13. EQUITY INCENTIVE PLAN

The Company’s 2006 Equity Incentive Plan (the "2006 Plan") was terminated as to future awards on July 12, 2016. The Company’s 2017 Stock Option and Incentive Plan (the "2017 Plan") was adopted by the Company’s stockholders on June 5, 2017 and there were 44,444 shares of common stock reserved for issuance under the 2017 Plan. The 2017 Plan will expire on June 5, 2027.

The Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”), which has the authority to set the number, exercise price, term and vesting provisions of the awards granted under the Plan, subject to the terms thereof. Either incentive or non-qualified stock options may be granted to employees of the Company, but only non-qualified stock options may be granted to non-employee directors and advisors. However, in either case, the Plan requires that stock options must be granted at exercise prices not less than the fair market value of the common stock on the date of the grant. Options issued under the plan vest over periods as determined by the Committee and expire 10 years after the date the option was granted.

The Company accounts for all stock-based compensation payments to employees and directors, including grants of employee stock options, at fair value and expenses the benefit in operating expense in the consolidated statements of operations over the service period of the awards. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model, which requires various assumptions including estimating stock price volatility, expected life of the stock option, risk free interest rate and estimated forfeiture rate.

Amendment of the 2017 Stock Option and Incentive Plan

On January 31, 2018, at a special meeting of the stockholders of the Company, the stockholders approved an amendment and restatement of the Company’s 2017 Stock Option and Incentive Plan (the “2017 Plan”) to:

increase the aggregate number of shares authorized for issuance under the 2017 Plan by 359,300 shares to 403,744 shares;

increase the maximum number of shares that may be granted in the form of stock options or stock appreciation rights to any one individual in any one calendar year and the maximum number of shares underlying any award intended to qualify as performance-based compensation to any one individual in any performance cycle, in each case to 66,667 shares of common stock; and

add an “evergreen” provision, pursuant to which the aggregate number of shares authorized for issuance under the 2017 Plan will be automatically increased each year on January 1st, beginning on January 1, 2019, by 5% of the number of shares of common stock issued and outstanding on the immediately preceding December 31st, or such lesser number of shares determined by the Company’s Board of Directors or Compensation Committee.

Stock Options.

The Company accounts for all stock-based compensation payments to employees and directors, including grants of employee stock options, at fair value at the date of grant and expenses the benefit in operating expense in the condensed consolidated statements of operations over the service period of the awards. The Company records the expense for stock-based compensation awards subject to performance-based milestone vesting over the remaining service period when management determines that achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions as of the reporting date. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option pricing model, which requires various assumptions including estimating stock price volatility, expected life of the stock option, risk free interest rate and estimated forfeiture rate.

During the year ended December 31, 2019, The Company granted stock options to employees and directors to purchase up to 292,604 shares of common stock at a weighted average exercise price of $2.36. These awards have vesting periods of up to four years and had a weighted average grant date fair value of $2.15. The fair value calculation of options granted during 2019 used the follow assumptions: risk free interest rates of 1.60% to 2.53%, based on the U.S. Treasury yield in effect at the time of grant; expected life of six years; and volatility of 133% to 139% based on historical volatility of the Company’s common stock over a time that is consistent with the expected life of the option.

The following table summarizes stock option activity under our plans during the year ended December 31, 2019:


	Number of	Weighted-Average
	Options	Exercise Price
Outstanding at January 1, 2019	224,895	$	15.90
Granted	292,604		2.36
Forfeited	(27,169)		6.03
Outstanding at December 31, 2019	490,330	$	8.30
Exercisable at December 31, 2019	181,705	$	13.48

As of December 31, 2019, there were 413,174 options that were vested or expected to vest with an aggregate intrinsic value of zero and a remaining weighted average contractual life of 8.7 years.

During the year ended December 31, 2018, there were 224,365 options granted with a weighted average exercise price of $10.50 and 15,236 options forfeited with a weighted average exercise price of $29.94.

During the years ended December 31, 2019 and 2018, we recorded compensation expense for all stock awards of $0.7 million and $0.5 million, respectively, within operating expense in the accompanying statements of operations. As of December 31, 2019, the unrecognized compensation expense related to unvested stock awards was $1.7 million, which is expected to be recognized over a weighted-average period of 2.0 years.