Stock-Based Compensation

The stock-based compensation expense included in the Company's consolidated financial statements for the three and six months ended July 2, 2017 and July 3, 2016 was as follows (in thousands):



	Three Months Ended				Six Months Ended
	July 2, 2017		July 3, 2016		July 2, 2017		July 3, 2016
Cost of revenue	$	20	$	47	$	53	$	85
Research and development	134		175		273		466
Selling, general and administrative	193		217		339		450
Total costs and expenses	$	347	$	439	$	665	$	1,001

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

No stock options were granted in the first six months of 2017 and 2016. As of July 2, 2017 and July 3, 2016, the fair value of unvested stock options, net of expected forfeitures, was approximately $361,000 and $305,000, respectively. The remaining unrecognized stock-based compensation expense is expected to be recognized over a weighted average period of 2.72 years.

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 2, 2017:



	Shares Available for Grant
	(in thousands)
Balance at January 1, 2017	2,632
Authorized	1,500
Options forfeited or expired	117
RSUs granted	(378	)
RSUs forfeited or expired	107
Balance at July 2, 2017	3,978

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 2017:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Term	Aggregate Intrinsic Value
	(in thousands)				(in years)	(in thousands)
Balance outstanding at January 1, 2017	4,979		$	2.35
Forfeited or expired	(117	)	$	2.96
Exercised	(53	)	1.31
Balance outstanding at July 2, 2017	4,809		$	2.35	3.64	$	656
Exercisable at July 2, 2017	3,968		$	2.61	2.52	$	216
Vested and expected to vest at July 2, 2017	4,636		$	2.39	3.44	$	560

The aggregate intrinsic value in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $1.46 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 first six months of 2017 and 2016 was $97,000 and $0, respectively. Total cash received from employees as a result of employee stock option exercises during the first six months of 2017 and 2016 was approximately $70,000 and $0, 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 $63,000 and $125,000 for the three and six months ended July 2, 2017, respectively.

Restricted Stock Units and Performance-based Restricted Stock Units

The Company began issuing RSUs and PRSUs in the third quarter of 2007. 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 and PRSUs was $284,000 and $0 for the three months and $473,000 and $0 for six months ended July 2, 2017, respectively. As of July 2, 2017 and July, 3, 2016, there was $1.2 million and $1.6 million, respectively, in unrecognized compensation expense related to RSUs and PRSUs. The remaining unrecognized stock-based compensation expense is expected to be recorded over a weighted average period of 2.23 years.

A summary of activity for the Company's RSUs and PRSUs for the six months ended July 2, 2017 and information regarding RSUs and PRSUs outstanding and expected to vest as of July 2, 2017 is as follows:



	RSUs & PRSUs Outstanding
	Number of Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested at January 1, 2017	1,370		$	1.68
Granted	378		1.57
Vested	(283	)	1.31
Forfeited	(107	)	—
Nonvested at July 2, 2017	1,358		$	1.72

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 of 2017 and 2016 was $0.41 and $0.31 per right, respectively.

As of July 2, 2017, 1.8 million shares remained available for issuance under the 2009 ESPP. For the three and six months ended July 2, 2017, the Company recorded stock-based compensation expense related to the 2009 ESPP of $0 and $67,000, 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 2, 2017		July 3, 2016		July 2, 2017		July 3, 2016
Expected term (months)	6.00		6.08		6.00		6.08
Risk-free interest rate	1.02	%	0.40	%	1.02	%	1.04	%
Volatility	49.71	%	54.31	%	49.71	%	61.06	%
Dividend yield	—		—		—		—

As of July 2, 2017, the unrecognized stock-based compensation expense relating to the Company's 2009 ESPP was $59,000 and is expected to be recognized over a weighted average period of approximately 4.5 months.