10. Share-Based Payments

Employee Stock Option Plans

The Company’s share-based incentive plan offering stock options is primarily through 2007 Equity Incentive Plan (the “2007 Plan”). Under this plan, one new share is issued for each stock option exercised. The plan is described below.

The 2007 Plan was restated and approved by the shareholders on December 12, 2016. Provisions of the restated 2007 Plan include the granting of up to 2,000,000 incentive and non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units. Options may be granted to employees, officers, non-employee directors and other service providers and may be granted upon such terms as the Compensation Committee of the Board of Directors determines in their sole discretion.

All vesting schedules for options granted are based on 3 or 4-year vesting schedules, with either one-third or one-fourth vesting on the first anniversary and the remaining options vesting ratably over the remainder of the vesting term. Generally, directors and officers have 3-year vesting schedules and all other employees have 4-year vesting schedules. Additionally, in the event of a change in control or the occurrence of a corporate transaction, the Company’s Board of Directors has the authority to elect that all unvested options shall vest and become exercisable immediately prior to the event or closing of the transaction. All options outstanding as of December 31, 2019 had contractual lives of ten years.

As of December 31, 2019, there were 544,647 options outstanding under the 2007 Plan. As of December 31, 2019, the 2007 Plan had 950,447 authorized unissued options.

The Company uses judgment in determining the fair value of the share-based payments on the date of grant using an option-pricing model with assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the risk-free interest rate of the awards, the expected life of the awards, the expected volatility over the term of the awards, and the expected dividends of the awards. The Company uses the Black-Scholes option pricing model to determine the fair value of share-based payments granted under the guidelines of ASC Topic 718.

The risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of the grant, based on the expected life of the stock option. The expected life of the stock option is determined using historical data.

The expected price volatility is determined using a weighted average of daily historical volatility of the Company’s stock price over the corresponding expected option life.

Under guidelines of ASC Topic 718, the Company recognizes the associated compensation cost for only those awards expected to vest on a straight-line basis over the underlying requisite service period. The Company estimated the forfeiture rates based on its historical experience and expectations about future forfeitures.

The Company did not grant any options during the years ended December 31, 2019 and 2018.

The following table shows the stock option activity:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
As of December 31, 2017		764,430		$	8.78		6.48	$	1,038
Granted		—			—
Expired and canceled		(106,108	)		7.56
Forfeited prior to vesting		(34,066	)		10.79
Exercised		—			—
As of December 31, 2018		624,256		$	8.87		5.28	$	—
Granted		—			—
Expired and canceled		(78,786	)		7.85
Forfeited prior to vesting		(823	)		11.97
Exercised		—			—
As of December 31, 2019		544,647		$	9.01		4.93	$	—
Vested and Expected to Vest at December 31, 2018		624,256		$	8.87		5.28	$	—
Vested at December 31, 2018		548,045		$	8.62		4.90	$	—
Vested and Expected to Vest at December 31, 2019		544,647		$	9.01		4.93	$	—
Vested at December 31, 2019		527,181		$	8.97		4.85	$	—

The total pre-tax compensation cost related to stock options recognized during the years ended December 31, 2019 and 2018 was $208 and $463, respectively. Tax benefit from compensation cost related to stock options during the years ended December 31, 2019 and 2018 was $0. As of December 31, 2019, the total compensation cost related to stock options not yet recognized and before the effect of any forfeitures was $51, which is expected to be recognized over approximately the next 0.38 year on a straight-line basis.

Employee Stock Purchase Plan

During the years ended December 31, 2019 and 2018, the Company issued shares to employees under the Company’s 2016 Employee Stock Purchase Plan (the “ESPP”). The ESPP was approved by the Company’s shareholders on December 12, 2016. As of December 31, 2019, and December 31, 2018, 422,866 and 442,994, respectively of the originally approved 500,000 shares were available for offerings under the ESPP. Offering periods under the ESPP commence on each Jan 1 and July 1 and continue for a duration of six months. The ESPP is available to all employees who do not own, or are deemed to own, shares of stock making up an excess of 5% of the combined voting power of the Company, its parent or subsidiary.

During each offering period, each eligible employee may purchase shares under the ESPP after authorizing payroll deductions. Under the ESPP, each employee may purchase up to the lesser of 2,500 shares or $25 of fair market value (based on the established purchase price) of the Company’s stock for each offering period. Unless the employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase common stock on the last business day of the period at a price equal to 85% (or a 15% discount) of the fair market value of the common stock on the first or last day of the offering period, whichever is lower.

Shares purchased and compensation expense associated with Employee Stock Purchase Plans were as follows:

	2019		2018
Shares purchased under ESPP plan		20,128		23,789
Plan compensation expense	$	9	$	10

Cash Dividends

On February 21, 2018, the Company declared a cash dividend of $0.07 per share of ClearOne common stock. The dividend was paid on March 21, 2018 to shareholders of record as of March 7, 2018. On June 13, 2018, the Company announced the suspension of its dividend program.

Issuance of Common Stock

The Company raised additional capital through an oversubscribed subscription rights offering (the "Rights Offering") which closed on December 4, 2018 and which raised $9,883 (net of stock issuance costs). In the Rights Offering, we issued one subscription right to each of our shareholders for each share of our common stock that they held. Each subscription right entitled the shareholder to purchase one share of our common stock at a purchase price of $1.20 per share. At the closing, we sold 8,306,535 shares of our common stock and returned subscriptions for 754,868 shares that were oversubscribed after allocating oversubscribed shares on a pro-rata basis.