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STOCK-BASED COMPENSATION | 12 Months Ended
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Jan. 01, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
STOCK-BASED COMPENSATION | STOCK-BASED COMPENSATION The Company's equity incentive program is a broad-based, long-term retention program intended to attract, motivate, and retain talented employees as well as align stockholder and employee interests. The Company provides stock-based incentive compensation, or awards, to eligible employees and non-employee directors. Awards that may be granted under the program include non-qualified and incentive stock options, restricted stock units, or RSUs, performance-based restricted stock units, or PRSUs, and stock bonus units. To date, awards granted under the program consist of stock options, RSUs and PRSUs. The majority of stock-based awards granted under the program vest over four years. Stock options granted under the program have a maximum contractual term of ten years. Stock-based compensation expense is recognized in the Company's consolidated statements of operations and includes compensation expense for the stock-based compensation awards granted or modified subsequent to January 1, 2006, based on the grant date fair value estimated in accordance with the provisions of the amended authoritative guidance. The impact on the Company's results of operations of recording stock-based compensation expense for fiscal years 2016, 2015, and 2014 was as follows (in thousands):
| Fiscal Years
| 2016 |  | 2015 |  | 2014
Cost of revenue | $ | 132 |  |  | $ | 109 |  |  | $ | 137 |
Research and development | 658 |  |  | 826 |  |  | 924 |
Selling, general and administrative | 794 |  |  | 1,064 |  |  | 1,181 |
Restructuring costs (1) | — |  |  | 29 |  |  | — |
Total costs and expenses | $ | 1,584 |  |  | $ | 2,028 |  |  | $ | 2,242 |
(1)Stock-based compensation related to restructuring plan initiated in the second quarter of fiscal year 2015. No stock-based compensation was capitalized during any period presented above. In 2016, the Company granted restricted stock units, or RSUs, to employees with various vesting terms. Total stock-based compensation related to RSUs was $953,000 in 2016. The Company issued net shares for the vested RSUs, withholding shares in settlement of employee tax withholding obligations. In 2016, the Company granted PRSUs to certain officers and cancelled PRSUs granted to certain employees in the prior year. Net credit received to stock-based compensation in 2016 due to the cancellation of PRSUs was $113,000. The amount of stock-based compensation included in inventories at the end of 2016, 2015 and 2014 was not significant. Valuation Assumptions The Company uses the Black-Scholes option pricing model to estimate the fair value of employee stock options and rights to purchase shares under the Company's 2009 ESPP. Using the Black-Scholes pricing model requires the Company to develop highly subjective assumptions including the expected term of awards, expected volatility of its stock, expected risk-free interest rate and expected dividend rate over the term of the award. The Company's expected term of awards assumption is based primarily on its historical experience with similar grants. The Company's expected stock price volatility assumption for both stock options and ESPP shares is based on the historical volatility of the Company's stock, using the daily average of the opening and closing prices and measured using historical data appropriate for the expected term. The risk-free interest rate assumption approximates the risk-free interest rate of a Treasury Constant Maturity bond with a maturity approximately equal to the expected term of the stock option or ESPP shares. This fair value is expensed over the requisite service period of the award. The fair value of RSUs and PRSUs is based on the closing price of the Company's common stock on the date of grant. Equity compensation awards which vest with service are expensed using the straight-line attribution method over the requisite service period. In addition to the assumptions used in the Black-Scholes pricing model, the amended authoritative guidance requires that the Company recognize expense for awards ultimately expected to vest; therefore the Company is required to develop an estimate of the number of awards expected to be forfeited prior to vesting, or forfeiture rate. The forfeiture rate is estimated based on historical pre-vest cancellation experience and is applied to all share-based awards. The following weighted average assumptions are included in the estimated fair value calculations for stock option grants:
| Fiscal Years
| 2016 |  | 2015 |  | 2014
Expected term (years) | 7.1 |  |  | 6.3 |  |  | 6.6 |
Risk-free interest rate | 1.40 | % |  | 1.75 | % |  | 1.98 | %
Expected volatility | 52 | % |  | 56 | % |  | 58 | %
Expected dividend | — |  |  | — |  |  | — |
The methodologies for determining the above values were as follows:
• | Expected term: The expected term represents the period that the Company's stock-based awards are expected to be outstanding and is estimated based on historical experience.
