NOTE

13.

EQUITY-BASED COMPENSATION

Equity Compensation Plans

October 2007,

the Company adopted the

2007

Omnibus Incentive Plan (the

“2007

Plan”) to provide for the granting of equity awards, such as stock options, unrestricted and restricted common stock, stock units, dividend equivalent rights, and stock appreciation rights to employees, directors and outside consultants, as determined by the Board of Directors (the “Board”). At the inception of the

2007

Plan,

80,000

shares were reserved for awards under the

2007

Plan.

For the years from

2009

2012,

the number of shares of common stock authorized for awards under the

2007

Plan increased annually in an amount equal to the lesser of (a)

40,000

shares; (b)

of the number of shares of the Company's common stock outstanding on the last day of the preceding year; or (c) such lesser number as determined by the Board. Accordingly, an additional

40,000,

37,427,

and

37,207

shares of common stock were authorized for awards under the

2007

Plan in

January 2012,

2011

and

2010,

respectively. Beginning in

2013,

the stockholders voted to remove the

40,000

-share cap and the

2007

Plan's shares authorized for awards increased annually by

of the number of shares of the Company's common stock outstanding on the last day of the preceding year. Accordingly, an additional

139,449,

82,461,

32,646,

59,157

shares of common stock were authorized for awards under the

2007

Plan in

2016,

2015,

2014

and

2013,

respectively. On

May 26, 2016,

the stockholders of the Company approved an amendment to the

2007

Plan to increase the number of shares of Company common stock authorized for awards thereunder by

1,124,826

shares. In

January 2017,

the Company added

610,774

shares to the

2007

Plan's shares authorized for awards, per the

2007

Plan's evergreen provision. As a result of the foregoing, the aggregate number of shares authorized for awards under the

2007

Plan was

2,318,486

shares, prior to its expiration on

March 15, 2017 (

after taking into account prior awards under the

2007

Plan).

Upon expiration of the

2007

Plan, new awards cannot be issued pursuant to the

2007

Plan, but awards outstanding as of its

March 15, 2017

plan expiration date will continue to be governed by its terms. Under the terms of the

2007

Plan, the exercise price of incentive stock options

may

not

be less than

100%

of the fair market value of the common stock on the date of grant and, if granted to an owner of more than

10%

of the Company's stock, then

not

less than

110%

of the fair market value of the common stock on the date of grant. Stock options granted under the

2007

Plan expire

later than

ten

years from the date of grant. Stock options granted to employees generally vest over

four

years, while options granted to directors and consultants typically vest over a shorter period, subject to continued service.

March 2017,

the Company adopted the

2017

Omnibus Incentive Plan (the

“2017

Plan”), which was approved by stockholders on

June 2, 2017,

to provide for the granting of equity awards, such as nonqualified stock options (“NQSOs”), incentive stock options (“ISOs”), restricted stock, performance shares, stock appreciation rights (“SARs”), RSUs and other share-based awards to employees, directors, and consultants, as determined by the Board. The

2017

Plan will

not

affect awards previously granted under the

2007

Plan. The

2017

Plan allows for awards of up to

2,318,486

shares of the Company's common stock, plus an automatic annual increase in the number of shares authorized for awards on the

first

day of each of the Company's fiscal years beginning

January

2018

through

January

2027

equal to (i)

of the number of shares of common stock outstanding on the last day of the immediately preceding fiscal year or (ii) such lesser number of shares of common stock than provided for in Section

(a)(i) of the

2017

Plan as determined by the Board. As of

June 30, 2020,

there were

3,044,090

shares available for future awards under the

2017

Plan.

Under the terms of the

2017

Plan, the exercise price of NQSOs, ISOs and SARs

may

not

be less than

100%

of the fair market value of the common stock on the date of grant and, if ISOs are granted to an owner of more than

10%

of the Company's stock, then

not

less than

110%

of the fair market value of the common stock on the date of grant. The term of awards will

not

be longer than

ten

years, or in the case of ISOs,

not

longer than

five

years with respect to holders of more than

10%

of the Company's stock. Stock options granted to employees generally vest over

four

years, while options granted to directors and consultants typically vest over a shorter period, subject to continued service. The Company issues new shares to satisfy option exercises under the

2007

Plan and the

2017

Plan.

Stock Option Summary

The following table summarizes information about the Company's stock options outstanding at

June 30, 2020,

and activity during the

three

-month period then ended:

(in thousands, except years and per share data)	Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
Outstanding at December 31, 2019		2,183		$	4.03		6.6	$	43
Options granted		520		$	0.97
Restricted stock units granted		160		$	—
Options exercised		-		$	—
Restricted stock units vested		(3	)	$	—
Options forfeited/cancelled		(167	)	$	5.83
Restricted stock units cancelled		(1	)	$	—
Outstanding at June 30, 2020		2,692		$	3.10		6.97	$	384

Vested and expected to vest at June 30, 2020		2,573		$	3.20		6.84	$	336

Vested at June 30, 2020		1,848		$	4.04		5.85	$	—

Exercisable at June 30, 2020		1,848		$	4.04		5.85	$	—

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the closing market price of the Company's common stock as quoted on the NYSE American as of

June 30, 2020

for options that have a quoted market price in excess of the exercise price. There were

stock option awards exercised during the

three

and

six

months ended

June 30, 2020.

