Stockholders’ Equity

Stock-Based Compensation

The following table summarizes stock-based compensation in our accompanying condensed consolidated statements of operations (in thousands):



	Three Months Ended				Six Months Ended
	July 1, 2017		June 25, 2016		July 1, 2017		June 25, 2016

Cost of revenue	$	105	$	79	$	197	$	154
Selling and marketing	295		229		541		414
Research and development	370		279		651		509
General and administrative	1,178		1,059		2,162		1,937
Loss (income) from discontinued operations	—		3		—		8
Total stock-based compensation	$	1,948	$	1,649	$	3,551	$	3,022

Pursuant to our 2014 Incentive Award Plan (the “2014 Plan”), during the six months ended July 1, 2017, we granted 0.4 million time-based restricted stock units (RSUs) to certain employees, advisors and directors, 0.4 million performance-based RSUs (“PSUs”) to certain members of management, and 0.2 million market-based RSUs (“MSUs”) to senior management.

In the first quarter of fiscal 2017, we issued 0.4 million PSUs. The number of PSUs that become eligible to vest for each recipient will be determined in the first quarter of 2018 based upon the Company’s level of achievement of certain financial targets for fiscal 2017. To the extent any PSUs become eligible to vest, they generally will vest over a three-year period retroactive to March 2017 as continued services are performed. Management is recognizing expense straight-line over the required service period based on its estimate of the number of PSUs that will vest. If there is a change in the estimate of the number of PSUs that are probable of vesting, we will cumulatively adjust compensation expense in the period that the change in estimate is made.

In the second quarter of fiscal 2017, we issued 0.2 million MSUs to senior management. The MSUs awarded will vest at any point during a five-year performance period, from 2017 through 2022, based on achievement of specified 120-day volume-weighted average closing share price targets, which is a market condition, or a change-in-control event, and if vested, will be issued in the form of common stock. The MSUs were valued at $9.31 - $5.78 per share using the Monte Carlo simulation model for the specified price targets.

RSUs are not included in issued and outstanding common stock until the shares are vested and released. With the exception of MSUs, the fair value of an RSU and PSU is measured based on the market price of the underlying common stock as of the date of grant, reduced by the purchase price of $0.001 per share. The weighted-average grant-date fair value per vested RSU share and the total fair value of vested shares from RSU grants was $7.46 and $2.1 million, respectively, for the six months ended July 1, 2017.

During the six months ended July 1, 2017, we granted 0.9 million stock options to certain employees and directors with a weighted average exercise price per share of $12.62. During the six months ended June 25, 2016, we granted 1.4 million stock options to certain employees and directors with a weighted average exercise price per share of $6.68.

The following table presents the assumptions used to estimate the fair value of options granted during the periods presented:



	Six Months Ended
	July 1, 2017	June 25, 2016
Risk-free interest rate	1.86% - 2.18%	1.3 - 1.6 %
Expected term (years)	6.25	6.25
Volatility	32.89% - 33.37%	38.23%
Expected dividend yield	—	—

A summary of stock option and RSU activity for the six months ended July 1, 2017 was as follows (in thousands for shares and intrinsic value):



								Restricted Stock Units
	Shares		Weighted-Average Remaining Contractual Term (Years)	Weighted-Average Exercise Price		Aggregate Intrinsic Value		Shares		Weighted-Average Grant Date Fair Value

Outstanding as of December 31, 2016	4,312		6.45	$	6.64	$	13,042	1,780		$	7.08
Granted⁽¹⁾	873			$	12.62			925		$	12.86
Settled (RSUs)	—			—				(288	)	$	7.46
Exercised	(458	)		$	4.48			—		—
Canceled and forfeited	(142	)		$	11.85			(510	)	$	6.89
Outstanding as of July 1, 2017	4,585		6.84	$	7.83	$	35,047	1,907		$	9.88
Vested and exercisable as of July 1, 2017	2,766		5.35	$	6.41	$	25,417	N/A		N/A

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(1) For RSUs, includes both time-based, performance-based, and market-based restricted stock units

Aggregate intrinsic value represents the difference between the closing stock price of our common stock and the exercise price of outstanding, in-the-money options. Our closing stock price as reported on the New York Stock Exchange as of June 30, 2017, the final trading day of the six months ended July 1, 2017, was $15.10. The total intrinsic value of options exercised and RSUs vested was approximately $7.2 million for the six months ended July 1, 2017. The aggregate fair value of the options that vested during the six months ended July 1, 2017 was $1.2 million.

As of July 1, 2017, total unrecognized compensation cost related to non-vested stock options and RSUs was approximately $6.8 million and $14.5 million, respectively, which is expected to be recognized over a weighted-average period of 3.0 years and 2.5 years, respectively, to the extent they are probable of vesting. As of July 1, 2017, we had 2.6 million shares available for grant under the 2014 Plan.

Common Stock

As of July 1, 2017, we had reserved the following shares of common stock for future issuance in connection with the following (in thousands):



	July 1, 2017
Options issued and outstanding	4,585
Restricted stock units issued and outstanding	1,907
Common stock available for stock-based award grants under incentive award plans	2,647
Common stock available for conversion of Series A Redeemable Convertible Preferred Stock	4,659
Total	13,798