• | Risk-free interest rate: The risk-free interest rate assumption is based upon the risk-free rate of a Treasury Constant Maturity bond with a maturity appropriate for the expected term of the Company's employee stock options.
• | Expected volatility: The Company determines expected volatility based on historical volatility of the Company's common stock according to the expected term of the options.
• | Expected dividend: The expected dividend assumption is based on the Company's intent not to issue a dividend under its dividend policy.
The weighted average estimated fair value for options granted during 2016, 2015 and 2014 was $0.46, $0.87, and $1.99 per option, respectively. As of the end of 2016, the fair value of unvested stock options, net of expected forfeitures, was approximately $1.6 million. This unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 3.10 years. Stock-Based Compensation Award Activity The following table summarizes the shares available for grant under the 2009 Plan :
| Shares Available for Grant
| (in thousands)
Balance at January 3, 2016 | 2,929 |
Authorized | — |
Options granted | (842 | )
Options forfeited or expired | 1,129 |
RSUs granted | (1,629 | )
RSUs forfeited | 789 |
PRSUs granted | (193 | )
PRSU's forfeited or expired | 449 |
Balance at January 1, 2017 | 2,632 |
Stock Options The following table summarizes stock options outstanding and stock option activity under the 2009 Plan, and the related weighted average exercise price, for 2016, 2015 and 2014:
| Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Term |  | Aggregate Intrinsic Value
| (in thousands) |  |  |  | (in years) |  | (in thousands)
Balance outstanding at December 29, 2013 | 7,242 |  |  | $ | 2.62 |  |  |  |  |
Granted | 428 |  |  | 3.51 |  |  |  |  |
Forfeited or expired | (219 | ) |  | 3.56 |  |  |  |  |
Exercised | (1,769 | ) |  | 2.57 |  |  |  |  |
Balance outstanding at December 28, 2014 | 5,682 |  |  | 2.67 |  |  |  |  |
Granted | 225 |  |  | 1.64 |  |  |  |  |
Forfeited or expired | (521 | ) |  | 2.87 |  |  |  |  |
Exercised | (120 | ) |  | 0.98 |  |  |  |  |
Balance outstanding at January 3, 2016 | 5,266 |  |  | 2.64 |  |  |  |  |
Granted | 842 |  |  | 0.86 |  |  |  |  |
Forfeited or expired | (1,129 | ) |  | 2.61 |  |  |  |  |
Exercised | — |  |  | — |  |  |  |  |
Balance outstanding at January 1, 2017 | 4,979 |  |  | $ | 2.35 |  |  | 4.06 |  | $ | 586 |
Exercisable at January 1, 2017 | 4,078 |  |  | $ | 2.59 |  |  | 2.90 |  | $ | 199 |
Vested and expected to vest at January 1, 2017 | 4,740 |  |  | $ | 2.41 |  |  | 3.78 |  | $ | 473 |
The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $1.39 as of the end of the Company's current reporting period, which would have been received by the option holders had all option holders exercised their options as of that date. The total intrinsic value of options exercised during 2016, 2015 and 2014 was $0, $83,000 and $3.7 million, respectively. Total cash received from employees as a result of employee stock option exercises during 2016, 2015 and 2014 was approximately $0, $117,000 and $4.5 million, respectively. The Company settles employee stock option exercises with newly issued common shares. In connection with these exercises, there was no tax benefit realized by the Company due to the Company's current loss position. Total stock-based compensation related to stock options was $486,000, $861,000, and $1.1 million for 2016, 2015, and 2014, respectively. Significant exercise price ranges of options outstanding, related weighted average exercise prices and contractual life information at the end of 2016 were as follows:
| Options Outstanding |  | Options Exercisable
Range of Exercise Prices | Options Outstanding |  | Weighted Average Remaining Contractual Life |  | Weighted Average Exercise Price |  | Options Vested and Exercisable |  | Weighted Average Exercise Price
| (in thousands) |  | (in years) |  |  |  | (in thousands) |  |
$0.78 - $0.78 | 4 |  |  | 2.17 |  | $ | 0.78 |  |  | 5 |  |  | $ | 0.78 |
0.86 - 0.86 | 726 |  |  | 9.68 |  | 0.86 |  |  | — |  |  | — |
