2021 Equity Plan will be increased effective the first business day of each calendar year by an amount equal to the lesser of: (i) 150,000 shares of common stock; (ii) three percent (3%) of the shares of common stock outstanding on the final day of the immediately preceding calendar year; and (iii) such smaller number of shares of common stock as determined by the compensation committee.
Stock Options
During the six months ended July 3, 2022, we granted 549,000 stock options, respectively, which vest ratably on each of the first, second, third, and fourth anniversaries of the grant date and expire 10 years from the grant date. During the six months ended July 4, 2021, we granted 343,000 stock options which vest in full on the first anniversary of the grant date and expire 15
months from the grant date; and granted 744,000 stock options which vest ratably on each of the first, second, third, and fourth anniversaries of the grant date and expire 10 years from the grant date. Share-based compensation expense related to stock option awards was $410 and $439 for the three months ended July 3, 2022 and July 4, 2021, respectively, and $832 and $444 for the six months ended July 3, 2022 and July 4, 2021, respectively. Actual forfeitures are recognized as they occur.
The fair value of each stock option is estimated on the date of grant using a Black-Scholes option-pricing model that uses assumptions noted in the following table. The risk-free interest rate used in the option valuation model was based on yields available on the grant dates for U.S. Treasury Strips with maturity consistent with the expected life assumption. The expected term of the option represents the period of time that options granted are expected to be outstanding and is based on the Securities and Exchange Commission ("SEC") Simplified Method (midpoint of average vesting time and contractual term). Expected volatility is based on an average of the historical, daily volatility of a peer group of similar companies over a period consistent with the expected life assumption ending on the grant date. We assumed no dividend yield in the valuation of the options granted as we have never declared or paid dividends on our common stock and currently intend to retain earnings for use in operations.

Six Months Ended
July 3, 2022
Expected volatility:47.2%
Expected term (in years):
6.25
Risk-free interest rate:1.9%
The following table summarizes our stock option activity during the six months ended July 3, 2022:
Number of Stock Options
(in thousands)		Weighted Average
Exercise Price Per Share		Aggregate Intrinsic Value
(in thousands)		Weighted-Average Remaining Contractual Life
Balance outstanding as of January 2, 2022986 $14.29 
Granted549 $11.24 
Exercised— $— 
Forfeited or canceled(99)$13.25 
Balance outstanding as of July 3, 20221,436 $13.22 $— 7.03 years
Balance vested and exercisable as of July 3, 2022435 $14.00 $— 5.49 years
The weighted average grant-date fair value of options granted in the six months ended July 3, 2022 was $5.37. As of July 3, 2022, total unrecognized compensation cost related to stock options was $4,939 and is expected to be recognized over a weighted average period of approximately 3.21 years.
Restricted Common Stock Units
During the six months ended July 3, 2022, we granted 115,000 restricted common stock units to our directors which vest in full on May 31, 2023. In addition, during the six months ended July 3, 2022, we granted 294,000 restricted common stock units, which vest ratably on each of the first, second and third anniversaries of the grant date. During the six months ended July 4, 2021, we granted 441,000 restricted common stock units to eligible employees and directors which vest in full on the first anniversary of the grant date and granted 205,000 restricted common stock units which vest ratably on each of the first, second and third anniversaries of the grant date. The grantee has no rights as a common stockholder until the common stock related to the restricted common stock units is issued upon vesting of the restricted units.
Share-based compensation expense related to restricted common stock unit awards was $1,411 and $6,100 for the three months ended July 3, 2022 and July 4, 2021, respectively, and $3,791 and $6,100 for the six months ended July 3, 2022 and July 4, 2021, respectively. Actual forfeitures are recognized as they occur. As of July 3, 2022, total unrecognized compensation cost related to restricted common stock units was $6,585 and is expected to be recognized over a weighted average period of approximately 1.68 years. The estimated fair value of restricted common stock units is based on the grant date closing price of our common stock for time-based vesting awards. During the six months ended July 3, 2022, 991,000 restricted common stock units vested. No restricted common stock units vested during the six months ended July 4, 2021.
The following table summarizes our restricted common stock unit activity during the six months ended July 3, 2022:
Number of Restricted Common Stock Units
(in thousands)		Weighted Average Grant Date Fair Value Per Share
Balance outstanding as of January 2, 20221,745 $8.34 
Granted409 $9.68 
Vested(991)$8.51 
Forfeited or canceled(73)$14.63 
Balance outstanding as of July 3, 20221,090 $8.18 
2021 Employee Stock Purchase Plan
In connection with our IPO, we also adopted the 2021 Employee Stock Purchase Plan (the “2021 ESPP”). A maximum of 707,000 shares of our common stock has been reserved for issuance under the 2021 ESPP. Under the 2021 ESPP, eligible employees may purchase our common stock through payroll deductions at a discount not to exceed 15% of the lower of the fair market values of our common stock as of the beginning or end of each offering period, which may range from 6 to 27 months. Payroll deductions are limited to 15% of the employee’s eligible compensation and a maximum of 2,500 shares of our common stock may be purchased by an employee each offering period. The initial six-month offering period commenced on September 1, 2021 and 79,000 shares were purchased under the 2021 ESPP during the six months ended July 3, 2022. As of July 3, 2022 and January 2, 2022, $889 and $937, respectively, was withheld on behalf of employees for future purchases under the 2021 ESPP and recorded as accrued compensation. Share-based compensation expense related to the 2021 ESPP was $223 for the three months ended July 3, 2022 and $427 for the six months ended July 3, 2022, respectively. Actual forfeitures are recognized as they occur. As of July 3, 2022, total unrecognized compensation cost related to the 2021 ESPP was $149 and will be recognized on a straight-line basis over the six-month offering period.
The fair value of the 2021 ESPP is estimated on the date of grant using a Black-Scholes option-pricing model that uses assumptions noted in the following table. The risk-free interest rate used in the option valuation model was based on yields available on the grant dates for U.S. Treasury Strips with maturity consistent with the expected life assumption. Expected volatility is based on an average of the historical, daily volatility of a peer group of similar companies over a period consistent with the expected life assumption ending on the grant date. We assumed no dividend yield in the valuation of the options granted as we have never declared or paid dividends on our common stock and currently intend to retain earnings for use in operations.
Six Months Ended
July 3, 2022
Expected volatility:47.2%
Expected term (in years):0.50
Risk-free interest rate:0.60%
Weighted average grant-date fair value per share
$3.20
Share-Based Compensation Expense Allocation
Share-based compensation expense was allocated in the condensed consolidated statements of operations as follows:
Three Months EndedSix Months Ended
July 3, 2022July 4, 2021July 3, 2022July 4, 2021
Cost of revenue$534 $704 $1,574 $704 
Research and development127 1,480 333 1,480 
Selling, general and administrative expenses1,382 4,355 3,143 4,360 
$2,043 $6,539 $5,050 $6,544