The 1998 Stock Plan (the “1998 Plan”), as amended, provides for the granting to employees (including officers and non-employee directors) of incentive stock options and for the granting to employees (including officers and non-employee directors) and consultants of nonstatutory stock options, stock purchase rights (“SPRs”), restricted stock, restricted stock units (“RSUs”), performance shares, performance units and stock appreciation rights. The exercise price of incentive stock options and stock appreciation rights granted under the 1998 Plan must be at least equal to the fair market value of the shares at the time of grant. With respect to any recipient who owns stock possessing more than 10% of the voting power of our outstanding capital stock, the exercise price of any option or SPR granted must be at least equal to 110% of the fair market value at the time of grant. Options granted under the 1998 Plan are exercisable at such times and under such conditions as determined by the administrator; generally over a four year period. The maximum term of incentive stock options granted to any recipient must not exceed ten years; provided, however, that the maximum term of an incentive stock option granted to any recipient possessing more than 10% of the voting power of our outstanding capital stock must not exceed five years. In the case of SPRs, unless the administrator determines otherwise, we have a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser’s employment with us for any reason (including death or disability). Such repurchase option lapses at a rate determined by the administrator. The purchase price for shares repurchased is the original price paid by the purchaser. The form of consideration for exercising an option or stock purchase right, including the method of payment, is determined by the administrator. The 1998 Plan expired in February 2008.

On June 11, 2008, the shareholders approved the adoption of the 2008 Equity Incentive Plan, (the “Incentive Plan”). There are no material changes in the Incentive Plan from the 1998 Plan. In 2014, the stockholders approved an amendment to the Incentive Plan for purposes of complying with Section 162(m) of the Internal Revenue Code of 1986, as amended, to increase the share reserve under the Incentive Plan, and to make certain other amendments to the terms of the Incentive Plan. The maximum aggregate number of shares that may be awarded and sold under the Incentive Plan is 2,850,000 shares plus any shares subject to stock options or similar awards granted under the 1998 Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the 1998 Plan that are forfeited to us on or after February 23, 2008, which was the date the 1998 Plan expired.

The following table represents the shares activity and the total number of shares available for grant under the Incentive Plan:

	Shares Available for Grant
Balances as of December 31, 2016		162,155
Additional shares reserved		650,000
Options granted		(524,400	)
Restricted stock granted		(212,538	)
Options cancelled		73,694
Awards cancelled		48,059
Balances as of December 30, 2017		196,970
Additional shares reserved		1,000,000
Options granted		(178,435	)
Restricted stock granted		(628,125	)
Options cancelled		166,798
Awards cancelled		143,754
Balances as of December 29, 2018		700,962

Awards (RSU, PSU, RSA) with a per share or unit purchase price lower than 100% of the fair market value of the Company's common stock on the date of grant under the 2008 Equity Incentive Plan, as amended, are counted against shares authorized under the plan as one and one-half shares of common stock for each share. When cancelled, these shares are added back to the Plan as one and one-half shares.

The following table shows stock-based compensation expenses by functional area in the consolidated statements of operations for 2018 and 2017(in thousands):

	FY 2018		FY 2017
	Year Ended		Year Ended
	December 29, 2018		December 30, 2017
Cost of revenues	$	47	$	152
Research and development		129		354
Sales and marketing		448		307
General and administrative		1,179		1,109
Total stock-based compensation expense	$	1,803	$	1,922

Stock-based compensation expense capitalized to inventory was immaterial for 2018 and 2017.

As of December 29, 2018, there was $4.8 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements under the Incentive Plan. The cost is expected to be recognized over a weighted average period of 2.38 years.

The following table summarizes information regarding activity in our stock option plans during the fiscal years ended 2018 and 2017 (in thousands except share and per share data):

	Outstanding Options
	Number of Shares			Weighted Average Exercise Price
Balances as of December 31, 2016		470,985			8.69
Options granted		524,400			9.90
Options exercised		(64,380	)		5.86
Options cancelled or forfeited		(73,694	)		10.47
Balances as of December 30, 2017		857,311		$	9.49
Options granted		178,435			6.00
Options exercised		(24,050	)		4.09
Options cancelled or forfeited		(166,798	)		9.85
Balances as of December 29, 2018		844,898		$	8.84

The following table summarizes information with respect to stock options outstanding and exercisable as of December 29, 2018:

	Options Outstanding						Options Vested and Exercisable
Range of Exercise Prices	Number of Shares Outstanding		Weighted Average Remaining Contractual Life (years)		Weighted Average Exercise Price		Number of Shares Exercisable		Weighted Average Exercise Price
$3.49 - $5.69		99,341		4.77	$	5.03		37,966	$	4.37
$5.81 - $6.00		89,926		5.28	$	5.93		25,390	$	5.91
$6.30 - $8.47		85,912		3.85	$	7.24		50,582	$	7.23
$8.58 - $9.05		85,874		4.11	$	8.83		55,959	$	8.71
$9.34 - $9.40		11,875		1.40	$	9.36		11,875	$	9.36
$9.54 - $9.54		324,854		5.08	$	9.54		135,188	$	9.54
$10.14 - $11.16		83,853		3.81	$	10.80		65,004	$	10.75
$12.85 - $12.85		15,394		4.70	$	12.85		8,520	$	12.85
$14.61 - $14.61		25,000		5.19	$	14.61		10,939	$	14.61
$16.29 - $16.29		22,869		3.18	$	16.29		16,893	$	16.29
$3.49 - $16.29		844,898		4.61	$	8.84		418,316	$	9.12

