(10)	STOCK OPTION AND EQUITY COMPENSATION PLANS

In 1997, the Company adopted a Long-Term Incentive and Stock Option Plan (the “1997 Plan”). Pursuant to the 1997 Plan, the Company's Board of Directors (or its committees and/or executive officers delegated by the Board of Directors) may grant incentive and nonqualified stock options to the Company's employees, officers, directors, consultants and advisors. As of June 30, 2011, there were options to purchase an aggregate of 20,000 shares of Common Stock outstanding under the 1997 Plan and none available for future grants.

In connection with the Company's strategic merger with ChoiceTel in 2002, the Company assumed all outstanding options under the 1999 Sontra Medical, Inc. Stock Option and Incentive Plan (the “1999 Plan”). The Company assumed options to purchase an aggregate of 86,567 shares of Common Stock under the 1999 Plan. As of June 30, 2011, there were options to purchase an aggregate of 3,853 shares of Common Stock outstanding under the 1999 Plan and none available for future grants.

In March 2003, the Company's shareholders approved its 2003 Stock Option and Incentive Plan (the “2003 Plan”). Pursuant to the 2003 Plan, the Company's Board of Directors (or its committees and/or executive officers delegated by the Board of Directors) may grant incentive and nonqualified stock options, restricted stock, and other stock-based awards to the Company's employees, officers, directors, consultants and advisors. As of June 30, 2011, the maximum aggregate number of shares that may be authorized for issuance under the 2003 Plan for all periods is 1,600,000 shares. As of June 30, 2011, there were restricted shares of Common Stock and options to purchase an aggregate of 1,379,500 shares of Common Stock outstanding under the 2003 Plan and 132,500 shares available for future grants.

In May 2008, the Company's shareholders approved the 2008 Equity Compensation Plan (the “2008 Plan”). The 2008 Plan provides for grants of incentive stock options to employees and nonqualified stock options and restricted stock to employees, consultants and non-employee directors of the Company. In July 2010, the Company's shareholders approved an amendment to the 2008 Plan to increase the maximum number of shares of Common Stock available under the Plan by 2,000,000 shares to 4,700,000 shares. As of June 30, 2011, there were restricted shares of Common Stock and options to purchase an aggregate of 2,966,416 shares of Common Stock outstanding under the 2008 Plan and 1,700,250 shares available for future grants.

Share-Based Compensation

For stock options and restricted stock issued and outstanding during the six months ended June 30, 2011 and 2010, the Company recorded additional paid-in capital and non-cash compensation expense of approximately $287,000 and $99,000, respectively.

The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option pricing model with certain assumptions noted below. Expected volatilities are based on historical volatility of the Common Stock using historical periods consistent with the expected term of the options. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the financial statements, to estimate option exercise and employee termination and forfeitures within the valuation model. The expected term of stock options granted under the Company's stock plans is based on the average of the contractual term (generally 10 years) and the vesting period (generally 24 to 42 months). The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. Restricted stock grants are valued based on the closing market price for the Common Stock on the grant date.

The assumptions used principally for stock options granted to employees and members of the Company's Board of Directors in the six months ended June 30, 2011 and 2010 were as follows:

	2011	2010
Risk-free interest rate	2.43% - 3.47%	2.97% - 3.71%
Expected dividend yield	-	-
Expected term (employee / director grants)	6.00 - 6.50 years	6.75 years
Forfeiture rate (excluding fully vested stock options)	0% - 15%	0% - 37%
Expected volatility	140% - 142%	145% - 151%

A summary of stock option activity under the Company's stock plans and stock options granted to officers of the Company outside any plan as of and for the six months ended June 30, 2011 is as follows:

Stock Options	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2011		3,029,030		$	0.87
Granted		915,000			3.08
Exercised		(608,334	)		0.86
Forfeited or expired		(173,593	)		3.34
Outstanding at June 30, 2011		3,162,103		$	1.38	7.12 years	$	13,469,635
Exercisable at June 30, 2011		2,413,766		$	0.85	6.51 years	$	8,115,510

The weighted-average grant-date fair value of stock options granted during the six months ended June 30, 2011 was $3.08 per share. Share-based compensation expense recognized in the six months ended June 30, 2011 was approximately $287,000 for options granted in the six months ended June 30, 2011. As of June 30, 2011, there was approximately $2,063,000 of total unrecognized compensation expense related to non-vested share-based option compensation arrangements. With the exception of the unrecognized share-based compensation related to certain restricted stock grants to officers and employees that contain performance conditions related to United States Food and Drug Administration (“FDA”) approval for Symphony or the sale of substantially all of the stock or assets of the Company (see Restricted Stock section below), unrecognized compensation is expected to be recognized over the next 12 months.

Restricted Stock

During the six months ended June 30, 2011, the Company granted an aggregate of 615,000 restricted shares of Common Stock to certain employees, officers and directors of the Company. The grants were issued pursuant to the 2008 Plan. The grant date fair value of these restricted stock grants was approximately $2,116,000.

These restricted share grants are subject to the terms and conditions of the Restricted Stock Agreements and the shares will vest upon the first to occur of (i) FDA approval of Symphony; or (ii) the sale of all or substantially all of the assets of the Company or all or substantially all of the outstanding capital stock of the Company in exchange for Liquid Proceeds. For the purposes of the Restricted Share Grants, “Liquid Proceeds” means (a) cash; (b) securities which can be sold immediately on NYSE or NASDAQ; (c) securities which are or will be registered such that they can be sold immediately on NYSE or NASDAQ upon termination of a lock-up period not to exceed one hundred eighty (180) days; or (d) a combination of cash and the foregoing securities. Compensation expense related to the restricted share grants will be recognized when the Company concludes that achievement of the performance vesting conditions is probable. No compensation expense was recognized during the six months ended June 30, 2011.

As of June 30, 2011, the Company had outstanding restricted stock grants amounting to 2,601,094 shares at a weighted-average grant-date fair value of $1.70 per share. Of the outstanding vested restricted stock grants, 881,500 shares have not been registered under the Securities Act. A summary of the Company's restricted stock activity as of and for the six months ended June 30, 2011, is as follows:

Restricted Stock	Shares			Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2011		1,629,594		$	1.12
Granted		680,000			3.39
Vested		(65,000	)		(1.49	)
Forfeited		(525,000	)		(1.57	)
Nonvested at June 30, 2011		1,719,594		$	1.82

As of June 30, 2011, there was approximately $3,489,000 of total unrecognized compensation expense related to non-vested share-based restricted stock arrangements granted pursuant to the Company's equity compensation plans. As of June 30, 2011, the Company cannot estimate the timing of completion of performance vesting requirements included in these restricted stock grant arrangements and accordingly no compensation expense has been recorded.