12. STOCK PLANS AND STOCK-BASED COMPENSATION

In October 2006, the Board adopted the Andrea Electronics Corporation 2006 Equity Compensation Plan (“2006 Plan”), which was subsequently approved by the shareholders. The 2006 Plan, as amended, authorized the granting of awards, the exercise of which would allow up to an aggregate of 18,000,000 shares of Andrea’s Common Stock to be acquired by the holders of those awards. Awards could be granted to key employees, officers, directors and consultants. As the 2006 Plan has expired, no further awards will be granted under the 2006 Plan.

The stock option awards granted under this plan have been granted with an exercise price equal to the market price of the Company’s stock at the date of grant with vesting periods of up to four years and 10-year contractual terms. The fair values of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model that uses the weighted-average assumptions noted in the following table. Expected volatilities are based on implied volatilities from historical volatility of the Company’s stock. The expected term of options granted represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

No options were granted during the year ended December 31, 2018 or 2017.

Option activity during 2018 is summarized as follows:

	Options Outstanding					Options Exercisable
	Options Outstanding		Weighted Average Exercise Price	Weighted Average Fair Value	Weighted Average Remaining Contractual Life	Options Exercisable	Weighted Average Exercise Price		Weighted Average Fair Value		Weighted Average Remaining Contractual Life
At January 1, 2018	15,163,001		$ 0.07	$ 0.07	4.15 years	12,561,401	$	0.07	$	0.07	3.19 years
Exercised	(2,190,000	)	$ 0.04	$ 0.04
Forfeited	(83,375	)	$ 0.05	$ 0.05
Canceled	(2,881,625	)	$ 0.04	$ 0.04
At December 31, 2018	10,008,001		$ 0.08	$ 0.08	4.81 years	8,847,351	$	0.08	$	0.08	4.41 years

During the year ended December 31, 2018, 1,357,575 options vested with a weighted average exercise price of $0.05 and a weighted average fair value of $0.05 per option. Based on the December 31, 2018 fair market value of the Company’s common stock of $0.06 per share, the aggregate intrinsic value of the 10,008,001 options outstanding and 8,847,351 options exercisable is $34,750 and $23,144, respectively.

Total compensation expense recognized related to stock option awards was $45,920 and $124,695 for the years ended December 31, 2018 and 2017, respectively. In the accompanying consolidated statement of operations for the year ended December 31, 2018, $42,430 of expense is included in general, administrative and selling expenses and $3,490 is included in research and development expenses. In the accompanying consolidated statement of operations for the year ended December 31, 2017, $106,448 of expense is included in general, administrative and selling expenses and $18,247 is included in research and development expenses.

As of December 31, 2018, there was $17,710 of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the 2006 Plan which is expected to be recognized in 2019.