The determination of the fair value of options granted is computed using the Black-Scholes option pricing model with the following weighted average assumptions:

The weighted average grant date fair value of options granted as calculated using the Black-Scholes option pricing was $2.27 and $3.68 per share for the fiscal years 2018 and 2017, respectively.

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 our stock price history over a period commensurate with the expected term of the options, trading volume of our 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, 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 we have not issued any dividends and does not anticipate issuing any dividends in the future.

Information regarding stock options outstanding, exercisable and expected to vest as of December 29, 2018 is summarized below:

	Number of		Weighted Average		Weighted Average Remaining Contractual		Aggregate Intrinsic Value
	Shares		Exercise Price		Life (years)		(thousands)
Options outstanding		844,898	$	8.84		4.61	$	12
Options vested and expected to vest		797,921	$	8.87		4.53	$	12
Options exercisable		418,316	$	9.12		3.38	$	12

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between our closing stock price on the last trading day of fiscal 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 29, 2018. This amount is subject to change due to changes to the fair market value of our common stock. The total intrinsic value of options exercised for fiscal years 2018 and 2017 was approximately $0.1 million and $0.3 million, respectively.

Effective for the 2018 fiscal year and thereafter, each non-employee member of the Board of Directors received an annual equity award of either restricted stock or RSU, at the election of such Board member, in each case equal to $40 thousand worth of our common stock (determined at the fair market value of the shares at the time such award is granted) under our Incentive Plan. Each equity award or RSU vests in full on the one-year anniversary of the date of grant provided that the non-employee member continues to serve on the Board through such date.

We recognize the estimated compensation expense of restricted stock units and awards, net of estimated forfeitures, over the vesting term. The estimated compensation expense is based on the fair value of our common stock on the date of grant.

Information regarding the restricted stock units outstanding, vested and expected to vest as of December 29, 2018 is summarized below:

The intrinsic value of the restricted stock units is calculated based on the closing price of our shares as quoted on the Nasdaq Global Market on the last trading day of the fiscal year, December 28, 2018, of $4.45.

The majority of the restricted stock units that were released in fiscal year 2018 were net-share settled such that we withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were based on the value of the restricted stock units on their release date as determined by our closing stock price. These net-share settlements had the effect of share repurchases as they reduced and retired the number of shares that would have otherwise been issued as a result of the release and did not represent an expense to us. For the fiscal year ended December 29, 2018, 86,941 shares of restricted stock units were released with an intrinsic value of approximately $0.6 million. We withheld 26,181 shares to satisfy approximately $194 thousand of employees’ minimum tax obligation on the released restricted stock units.

Information regarding the RSU activity during the years ended December 29, 2018 and December 30, 2017 is summarized below:

	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2016		335,805		$	11.20
Restricted stock units granted		137,391		$	9.88
Restricted stock units released		(80,009	)	$	12.37
Restricted stock units forfeited		(32,039	)	$	11.44
Outstanding as of December 30, 2017		361,148		$	10.42
Restricted stock units granted		418,750		$	7.79
Restricted stock units released		(86,941	)	$	7.38
Restricted stock units forfeited		(95,836	)	$	10.01
Outstanding as of December 29, 2018		597,121		$	9.08

During the year ended December 29, 2018, the Company awarded 418,750 restricted stock units at a weighted average grant date fair value of $7.79 per share. Of this amount, 238,200 stock units represent performance-based shares that are subject to service, performance or market vesting conditions with a weighted average grant date fair value of $7.89 per share.

RSUs granted with market conditions are valued using a Monte Carlo simulation model and compensation expense is recognized ratably during the service period even if the market condition is not satisfied. To the extent that the market condition is not met, the RSUs will not vest and will be cancelled.

RSUs granted with performance conditions are valued at the grant date fair value of the underlying common shares. The Company makes a determination regarding the probability of the performance criteria being achieved and compensation expense is recognized ratably over the requisite service period, if it is expected that the performance criteria will be met.

Information regarding the restricted stock awards activity during the year ended December 29, 2018 and December 30, 2017 is summarized below:

	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2016		1,289		$	15.51
Restricted stock awards granted		4,301		$	9.30
Restricted stock awards released		(1,289	)	$	15.51
Outstanding as of December 30, 2017		4,301		$	9.30
Restricted stock awards granted		—			—
Restricted stock awards released		(4,301	)	$	9.30
Outstanding as of December 29, 2018		—			—