14. Stock-Based Compensation

Equity Incentive Plans – The Company’s 2013 Equity Compensation Plan (the “2013 Plan”) was adopted for the purpose of providing equity incentives to employees, officers, directors and consultants including options, restricted stock, restricted stock units, stock appreciation rights, other equity awards, annual incentive awards and dividend equivalents. The Company amended the 2013 Plan to increase the number of authorized shares of common stock under the Plan from 225,000 shares to 615,000 shares, which the Company’s stockholders approved on June 26, 2017. The Company further amended the 2013 Plan to increase the number of authorized shares of common stock under the Plan by 300,000 shares, which the Company’s stockholders approved and ratified on November 8, 2018. The Company is now authorized to issue 915,000 shares under the amended 2013 Plan.

Stock Options

The fair value of options is estimated on the date of grant using the Black-Scholes option pricing model. The valuation determined by the Black-Scholes pricing model is affected by the Company’s stock price as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The risk free rate is based on the U.S. Treasury rate for the expected life at the time of grant, volatility is based on the average long-term implied volatilities of peer companies, the expected life is based on the estimated average of the life of options using the simplified method, and forfeitures are estimated on the date of grant based on certain historical data. The Company utilizes the simplified method to determine the expected life of its options due to insufficient exercise activity during recent years as a basis from which to estimate future exercise patterns. The expected dividend assumption is based on the Company’s history and expectation of dividend payouts.

Forfeitures are required to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The following table summarizes the Company’s stock option activity for the years ended December 31, 2018 and 2017:

On April 19, 2018, the Company granted 75,000, 75,000, 70,000 and 30,000 stock options to Executive Chairman Jingbo Song, Non-executive Chairman James Kirsch, CEO Michael Wang and CFO Gary Xiao, respectively, in connection with their employment agreements. On September 7, 2018, the Company granted 3,000 stock options to an employee, in connection with his employment agreements. These options had an aggregate fair value of $547,000, using the Black-Scholes option-pricing model with the following assumptions:

The April 19, 2018 options granted are exercisable at an exercise price of $2.82 per share over a ten-year term and vest over two years, with one-third vested upon grant, while the September 7, 2018 options garnted are exercisable at an exercise price of $3.07 per share over a ten-year term and vest over two years, with one-third vested upon grant

The Company recorded non-cash compensation expense of approximately $659,000 and $706,000 as a component of general and administrative expenses in the accompanying consolidated statements of operations for the years ended December 31, 2018 and 2017, respectively, pertaining to stock options.

Total unrecognized compensation expense related to unvested stock options at December 31, 2018 amounts to approximately $301,000 and is expected to be recognized over a remaining weighted average period of 1.2 years.

Warrants

As of December 31, 2018 and 2017, there were 170,314 warrants outstanding and exercisable, with a weighted average exercise price of $32.44 per share. The weighted average remaining contractual life of the warrants outstanding and exercisable at December 31, 2018 and 2017 was 2.6 and 3.3 years, respectively, and the aggregate intrinsic value was $0.

Restricted Stock

A summary of restricted stock activity for the year ended December 31, 2018 is as follows:

On June 26, 2017, the Company granted 15,544 restricted stock units (“RSUs”) to certain Board members. The RSUs vest on June 28, 2018, subject to continued service on the vesting date. The RSUs have no voting or dividend rights. The fair value of the common stock on the date of grant was $7.72 per share, based upon the closing market price on the grant date. The aggregate grant date fair value of the combined awards amounted to $120,000.

The Company recorded non-cash compensation expense of $141,000 and $161,000 as a component of general and administrative expenses in the accompanying consolidated statements of operations for the years ended December 31, 2018 and 2017, respectively, pertaining to restricted stock.

Total unrecognized compensation expense related to unvested restricted stock at December 31, 2018 amounts to $98,000 and is expected to be recognized over a weighted average period of 0.4 year.