Stock-Based Compensation

The Company's 2004 Stock Option and Incentive Plan was amended and restated most recently in 2019. At a Special Meeting of Stockholders held on November 12, 2019, the stockholders of the Company approved the Company’s Eleventh Amended and Restated 2004 Stock Option and Incentive Plan (the “2004 Stock Plan”), which, among other things, increased the number of shares of the Company’s common stock authorized for issuance thereunder by 327,000 shares. The 2004 Stock Plan, among other things, provides for granting of incentive and nonqualified stock option and stock bonus awards to officers, employees and outside consultants. Outstanding options under the 2004 Stock Plan generally vest over four years and terminate 10 years after the grant date, or earlier if the option holder is no longer an executive officer, employee, consultant, advisor or director, as applicable, of the Company. As of December 31, 2019, 439,890 shares of common stock were authorized for issuance under the 2004 Stock Plan, of which 24,500 shares had been issued, 164,980 shares were subject to outstanding options at a weighted average exercise price of $7.16 per share and 250,410 shares were available for future grant.

The Company's 2009 Non-Qualified Inducement Stock Plan (the “2009 Inducement Plan”) is intended to encourage and enable employees, including prospective employees, of the Company upon whose judgment, initiative, and efforts the Company largely depends for the successful conduct of its business to acquire a proprietary interest in the Company. The 2009 Inducement Plan, among other things, provides for the granting of awards, including non-qualified stock options, restricted stock, and unrestricted stock. As of December 31, 2019, 1,250 shares of common stock were authorized for issuance and were available for future grant under the 2009 Inducement Plan.

The exercise price of stock options awarded under the 2004 Stock Plan and the 2009 Inducement Plan may not be less than the fair value of the common stock on the date of the option grant. For holders of more than 10% of the Company’s total combined voting power of all classes of stock, incentive stock options may not be granted at less than 110% of the fair value of the Company’s common stock at the date of grant and for a term not to exceed five years.

The Company's 2010 Employee Stock Purchase Plan was amended and restated most recently in 2018. The 2010 ESPP authorizes an annual increase on the first day of each of the Company’s fiscal years equal to the lesser of (i) 2,500 shares, (ii) 1 percent of the shares of common stock outstanding on the last day of the immediately preceding fiscal year, or (iii) such lesser number of shares as is determined by the Board. All of the Company’s full-time employees and certain part-time employees are eligible to participate in the 2010 ESPP. For part-time employees to be eligible, they must have customary employment of more than five months in any calendar year and more than 20 hours per week. Employees who, after exercising their rights to purchase shares under the 2010 ESPP, would own shares representing 5% or more of the voting power of the Company’s common stock, are ineligible to participate.

Under the 2010 ESPP, participating employees can authorize the Company to withhold up to 10% of their earnings during consecutive six-month payment periods for the purchase of the shares. At the conclusion of each period, participating employees can purchase shares at 85% of the lower of their fair value at the beginning or end of the period. The 2010 ESPP is regarded as a compensatory plan. For the years ended December 31, 2019 and 2018 the Company issued 4,331 and 2,280 shares of its common stock, respectively, under the 2010 ESPP. As of December 31, 2019, there were 10,946 remaining shares to be issued under the 2010 ESPP.

The Company uses the Black-Scholes option pricing model for determining the fair value of shares of common stock issued or to be issued under the 2010 ESPP. The following assumptions are used in determining fair value: The risk-free interest rate assumption is based on the United States Treasury’s constant maturity rate for a six month term (corresponding to the expected option term) on the date the option was granted. The expected dividend yield is zero because the Company does not currently pay dividends nor expects to do so during the expected option term. An expected term of six months is used based on the duration of each plan offering period. The volatility assumption is based on a consideration of stock price volatility over the most recent period of time corresponding to the expected term and is also based on expected future stock price volatility.

The weighted average grant-date fair value of stock options used in the calculation of stock-based compensation expense in the accompanying statement of operations for the years ended December 31, 2019 and 2018 is calculated using the following assumptions:



	Years Ended December 31,
	2019		2018
Risk-free interest rate	1.9%		2.2 - 3.0%
Expected dividend yield	—		—
Expected option term	10 years		3 - 5 years
Volatility	72.4	%	70.0	%

The risk-free interest rate assumption is based on the United States Treasury’s constant maturity rate for a three or five year term (corresponding to the expected option term) on the date the option was granted. The expected dividend yield is zero as the Company does not currently pay dividends nor expects to do so during the expected option term. The expected option term of three to five years is estimated based on an analysis of actual option exercises. The volatility assumption is based on daily historical volatility during the time period that corresponds to the expected option term and expected future stock price volatility. The pre-vesting forfeiture rate is based on the historical and projected average turnover rate of employees.

A summary of option activity for the year ended December 31, 2019 is presented below:



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2018	49,410		$	40.84
Granted	150,000		4.58
Exercised	—		—
Forfeited	(34,420	)	38.69
Expired	(10	)	19,713.00
Outstanding at December 31, 2019	164,980		$	7.16	9.3	$	—
Vested or expected to vest at December 31, 2019	164,980		$	7.16	9.3	$	—
Exercisable at December 31, 2019	13,086		$	34.54	2.0	$	—

Expected to vest options are determined by applying the pre-vesting forfeiture rate to the total outstanding options. Aggregate intrinsic value represents the total pre-tax intrinsic value (the aggregate difference between the closing stock price of the Company’s common stock as of December 31, 2019, as applicable, and the exercise price for the in-the-money options) that would have been received by the option holders if all the in-the-money options had been exercised on December 31, 2019.

The weighted average per share grant-date fair values of options granted during 2019 and 2018 was $4.58 and $17.10, respectively.

The aggregate intrinsic value of options issued or exercised during 2019 and 2018 was $0.

Total unrecognized stock-based compensation costs related to non-vested stock options was $545,459, which related to 164,980 shares with a per share weighted fair value of $7.16 as of December 31, 2019. This unrecognized cost is expected to be recognized over a weighted average period of approximately 1.0 year.

Cash received from option exercises and purchases under the 2004 ESPP and the 2010 ESPP for 2019 and 2018, was $15,106 and $18,618, respectively. The Company issues new shares upon option exercises, purchases under the Company’s ESPPs, and vesting of restricted stock.

The Company recorded stock-based compensation expense of $190,331 and $446,077 for 2019 and 2018, respectively.