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Stockholders' Equity and Stock-Based Compensation | 6 Months Ended
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Jul. 03, 2021
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stockholder' Equity and Stock Based Compensation | 9. Stockholders’ Equity and Stock-Based Compensation Stock-Based Compensation The Company accounts for stock-based compensation granted to employees and directors, including employees stock option awards, restricted stock and restricted stock units (“RSUs”) in accordance with ASC 718, “Compensation – Stock Compensation” (“ASC 718”). Accordingly, stock-based compensation cost is measured at grant date, based on the fair value of the award, and is recognized as expense over the employee’s service period. The Company recognizes compensation expense on a ratable basis over the requisite service period of the award. The Company values options using the Black-Scholes option pricing model. Time-based RSUs are valued at the grant date fair value of the underlying common shares. Performance-based RSUs without market conditions are valued at grant date fair value of the underlying common shares. Performance-based RSUs granted with market conditions and performance-based stock options with market conditions are valued using the Monte Carlo simulation model. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of stock-based awards, including the option’s expected term and the price volatility of the underlying stock. The Monte Carlo simulation model incorporates assumptions for the holding period, risk-free interest rate, stock price volatility and dividend yield. 2008 Equity Incentive Plan. The terms of awards granted during the six months ended July 3, 2021 were consistent with those described in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended January 2, 2021. The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the three and six months ended July 3, 2021 and June 27, 2020:
|  | Three Months Ended |  |  | Six Months Ended |
(in thousands) |  | July 3, 2021 |  |  | June 27, 2020 |  |  | July 3, 2021 |  |  | June 27, 2020 |
Cost of revenues |  | $ | 46 |  |  | $ | 35 |  |  | $ | 93 |  |  | $ | 59 |
Research and development |  |  | 14 |  |  |  | 24 |  |  |  | 50 |  |  |  | (7 | )
Sales and marketing |  |  | 41 |  |  |  | 134 |  |  |  | 139 |  |  |  | 173 |
General and administrative |  |  | 179 |  |  |  | 243 |  |  |  | 364 |  |  |  | 306 |
|  | $ | 280 |  |  | $ | 436 |  |  | $ | 646 |  |  | $ | 531 |
Stock-based compensation expense capitalized to inventory was immaterial for the six months ended July 3, 2021 and June 27, 2020. As of July 3, 2021, there was $1.5 million of total unrecognized compensation cost, net of expected forfeitures, related to non-vested stock-based compensation arrangements. The cost is expected to be recognized over a weighted average period of 2.16 years. Summary of Stock Options. The following table summarizes stock options information during the six months ended July 3, 2021:
|  | Number of Shares |  |  | Weighted Average Exercise Price Per Share |  |  | Aggregate Intrinsic Value (thousands) |
Outstanding as of January 2, 2021 |  |  | 1,649,540 |  |  | $ | 4.67 |  |  |  |  |
Granted |  |  | 49,000 |  |  |  | 6.83 |  |  |  |  |
Exercised |  |  | (23,304 | ) |  |  | 4.15 |  |  |  |  |
Canceled or forfeited |  |  | (126,836 | ) |  |  | 4.47 |  |  |  |  |
Outstanding as of July 3, 2021 |  |  | 1,548,400 |  |  | $ | 4.77 |  |  | $ | 4,297 |
The weighted average grant date fair value of the options granted was $3.86 and $1.01 per share for the six months ended July 3, 2021 and June 27, 2020, respectively. The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock-based awards (options) with the following weighted average assumptions:
|  | Three Months Ended |  |  | Six Months Ended |
|  | July 3, 2021 |  |  | June 27, 2020 |  |  | July 3, 2021 |  |  | June 27, 2020 |
Average risk free interest rate |  |  | 0.79 | % |  |  | 0.27 | % |  |  | 0.77 | % |  |  | 0.39 | %
Expected life (in years) |  | 4.45 years |  |  | 4.55 years |  |  | 4.45 years |  |  | 4.55 years |
Dividend yield |  |  | — | % |  |  | — | % |  |  | — | % |  |  | — | %
Average volatility |  |  | 73 | % |  |  | 62 | % |  |  | 73 | % |  |  | 59 | %
Performance stock options granted with market conditions are valued using a Monte Carlo simulation model in combination with a Black-Scholes option pricing model. Option-pricing models require the input of various subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The expected stock price volatility is based on analysis of the Company’s stock price history over a period commensurate with the expected term of the options, trading volume of the Company’s stock, look-back volatilities and Company-specific events that affected volatility in a prior period. The expected term of employee stock options represents the weighted average period the stock options are expected to remain outstanding and is based on the history of exercises and cancellations on all past option grants made by the Company, the contractual term, the vesting period and the expected remaining term of the outstanding options. The risk-free interest rate is based on the U.S. Treasury interest rates whose term is consistent with the expected life of the stock options. No dividend yield is included as the Company has not issued any dividends and does not anticipate issuing any dividends in the future. Information regarding stock options outstanding, vested, expected to vest, and exercisable as of July 3, 2021 is summarized below:
|  | Number of Shares |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Life (Years) |  |  | Aggregate Intrinsic Value (thousands) |
Options outstanding |  |  | 1,548,400 |  |  | $ | 4.77 |  |  |  | 5.63 |  |  | $ | 4,297 |
Options vested and expected to vest |  |  | 1,388,531 |  |  | $ | 4.84 |  |  |  | 5.49 |  |  | $ | 3,815 |
Options exercisable |  |  | 697,847 |  |  | $ | 5.73 |  |  |  | 4.62 |  |  | $ | 1,599 |
The aggregate intrinsic value in the table above represents the pre-tax intrinsic value, based on the Company’s closing price as of July 3, 2021, that would have been received by option holders had all option holders exercised their stock options as of that date. This amount changes based on the fair market value of the Company’s common stock. The total intrinsic value of options exercised for the six months ended July 3, 2021 and June 27, 2020 was approximately $70 thousand and $0 thousand, respectively. Summary of RSUs and Awards Information regarding RSUs activity for the six months ended July 3, 2021 is summarized below:
|  | Number of Shares |
Outstanding as of January 2, 2021 |  |  | 524,851 |
RSUs granted |  |  | 29,485 |
RSUs released |  |  | (315,643 | )
RSUs forfeited |  |  | (54,312 | )
Outstanding as of July 3, 2021 |  |  | 184,381 |

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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