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Note 13 - Stock-based Compensation

12 Months Ended

Jan. 02, 2022

Share-based Payment Arrangement [Text Block]

NOTE 13-STOCK-BASED COMPENSATION

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 ("PRSU") 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 2021, 2020, and 2019 was as follows (in thousands):

	*Fiscal Years*
	*2021*		*2020*		*2019*
Cost of revenue	$	282	$	162	$	78
Research and development		843		670		2,242
Selling, general and administrative		1,401		907		824
Total costs and expenses	$	2,526	$	1,739	$	3,144

No stock-based compensation was capitalized or included in inventories at the end of 2021, 2020 and 2019.

Stock-Based Compensation Award Activity

The following table summarizes the shares available for grant under the 2019 Plan (in thousands):

	*Shares Available for Grant*

Balance at December 29, 2019		272
Authorized		550
Options granted		—
Options forfeited or expired		65
RSUs granted		(816	)
RSUs forfeited		249
Balance at January 3, 2021		320
Authorized		600
Options granted		—
Options forfeited or expired		31
RSUs granted		(619	)
RSUs forfeited		262
Balance at January 2, 2022		594

No stock options were granted during the fiscal years 2021, 2020, and 2019.

Stock Options

The following table summarizes stock options outstanding and stock option activity under the 2019 Plan for 2021, 2020 and 2019:

	*Number of Shares*			*Weighted Average Exercise Price*		*Weighted Average Remaining Term*		*Aggregate Intrinsic Value*
	(in thousands)					(in years)		(in thousands)
Balance outstanding at December 30, 2018		229		$	30.52		3.70
Granted		—			—
Forfeited or expired		(42	)		24.14
Exercised		(1	)		10.92
Balance outstanding at December 29, 2019		186			32.09		3.32
Granted		—			—
Forfeited or expired		(65	)		38.83
Exercised		—			—
Balance outstanding at January 3, 2021		121			28.46		3.75
Granted		—			—
Forfeited or expired		(28	)		31.68
Exercised		—			—
Balance outstanding at January 2, 2022		93		$	27.49		3.19	$	—
Exercisable and Vested and expected to vest at January 2, 2022		93		$	27.49		3.19	$	—

There was no intrinsic value for the stock options, based on the Company’s closing stock price of $5.11 per share at January 2, 2022, the last trading day 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 2021, 2020 and 2019 was not significant. Total cash received from employees as a result of employee stock option exercises during 2021, 2020 and 2019 was approximately $0, $0, and $3,600, 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 net loss position.

Total stock-based compensation expense recognized related to stock options was $0, $39,000, and $60,000 for fiscal years 2021, 2020, and 2019, respectively. No stock options were granted during each of the fiscal years 2021, 2020 and 2019. As of the end of 2021, there are no unvested stock options.

Significant exercise price ranges of options outstanding, related weighted average exercise prices and contractual life information at the end of 2021 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)
$12.05		48		4.68	$	12.05		48	$	12.05
$30.38		3		0.60		30.38		3		30.38
$31.50		5		0.85		31.5		5		31.50
$32.20		3		1.35		32.2		3		32.20
$40.18		0.4		0.81		40.18		0.4		40.18
$44.80		6		2.96		44.80		6		44.80
$46.62		3		2.35		46.62		3		46.62
$47.46		13		1.94		47.46		13		47.46
$48.72		8		0.35		48.72		8		48.72
$53.48		4		2.38		53.48		4		53.48
$12.05- $53.48		93		3.19	$	27.49		93	$	27.49

Valuation Assumptions

The Company uses the Black-Scholes option pricing model to estimate the fair value 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 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 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.

Restricted Stock Units

The Company grants restricted stock units ("RSU") to employees with various vesting terms. 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. Stock-based compensation related to grants of vested RSUs and PSUs was $2.4million, $1.7, million and $3.0 million in 2021, 2020 and 2019, respectively.

The following table summarizes RSU’s activity under the 2019 Plan and the related weighted average grant date fair value, for 2021, 2020 and 2019:

	*RSUs & PRSUs Outstanding*
	*Number of Shares*			*Weighted Average Grant Date Fair Value*
	(in thousands)
Nonvested at December 30, 2018		183		$	17.22
Granted		353			10.77
Vested		(118	)		14.48
Forfeited		(41	)		—
Nonvested at December 29, 2019		377		$	12.55
Granted		816			3.97
Vested		(144	)		10.41
Forfeited		(249	)		7.93
Nonvested at January 3, 2021		800		$	4.99
Granted		619			5.81
Vested		(586	)		4.99
Forfeited		(265	)		5.00
Nonvested at January 2, 2022		568		$	5.86

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 2021, 2020 and 2019 was $2.18, $1.09 and $4.28, respectively. Sales under the ESPP were 83,605 shares of common stock at an average price per share of $3.14 for 2021, 20,409 shares of common stock at an average price per share of $2.47 for 2020, and 24,131 shares of common stock at an average price per share of $9.76 for 2019.

As of January 2, 2022, 258,343 shares under the 2009 ESPP remained available for issuance. The Company recorded compensation expenses related to the ESPP of $110,000, $39,000 and $60,000 in 2021, 2020 and 2019, 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*
	*2021*			*2020*			*2019*
Expected life (months)		6.0			6.0			6.0
Risk-free interest rate		0.05	%		0.12	%		2.37	%
Volatility		74	%		82	%		54	%
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.