Note 13 - Stock-based Compensation

12 Months Ended

Jan. 03, 2021

Notes to Financial Statements

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, or PRSUs, 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 2020, 2019, and 2018 was as follows (in thousands):

	Fiscal Years
	2020		2019		2018
Cost of revenue	$	162	$	78	$	129
Research and development		670		2,242		760
Selling, general and administrative		907		824		1,012
Total costs and expenses	$	1,739	$	3,144	$	1,901

  No stock-based compensation was capitalized or included in inventories at the end of 2020, 2019 and 2018.

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

Stock Options

The following table summarizes stock options outstanding and stock option activity under the 2019 Plan, and the related weighted average exercise price, for 2020, 2019 and 2018:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Term		Aggregate Intrinsic Value
	(in thousands)					(in years)		(in thousands)
Balance outstanding at December 31, 2017		254		$	29.26		4.34
Granted		—			—
Forfeited or expired		(10	)		25.20
Exercised		(15	)		12.60
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	$	—
Exercisable and Vested and expected to vest at January 3, 2021		121		$	28.46		3.75	$	—

There was no intrinsic value for the stock options, based on the Company’s closing stock price of $3.79 per share as of the end 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 2020, 2019 and 2018 was not significant. Total cash received from employees as a result of employee stock option exercises during 2020, 2019 and 2018 was approximately $0, $3,600, and $195,000, 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 $39,000, $117,000, and $131,000 for 2020, 2019, and 2018, respectively. No stock options were granted during the fiscal year 2020, 2019 and 2018. As of the end of 2020, the fair value of unvested stock options, net of expected forfeitures, was approximately $38,000. This unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 0.00 year.

Significant exercise price ranges of options outstanding, related weighted average exercise prices and contractual life information at the end of 2020 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		52		5.68	$	12.05		52	$	12.05
$18.48 - $31.50		14		2.82		26.71		14		26.71
$32.20		3		2.34		32.2		3		32.20
$38.92		14		0.85		38.92		14		38.92
$39.48 - $44.94		9		2.76		42.94		9		42.91
$46.62		3		3.34		46.62		3		46.62
$47.46		14		2.94		47.46		14		47.46
$48.72		8		1.35		48.72		8		48.72
$53.48		4		3.38		53.48		4		53.48
$12.05- $53.48		121		3.75	$	28.46		121	$	28.46

Valuation Assumptions

The Company uses the Black-Scholes option pricing model to estimate the fair value of employee stock options and 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 both stock options and 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 stock option or 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.

No stock options were granted during the years 2020, 2019 and 2018.

Restricted Stock Units

The Company grants restricted stock units, or RSUs, 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 $1.7 million, $3.0, million and $1.6 million in 2020, 2019 and 2018, respectively.

The following table summarizes RSU’s activity under the 2019 Plan and the related weighted average grant date fair value, for 2020, 2019 and 2018:

	RSUs & PRSUs Outstanding
	Number of Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested at December 31, 2017		168		$	21.56
Granted		110			11.90
Vested		(77	)		19.18
Forfeited		(18	)		—
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

 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 2020, 2019 and 2018 was $1.09, $4.28 and $5.18, respectively. Sales under the ESPP were 20,409 shares of common stock at an average price per share of $2.47 for 2020, 24,131 shares of common stock at an average price per share of $9.76 for 2019, and 31,306 shares of common stock at an average price per share of $15.40 for 2018.

  As of January 3, 2021, 341,926 shares under the 2009 ESPP remained available for issuance. The Company recorded compensation expenses related to the ESPP of $39,000, $60,000 and $205,000 in 2020, 2019 and 2018, 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
	2020			2019			2018
Expected life (months)		6.0			6.0			6.0
Risk-free interest rate		0.12	%		2.37	%		2.26	%
Volatility		82	%		54	%		50	%
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.