8.	Stock-Based Compensation Plans

The Plan - In 2007, the Company adopted the 2007 Stock Incentive Plan, as amended (the “Plan”). The Plan provides for the grant of Incentive Stock Options, Nonqualified Stock Options, Restricted Stock Awards, Restricted Stock Unit Awards, Performance Awards and other stock-based awards, or any combination of the foregoing to our key employees, non-employee directors and consultants. As of December 31, 2014 the total number of Shares reserved and available for grant and issuance pursuant to this Plan is 8,423,787 Shares, subject to the automatic annual Share increase as defined in the Plan. Under the Plan, the exercise price is determined by the compensation committee of the Board of Directors, and for options intended to qualify as qualified incentive stock options, may not be less than the fair market value as determined by the closing stock price at the date of the grant. Each option and award shall vest and expire as determined by the compensation committee. Options expire no later than ten years from the date of grant. All grants provide for accelerated vesting if there is a change of control, as defined in the Plan.

Stock option awards granted for the year 2014 were estimated to have a weighted average fair value per share of $2.51. Stock option awards granted for the years 2013 and 2012 were estimated to have weighted average fair values per share of $0.47 and $0.37, respectively. The fair value calculation is based on stock options and warrants granted during a period using the Black-Scholes option-pricing model on the date of grant. In addition, for all stock options and compensation-based warrants granted, exercise price was determined based on the fair market value as determined by the closing stock price at the date of the grant. For stock option and compensation-based warrants granted during 2012, 2013 and 2014 the following weighted average assumptions were used in determining fair value:

	2012			2013			2014
Risk-free interest rate		0.78	%		1.58	%		2.12	%
Dividend yield		0	%		0	%		0	%
Expected volatility		185	%		189	%		174	%
Expected term in months		61			69			80

The Company determines the expected term of its stock option and warrant awards using the simplified method based on the weighted average of the length of the vesting period and the term of the exercise period. Expected volatility is determined by the volatility of the Company’s historical stock price over the expected term of the grant. The risk-free interest rate for the expected term of each option and warrant granted is based on the U.S. Treasury yield curve in effect at the time of grant.

Option activity under the Plan for the year ended December 31, 2014, was as follows:

					Weighted
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Options		Price		Term		Value
					(In years)
Year Ended December 31, 2014
Outstanding at December 31, 2013		6,032,188	$	0.90		6.8	$	18,671,745
Granted		325,000		2.57		9.4
Exercised		(525,000)		0.83
Forfeited/expired		(404,410)		0.68
Outstanding at December 31, 2014		5,427,778	$	1.03		6.0	$	8,829,412
Vested and expected to vest December 31, 2014		5,427,778	$	1.03		6.0	$	8,829,412
Exercisable at December 31, 2014		4,734,861	$	0.99		5.6	$	7,930,757

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2014 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2014. This amount changes based on the fair market value of the Company’s stock. The aggregate pretax intrinsic value of exercises in 2014 totaled $914,824.

Option activity under the Plan for the year ended December 31, 2013, was as follows:

					Weighted
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Options		Price		Term		Value
					(In years)
Year Ended December 31, 2013
Outstanding at December 31, 2012		3,482,188	$	1.22		5.8		5,339
Granted		2,550,000	$	0.48		9.6
Exercised		-		-
Forfeited/expired		-		-
Outstanding at December 31, 2013		6,032,188	$	0.90		6.8	$	18,671,745
Vested and expected to vest December 31, 2013		6,032,188	$	0.90		6.8	$	18,671,745
Exercisable at December 31, 2013		4,848,298	$	1.0535		6.2	$	14,824,475

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2013 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2013. This amount changes based on the fair market value of the Company’s stock.

Option activity under the Plan for the year ended December 31, 2012, was as follows:

					Weighted
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Options		Price		Term		Value
					(In years)
Year Ended December 31, 2012
Outstanding at December 31, 2011		3,432,188	$	1.23		6.8	$	2,839
Granted		50,000	$	0.37		9.5
Exercised		-		-
Forfeited/expired		-		-
Outstanding at December 31, 2012		3,482,188	$	1.22		5.8	$	5,339
Vested and expected to vest December 31, 2012		3,482,188	$	1.22		5.8	$	5,339
Exercisable at December 31, 2012		181,771	$	0.32		7.0	$	4,130

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of 2012 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on December 31, 2012. This amount changes based on the fair market value of the Company’s stock.

