(10) Stock-based Compensation

Effective May 5, 2015, the Company adopted the 2015 Equity Plan (the “2015 Plan”), pursuant to which the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other stock and cash awards to eligible participants. The Company also maintains an Amended and Restated 2005 Stock Incentive Plan (the “2005 Plan”). Together, the 2015 Plan and 2005 Plan are referred to herein as the “Plans.” Under the 2015 Plan, an aggregate of 176,000 shares of the Company’s common stock remained unreserved and available for issuance at October 1, 2017. The 2005 Plan prohibits the granting of incentives after May 12, 2015, the tenth anniversary of the date the 2005 Plan was approved by the Company’s shareholders. Nonetheless, the 2005 Plan will remain in effect until all outstanding incentives granted thereunder have either been satisfied or terminated.

The Company recognized stock-based compensation expense in its consolidated statements of operations for the three and nine months ended October 1, 2017 and October 2, 2016, respectively, as follows:


	Three Months Ended				Nine Months Ended
	October 1,		October 2,		October 1,		October 2,
(in thousands)	2017		2016		2017		2016
Stock options	$	57	$	157	$	173	$	209
Restricted stock		(5)		15		10		45
	$	52	$	172	$	183	$	254

During the three and nine months ended October 1, 2017, the Company recognized recapture of previously recorded stock-based compensation due to one of the Company’s former directors declining to stand for reelection to the Board in the second quarter of 2017 and one of the Company’s former director’s resignation in the third quarter of 2017. During the nine months ended October 2, 2016, the Company recognized recapture of previously recorded stock-based compensation due to the departure of the Company’s former Chief Financial Officer.

The compensation expense for stock option grants is recognized in general and administrative expense in the Company’s consolidated statements of operations through the applicable service period. Options granted to certain non-officer employees vest in equal annual installments over a period of four years and expire either five or ten years from the grant date. Compensation expense equal to the grant date fair value is generally recognized for these awards over the vesting period.

Options granted to certain non-employees in exchange for future services either vest in monthly installments over a period of approximately two years or are granted monthly and vest immediately, and expire five years from the grant date. Expense equal to the current fair value is recognized over the vesting period, with the value being marked to market in each accounting period for any unvested portions of the awards.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes valuation method with the assumptions noted in the table below. Due to a lack of recent historical share option exercise experience, the Company uses a simplified method for estimating the expected life, as outlined in Accounting Standards Codification 718, calculated using the following formula: (vesting term + original contract term)/2. Expected volatilities are based on the movement of the Company’s common stock price over the most recent historical period equivalent to the expected life of the option. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. maturities over the expected life at the time of grant.

Information regarding the Company’s stock options is summarized below:


				Weighted
				Average
				Remaining
	Number of	Weighted Average		Contractual
(number of options in thousands)	Options	Exercise Price		Life in Years
Options outstanding at January 1, 2017	686	$	9.15	5.7
Granted	55		4.29
Exercised	—		—
Forfeited or expired	(217)		13.26
Options outstanding at October 1, 2017	524	$	6.94	6.0


	Nine Months Ended
	October 1, 2017			Fiscal 2016
Weighted-average fair value of options granted during the period	$	2.42		$	1.97
Expected life (in years)		6.1			5.2
Expected stock volatility		54.41	%		39.98	%
Risk-free interest rate		2.0	%		1.2	%