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

-year vesting schedules, with either

one

third

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

-year vesting schedules and all other employees have

-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, 2018

had contractual lives of

ten

years.

As of

December 31, 2018,

there were

624,256

options outstanding under the

2007

Plan. As of

December 31, 2018,

the

2007

Plan had

870,838

authorized unissued options, while there were

options remaining that could be granted under the

1998

Plan.

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.

In applying the Black-Scholes methodology to the options granted, the Company used the following assumptions:

	Year ended December 31,
	2018		2017
Risk-free interest rate, average		—		2.21
Expected option life, average (in years)		—		7.9
Expected price volatility, average		—		40.71
Expected dividend yield		—		2.83

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 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, 2016		850,232		$	8.06		5.78	$	3,001
Granted		105,000			9.90
Expired and canceled		(3,144	)		10.29
Forfeited prior to vesting		(8,996	)		11.01
Exercised		(178,662	)		5.90
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	$	—
Vested and Expected to Vest at December 31, 2017		764,430		$	8.78		6.48	$	1,038
Vested at December 31, 2017		529,669		$	7.89		5.50	$	1,033
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	$	—

The weighted average per share fair value of options granted during the years ending

December 31, 2018

and

2017

was

and

$3.31

respectively. The total intrinsic value of options exercised during the years ended

December 31, 2018

and

2017

was

and

$646

respectively.

The total pre-tax compensation cost related to stock options recognized during the years ended

December 31, 2018

and

2017

was

$463

and

$665,

respectively. Tax benefit from compensation cost related to stock options during the years ended

December 31, 2018

and

2017

was

$0.

As of

December 31, 2018,

the total compensation cost related to stock options

not

yet recognized and before the effect of any forfeitures was

$262,

which is expected to be recognized over approximately the next

1.17

years on a straight-line basis.

Employee Stock Purchase Plan

During the years ended

December 31, 2018

and

2017,

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, 2018

and

December 31, 2017,

442,994

and

466,783,

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

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:

	2018		2017
Shares purchased under ESPP plan		23,789		9,110
Plan compensation expense	$	10	$	13

Stock Repurchase Program and Cash Dividends

March

2017,

the Board of Directors of the Company renewed and extended the repurchase program for up to an additional

$10

million of common stock over the next

twelve

months. In connection with the repurchase extension authorization, the Company was authorized to complete the repurchase through open market transactions or through an accelerated share repurchase program, in each case to be executed at management’s discretion based on business and market conditions, stock price, trading restrictions, acquisition activity and other factors. All the transactions effectuated under this program occurred in open market purchases. This program terminated in

March 2018.

During the

twelve

months ended

December 31, 2017,

we acquired

551,936

shares at an average price of

$9.28

per share under the stock repurchase program authorized by the Board of Directors in

March 2016

and renewed and extended in

March 2017.

Before the program was terminated in

March 2018,

we acquired

17,549

shares at an average price of

$8.39

per share during

2018.

Cash Dividends

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.

June 13, 2018,

the Company announced the suspension of its dividend program.

Issuance of Common Stock

The Company raise 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.