0.90 - 1.32 | 463 |  |  | 2.62 |  | 0.96 |  |  | 414 |  |  | 0.92 |
1.63 - 1.63 | 731 |  |  | 1.92 |  | 1.63 |  |  | 731 |  |  | 1.63 |
2.17 - 2.76 | 446 |  |  | 4.04 |  | 2.29 |  |  | 446 |  |  | 2.29 |
2.78 - 2.78 | 1,299 |  |  | 3.08 |  | 2.78 |  |  | 1,299 |  |  | 2.78 |
2.82 - 3.39 | 635 |  |  | 5.20 |  | 3.29 |  |  | 530 |  |  | 3.28 |
3.48 - 3.82 | 185 |  |  | 5.63 |  | 3.60 |  |  | 164 |  |  | 3.57 |
3.92 - 3.92 | 2 |  |  | 4.28 |  | 3.92 |  |  | 1 |  |  | 3.92 |
4.17 - 4.17 | 488 |  |  | 0.79 |  | 4.17 |  |  | 488 |  |  | 4.17 |
$0.78 - $4.17 | 4,979 |  |  | 4.06 |  | $ | 2.35 |  |  | 4,078 |  |  | $ | 2.59 |
Restricted Stock Units RSUs entitle the holder to receive, at no cost, one common share for each restricted stock unit on the vesting date as it vests. The Company withholds shares in settlement of employee tax withholding obligations upon the vesting of restricted stock units. The stock-based compensation related to grants of vested RSUs was $953,000, $834,000, $854,000 in 2016, 2015 and 2014, respectively. In 2016, the Company cancelled PSU's issued to certain officers, which resulted in a credit of $113,000 to the stock-based compensation.
| RSUs & PRSUs Outstanding
| Number of Shares |  | Weighted Average Grant Date Fair Value
| (in thousands) |  |
Nonvested at December 29, 2013 | 225 |  |  | $ | 3.17 |
Granted | 947 |  |  | 3.74 |
Vested | (480 | ) |  | 3.86 |
Forfeited | (42 | ) |  | — |
Nonvested at December 28, 2014 | 650 |  |  | 3.47 |
Granted | 1,128 |  |  | 1.46 |
Vested | (221 | ) |  | 1.42 |
Forfeited | (122 | ) |  | — |
Nonvested at January 3, 2016 | 1,435 |  |  | 2.30 |
Granted | 1,822 |  |  | 0.97 |
Vested | (649 | ) |  | 1.07 |
Forfeited | (1,238 | ) |  | — |
Nonvested at January 1, 2017 | 1,370 |  |  | $ | 1.68 |
Employee Stock Purchase Plan The weighted average estimated fair value, as defined by the amended authoritative guidance, of rights issued pursuant to the Company's ESPP during 2016, 2015 and 2014 was $0.62, $0.42 and $0.96, respectively. Sales under the ESPP were 732,000 shares of common stock at an average price of $0.81 for 2016, 458,000 shares of common stock at an average price of $1.26 for 2015, and 278,000 shares of common stock at an average price of $2.76 for 2014. Under the 2009 ESPP, the Company issued 732,000 shares at an average price of $0.81 per share during 2016. As of January 1, 2017, 687,000 shares under the 2009 ESPP remained available for issuance. For 2016, the Company recorded compensation expenses related to the ESPP of $258,000, $232,000 and $255,000 in 2016, 2015 and 2014, respectively. The fair value of rights issued pursuant to the Company's ESPP was estimated on the commencement date of each offering period using the following weighted average assumptions:
| Fiscal Years
| 2016 |  | 2015 |  | 2014
Expected life (months) | 6.1 |  |  | 6.0 |  |  | 6.0 |
Risk-free interest rate | 0.97 | % |  | 0.21 | % |  | 0.07 | %
Volatility | 59.3 | % |  | 55 | % |  | 49 | %
Dividend yield | — |  |  | — |  |  | — |
The methodologies for determining the above values were as follows:
• | Expected term: The expected term represents the length of the purchase period contained in the ESPP.
• | Risk-free interest rate: The risk-free interest rate assumption is based upon the risk-free rate of a Treasury Constant Maturity bond with a maturity appropriate for the term of the purchase period.
• | Volatility: The Company determines expected volatility based on historical volatility of the Company's common stock for the term of the purchase period.
• | Dividend Yield: The expected dividend assumption is based on the Company's intent not to issue a
dividend under its dividend policy. As of the end of 2016, the unrecognized stock-based compensation expense relating to the Company's ESPP was $97,000 and was expected to be recognized over a weighted average period of approximately 4.5 months.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51659978&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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