Note 9 — Stock-Based Compensation

The stock-based compensation expense included in the Company's consolidated financial statements for the three and six-months ended July 1, 2018 and July 2, 2017 was as follows (in thousands):

	Three Months Ended				Six Months Ended
	July 1, 2018		July 2, 2017		July 1, 2018		July 2, 2017
Cost of revenue	$	35	$	20	$	69	$	53
Research and development		207		134		390		273
Selling, general and administrative		237		193		452		339
Total costs and expenses	$	479	$	347	$	911	$	665

No stock-based compensation was capitalized during any period presented above.

No stock options were granted during the three and six month periods ended July 1, 2018 and July 2, 2017. As of July 1, 2018 and July 2, 2017, the fair value of unvested stock options, net of expected forfeitures, was approximately $200,000 and $361,000, respectively. The remaining unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of 2.0 years as of July 1, 2018.

Stock-Based Compensation Award Activity

The following table summarizes the activity in the shares available for grant under the 2009 Plan during the six months ended July 1, 2018:

	Shares Available for Grant
	(in thousands)
Balance at December 31, 2017		3,899
Authorized		4,000
RSUs granted		(1,229	)
RSUs forfeited or expired		136
Options forfeited		50
Balance at July 1, 2018		6,856

Stock Options

The following table summarizes stock options outstanding and stock option activity under the 2009 Plan, and the related weighted average exercise price, for the first six months of 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		3,558		$	2.09
Forfeited or expired		(50	)
Balance outstanding at July 1, 2018		3,508		$	2.08		3.89	$	285
Exercisable at July 1, 2018		3,066		$	2.24		3.29	$	167
Vested and expected to vest at July 1, 2018		3,430		$	2.11		3.80	$	263

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $1.15 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 the six months ended July 1, 2018 and July 2, 2017 was $0 and $97,000, respectively. Total cash received from employees as a result of employee stock option exercises during the six months ended July 1, 2018 and July 2, 2017 was approximately $0 and $70,000, 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 loss position. Total stock-based compensation related to stock options was $34,000 and $63,000 for the three months and $72,000 and $125,000 for the six months ended July 1, 2018 and July 2, 2017, respectively.

Restricted Stock Units

The Company grants restricted stock units or RSUs, to employees and board of directors with various vesting terms. RSUs entitle the holder to receive, at no cost, one common share for each RSU as it vests. In general, the Company's policy is to withhold shares in settlement of employee tax withholding obligations upon the vesting of RSUs. The stock-based compensation related to RSUs was $382,000 and $284,000 for three months and $722,000 and $473,000 the six months ended July 1, 2018 and July 2, 2017, respectively. As of July 1, 2018 and July 2, 2017, there was $2.3 million and $1.2 million, respectively, in unrecognized compensation expense related to RSUs. The remaining unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 2.59 years.

A summary of activity for the Company's RSUs for the six months ended July 1, 2018 and information regarding RSUs outstanding and expected to vest as of July 1, 2018 is as follows:

	RSUs & PRSUs Outstanding
	Number of Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested at December 31, 2017		2,363		$	1.54
Granted		1,229			1.55
Vested		(365	)		1.39
Forfeited		(136	)		—
Nonvested at July 1, 2018		3,091		$	1.56

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 2009 ESPP during the second quarters ended July 1, 2018 and July 2, 2017, was $0.47 and $0.41 per right, respectively.

As of July 1, 2018, 1.4 million shares remained available for issuance under the 2009 ESPP. For the three and six months ended July 1, 2018, the Company recorded stock-based compensation expense related to the 2009 ESPP of $63,000 and $117,000 respectively.

The fair value of rights issued pursuant to the Company's 2009 ESPP was estimated on the commencement date of each offering period using the following weighted average assumptions:

	Three Months Ended						Six Months Ended
	July 1, 2018			July 2, 2017			July 1, 2018			July 2, 2017
Expected term (months)		6.00			6.0			6.00			6.00
Risk-free interest rate		2.09	%		1.02	%		2.09	%		1.02	%
Volatility		44.76	%		49.71	%		44.76	%		49.71	%
Dividend yield		—			—			—			—

As of July 1, 2018, the unrecognized stock-based compensation expense relating to the Company's 2009 ESPP was $77,000 and is expected to be recognized over a weighted average period of approximately 4.6 months.