There were

thousand stock option awards exercised for the

three

and

six

months ended

June 30, 2019

for which the Company received cash payments of

$189

thousand. There was

intrinsic value for stock option awards exercised for the

six

months ended

June 30, 2019.

As of

June 30, 2020,

total unrecognized compensation cost related to unvested stock options and restricted stock units was approximately

$743

thousand. This amount is expected to be recognized as stock-based compensation expense in the Company's unaudited condensed consolidated statements of operations and comprehensive loss over the remaining weighted average vesting period of

2.32

years.

Stock Option Awards to Employees and Directors

The Company grants options to purchase common stock to its employees and directors at prices equal to or greater than the market value of the stock on the dates the options are granted. The Company has estimated the value of stock option awards as of the date of grant by applying the Black-Scholes option pricing model using the single-option valuation approach. The application of this valuation model involves assumptions that are judgmental and subjective in nature. See Note

“Summary of Significant Account Policies,” for a description of the accounting policies that the Company applied to value its stock-based awards.

During the

six

months ended

June 30, 2020

and

2019,

the Company granted options to employees and directors to purchase an aggregate of

520,000

and

125,000

shares of common stock, respectively.

The weighted-average assumptions used in determining the value of options are as follows:

	Six Months Ended June 30,
Assumption	2020			2019
Expected price volatility		159.81	%		106.86	%
Expected term (in years)		6.43			6.16
Risk-free interest rate		0.50	%		2.08	%
Dividend yield		0.00	%		0.00	%
Weighted-average fair value of options granted during the period	$	0.93		$	0.27

Expected Price Volatility

—This is a measure of the amount by which the stock price has fluctuated or is expected to fluctuate. The computation of expected volatility was based on the historical volatility of our own stock.

Expected Term

—This is the period of time over which the options granted are expected to remain outstanding. The expected life assumption is based on the Company's historical data.

Risk-Free Interest Rate

—This is the U.S. Treasury rate for the week of the grant having a term approximating the expected life of the option.

Dividend Yield

—We have

not

made any dividend payments nor do we have plans to pay dividends in the foreseeable future.

Forfeitures are estimated at the time of grant and reduce compensation expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate.

In addition, during the

six

months ended

June 30, 2020,

the Company granted

160,000

RSUs to employees. During the

six

months ended

June 30, 2019,

the Company did

not

grant RSUs to employees.

For the

three

months ended

June 30, 2020

and

2019,

the Company recognized stock-based compensation expense of

$128

thousand and

$116

thousand, respectively, for stock-based awards to employees and directors. For the

six

months ended

June 30, 2020

and

2019,

the Company recognized stock-based compensation expense of

$174

thousand and

$223

thousand, respectively, for stock-based awards to employees and directors.

April 2019,

the Company modified stock options held by Mr. Yonghao (Carl) Ma, who resigned as a director of the Company, effective

April 29, 2019.

The option exercise period for Mr. Liu was extended from

three

months to

three

years, calculated from his date of resignation. Also, his stock option awards became fully vested at the date of his resignation. In connection with the stock option modification, the Company recognized stock-based compensation expense of

$14

thousand, which is included in the figure above.

May 2019,

the Company modified stock options held by Mr. Yanbin (Lawrence) Liu, who resigned as a director of the Company, effective

May 1, 2019.

The option exercise period for Mr. Yanbin Liu was extended from

three

months to

three

thousand, which is included in the figure above.

April 2020,

the Company modified stock options held by Ms. Gail Maderis, who resigned as a director of the Company, effective

April 1, 2020.

The option exercise period for Ms. Maderis was extended from

three

months to

three

years, calculated from her date of resignation. Also, her stock option awards became fully vested at the date of her resignation. In connection with the stock option modification, the Company recognized stock-based compensation expense of

$36

thousand, which is included in the figure above.

Stock-Based Awards to Non-Employees

During the

six

months ended

June 30, 2020

and

2019,

the Company did

not

grant options exercisable for shares of common stock to non-employees in exchange for advisory and consulting services.

When the Company grants stock options, the stock options are recorded at their fair value on the grant date and recognized over the respective service or vesting period. The fair value of the stock options that are granted is calculated using the Black-Scholes option pricing model as discussed above.

In addition, during the

six

months ended

June 30, 2020

and

2019,

the Company did

not

grant RSUs to non-employees.

For the

three

months ended

June 30, 2020

and

2019,

the Company recognized stock-based compensation expense of negative

thousand and

thousand, respectively, related to non-employee consultant stock and option grants. For the

six

months ended

June 30, 2020

and

2019,

the Company recognized stock-based compensation expense of

thousand and

$14

thousand, respectively, related to non-employee consultant stock and option grants.

Summary of Stock-Based Compensation Expense

A summary of the stock-based compensation expense included in results of operations for the options and restricted stock awards discussed above is as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2020		2019		2020		2019
Research and development	$	7	$	13	$	14	$	24
Sales and marketing		11		27		20		46
General and administrative		108		83		149		167
Total stock-based compensation expense	$	126	$	123	$	183	$	237

Since the Company has operating losses and net operating loss carryforwards, there are

tax benefits associated with stock-based compensation expense.