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Stock-Based Compensation
6 Months Ended
Jun. 29, 2024
Share-Based Payment Arrangement [Abstract]  
Stock-Based Compensation

9. Stock-Based Compensation

The Company accounts for stock-based compensation granted to employees and directors, including stock option awards, restricted stock and restricted stock units (“RSUs”) in accordance with FASB ASC Topic 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 an 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, as amended.

The terms of awards granted during the six months ended June 29, 2024 were consistent with those described in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 30, 2023.

The following table shows stock-based compensation expense included in the condensed consolidated statements of operations for the three and six months ended June 29, 2024 and July 1, 2023 (in thousands):

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 29, 2024

 

 

July 1, 2023

 

 

June 29, 2024

 

 

July 1, 2023

 

Cost of revenues

 

$

73

 

 

$

34

 

 

$

133

 

 

$

95

 

Research and development

 

 

52

 

 

 

52

 

 

 

104

 

 

 

104

 

Sales and marketing

 

 

110

 

 

 

85

 

 

 

221

 

 

 

206

 

General and administrative

 

 

184

 

 

 

229

 

 

 

355

 

 

 

468

 

Total stock-based compensation expense

 

$

419

 

 

$

400

 

 

$

813

 

 

$

873

 

 

Stock-based compensation expense capitalized to inventory was immaterial for the six months ended June 29, 2024 and July 1, 2023.

As of June 29, 2024, there was $1.4 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 1.76 years.

Summary of Stock Options

The following table summarizes stock options information during the six months ended June 29, 2024:

 

 

 

Number of
Shares

 

 

Weighted
Average
Exercise Price
Per Share

 

 

Aggregate
Intrinsic
Value
(thousands)

 

Outstanding as of December 30, 2023

 

 

2,757,921

 

 

$

3.60

 

 

 

 

Granted

 

 

20,300

 

 

$

2.94

 

 

 

 

Exercised

 

 

(135

)

 

$

2.32

 

 

 

 

Canceled or forfeited

 

 

(490,666

)

 

$

4.68

 

 

 

 

Outstanding as of June 29, 2024

 

 

2,287,420

 

 

$

3.37

 

 

$

36

 

 

The weighted average grant date fair value of the options granted was $1.82 and $1.35 per share for the six months ended June 29, 2024 and July 1, 2023, 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

 

 

 

June 29, 2024

 

 

July 1, 2023

 

 

June 29, 2024

 

 

July 1, 2023

 

Average risk free interest rate

 

 

4.35

%

 

 

3.83

%

 

 

4.35

%

 

 

3.83

%

Expected life (in years)

 

 

4.40

 

 

 

4.40

 

 

 

4.40

 

 

 

4.40

 

Dividend yield

 

 

 

 

 

 

 

 

Average volatility

 

 

77

%

 

 

76

%

 

 

77

%

 

 

76

%

 

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 an 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 June 29, 2024 is summarized below:

 

 

 

Number of
Shares

 

 

Weighted
Average
Exercise Price

 

 

Weighted
Average
Remaining
Contractual
Life (Years)

 

 

Aggregate
Intrinsic
Value
(thousands)

 

Options outstanding

 

 

2,287,420

 

 

$

3.37

 

 

 

4.29

 

 

$

36

 

Options vested and expected to vest

 

 

2,230,362

 

 

$

3.40

 

 

 

4.24

 

 

$

34

 

Options exercisable

 

 

1,258,699

 

 

$

4.03

 

 

 

3.03

 

 

$

12

 

 

The aggregate intrinsic value in the table above represents the pre-tax intrinsic value, based on the Company’s closing price as of June 29, 2024, 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 June 29, 2024 and July 1, 2023 was immaterial and approximately $4 thousand, respectively.

Summary of RSUs

Information regarding RSUs activity for the six months ended June 29, 2024 is summarized below:

 

 

 

Number
of Shares

 

Outstanding as of December 30, 2023

 

 

353,212

 

RSUs granted

 

 

120,000

 

RSUs released

 

 

(196,335

)

RSUs forfeited

 

 

(16,669

)

Outstanding as of June 29, 2024

 

 

260,208