NOTE 11 — EMPLOYEE STOCK OPTION PLAN:

Effective June 3, 2008, the Company’s stockholders voted to approve the 2008 Stock Incentive Plan (“SIP”), with 750,000 shares of Common Stock available to be issued. At the Annual Stockholder meeting on September 22, 2011 the Company’s stockholders voted to approve an increase to the shares of Common Stock issuable under the SIP by 125,000 to 750,000. Under the terms of the SIP, the Compensation Committee of the Company’s Board has the discretion to select the persons to whom awards are to be granted. Awards can be stock options, restricted stock and/or restricted stock units. The awards become vested at such times and under such conditions as determined by the Compensation Committee. As of December 31, 2017, there were 480,172 options exercised, 228,177 options outstanding and 41,651 options still available to be issued under the SIP.

Effective June 19, 2014, the Company’s stockholders voted to approve the 2014 Stock Incentive Plan (“SIP14”), with 800,000 shares of Common Stock available to be issued. Under the terms of the SIP14, the Compensation Committee of the Company’s Board has the discretion to select the persons to whom awards are to be granted. Awards can be stock options, restricted stock and/or restricted stock units. The awards become vested at such times and under such conditions as determined by the Compensation Committee. As of December 31, 2017, there were 22,000 options exercised, 375,625 options outstanding and 402,375 options still available to be issued under the SIP14.

The Company's results for the years ended December 31, 2017, 2016 and 2015 include stock-based compensation expense totaling $384,897, $304,100, and $334,400 respectively. Such amounts have been included in the Consolidated Statements of Operations within cost of goods sold ($47,000, $-, and $- respectively), research and development ($89,400, $89,200, and $62,700 respectively) and selling, general and administrative expenses ($248,497, $214,900, and $271,700 respectively).

Stock option compensation expense in the years ended December 31, 2017, 2016 and 2015 represents the estimated fair value of options outstanding which is being amortized on a straight-line basis over the requisite vesting period of the entire award.

The weighted average estimated fair value of stock options granted in the years ended December 31, 2017 and 2016 were $2.77 and $2.75 per share, respectively. The Company did not grant any stock options during the year ended December 31, 2015. The fair value of options at the date of grant was estimated using the Black-Scholes option pricing model. The expected volatility is based upon historical volatility of our stock and other contributing factors. The expected term is based on the Company’s historical experience with similar type options.

The weighted-average assumptions made in calculating the fair values of options are as follows for the respective years ended:

	December 31, 2017			December 31, 2016			December 31, 2015
Expected term (in years)		5.48			4.71			n/a
Expected volatility		43.31	%		45.78	%		n/a
Expected dividend yield		n/a			n/a			n/a
Risk-free interest rate		1.78	%		0.92	%		n/a

The Company granted 267,875 new options during the year ended December 31, 2017 to employees.

The following table provides stock options activity for the years ended December 31, 2017, 2016, and 2015:

	Number of Shares		Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at December 31, 2014		691,869		3.66	3.97 years	$	334,636

Granted		-		-
Exercised		41,141		2.25			65,449
Forfeited/expired/cancelled		1,250		4.30
Outstanding at December 31, 2015		649,478		3.75	3.21 years	$	1,032,362

Exercisable at December 31, 2015		359,228		3.89	2.03 years	$	522,039

Outstanding at December 31, 2015		649,478		3.75	3.21 years	$	1,032,362

Granted		142,875		7.08
Exercised		191,804		3.73			629,143
Forfeited/expired/cancelled		-		-
Outstanding at December 31, 2016		600,549		4.55	3.43 years	$	1,463,052

Exercisable at December 31, 2016		267,549		4.14	2.66 years	$	731,997

Outstanding at December 31, 2016		600,549	$	4.55	3.43 years	$	1,463,052

Granted		267,875	$	6.40
Exercised		56,969	$	4.19			100,018
Forfeited/expired/cancelled		785	$	5.56
Outstanding at December 31, 2017		810,670	$	5.18	3.69 years	$	2,477,853

Exercisable at December 31, 2017		371,295	$	4.44	2.62 years	$	1,409,440

The following table summarizes information about stock options outstanding at December 31, 2017:

	Stock Options Outstanding								Stock Options Exercisable
Range of Exercise Prices	Shares		Average Remaining Contract Life (Year)		Weighted Average Exercise Price		Aggregate Intrinsic Value		Shares		Weighted Average Exercise Price		Aggregate Intrinsic Value
1 to 2.79999		-		-	$	-	$	-		-	$	-	$	-
2.8 to 4.59999		362,750		2.68		3.51		1,702,125		244,000		3.55		1,135,255
4.6 to 6.39999		240,045		3.56		5.73		592,678		96,545		5.49		261,585
6.4 to 8.19999		161,000		6.26		7.06		183,050		12,000		7.15		12,600
8.2 to 10		46,875		3.44		8.86		-		18,750		8.86		-
Total		810,670		3.69	$	5.18	$	2,477,853		371,295	$	4.44	$	1,409,440

As of December 31, 2017, there was $735,946 of net unrecognized compensation cost related to stock options that are not vested, which is expected to be recognized over a weighted average period of approximately 2.57 years. The total fair value of shares vested during the year ended December 31, 2017, was $380,465.