A summary of options outstanding and exercisable as of December 31, 2014:

		Options Outstanding						Options Exercisable
				Weighted
				Average		Weighted				Weighted
		Number		Remaining		Average		Number		Average
Exercise Prices		Outstanding		Contractual Life		Exercise Price		Exercisable		Exercise Price
				(Years)

$	0.30		50,000		3.9	$	0.30		50,000	$	0.30
$	0.33		100,000		6.5	$	0.33		89,583	$	0.33
$	0.39		25,000		7.8	$	0.39		25,000	$	0.39
$	0.46		2,152,778		8.6	$	0.46		1,756,945	$	0.46
$	0.53		20,000		6.1	$	0.53		18,333	$	0.53
$	0.90		270,000		3.3	$	0.90		270,000	$	0.90
$	1.40		2,500,000		3.8	$	1.40		2,500,000	$	1.40
$	1.95		25,000		8.8	$	1.95		25,000	$	1.95
$	1.96		25,000		9.8	$	1.96		-		-
$	2.28		15,000		9.7	$	2.28		-		-
$	2.37		15,000		9.7	$	2.37		-		-
$	2.40		150,000		9.3	$	2.40		-		-
$	2.42		5,000		9.7	$	2.42		-		-
$	2.71		50,000		9.3	$	2.71		-		-
$	4.30		25,000		9.1	$	4.30		-		-
			5,427,778		6.0	$	1.03		4,734,861	$	0.99

Warrant activity under the Plan for the year ended December 31, 2014, was as follows:

					Weighted
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Warrants		Price		Term		Value
					(In years)
Year Ended December 31, 2014
Outstanding at December 31, 2013		10,000	$	0.90		4.3	$	31,000
Granted		-		-
Exercised		-		-
Forfeited/expired		-		-
Outstanding at December 31, 2014		10,000	$	0.90		3.3	$	17,600
Vested and expected to vest December 31, 2014		10,000	$	0.90		3.3	$	17,600
Exercisable at December 31, 2014		10,000	$	0.90		3.3	$	17,600

Warrant activity under the Plan for the year ended December 31, 2013, was as follows:

					Weighted
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Warrants		Price		Term		Value
					(In years)
Year Ended December 31, 2013
Outstanding at December 31, 2012		85,620	$	0.90		0.9	$	-
Granted		-		-
Exercised		-		-
Forfeited/expired		(75,620)		0.90
Outstanding at December 31, 2013		10,000	$	0.90		4.3	$	31,000
Vested and expected to vest December 31, 2013		10,000	$	0.90		4.3	$	31,000
Exercisable at December 31, 2013		10,000	$	0.90		4.3	$	31,000

Warrant activity under the Plan for the year ended December 31, 2012, was as follows:

					Weighted
			Weighted-		Average
			Average		Remaining		Aggregate
			Exercise		Contractual		Intrinsic
	Warrants		Price		Term		Value
					(In years)
Year Ended December 31, 2012
Outstanding at December 31, 2011		85,620	$	0.90		1.9	$	-
Granted		-
Exercised		-
Forfeited/expired		-
Outstanding at December 31, 2012		85,620	$	0.90		0.9	$	-
Vested and expected to vest December 31, 2012		85,620	$	0.90		0.9	$	-
Exercisable at December 31, 2012		-		-		-		-

A summary of warrants outstanding and exercisable as of December 31, 2014:

		Warrants Outstanding						Warrants Exercisable
				Weighted
				Average		Weighted				Weighted
Range of Exercise		Number		Remaining		Average		Number		Average
Prices		Outstanding		Contractual Life		Exercise Price		Exercisable		Exercise Price
				(Years)

$	0.90		10,000		3.3	$	0.90		10,000	$	0.90
			10,000		3.3	$	0.90		10,000	$	0.90

Stock Option Grants - Total stock option expense for the years 2012 and 2013 totaled $63,385 and $704,480, respectively. Total stock option expense for the year 2014 totaled $404,150. Of this amount, $83,139 related to stock options for personnel involved in R&D activities and $321,011 related to stock options for outside directors and officers and management of the Company. As of December 31, 2014, total unrecognized compensation cost related to unexpensed stock option awards amounted to $705,387.

Warrant Grants - There were no warrants for services granted in 2014 and there was no warrant expense for the year 2014. There were no warrants for services granted in the years 2012 and 2013 and there was no warrant expense for the years 2012 and 2013.