4. Stock Incentive Plan and Warrants

Options

The Company maintained two long-term incentive compensation plans which have been terminated; namely, the Provectus Pharmaceuticals, Inc. 2002 Stock Plan, which provided for the issuance of 18,450,000 shares of common stock pursuant to stock options, and the 2012 Stock Plan, which provided for the issuance of up to 20,000,000 shares of common stock pursuant to stock options. Currently, the Provectus Biopharmaceuticals, Inc. 2014 Equity Compensation Plan provides for the issuance of up to 20,000,000 shares of common stock pursuant to stock options for the benefit of eligible employees and directors of the Company.

Options granted under the 2002, 2012 and 2014 Stock Plans were either “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code or options which were not incentive stock options. The stock options are exercisable over a period determined by the Board of Directors (through its Compensation Committee), but generally no longer than 10 years after the date they are granted.

For stock options granted to employees during 2014, 2013 and 2012, the Company has estimated the fair value of each option granted using the Black-Scholes option pricing model with the following assumptions:


	2014	2013	2012
Weighted average fair value per options granted	$0.77	$0.57	$0.73
Significant assumptions (weighted average) risk-free interest rate at grant date	0.25%	0.25%	0.25%
Expected stock price volatility	85% – 92%	83% – 85%	83% – 87%
Expected option life (years)	10	10	10

On May 14, 2012, the Company issued 50,000 stock options to a newly appointed member of the board. On June 28, 2012, the Company issued 200,000 stock options to its re-elected members of the board. All of the stock options issued in 2012 vest on the date of grant and have an exercise price equal to the fair market price on the date of issuance.

One employee of the Company exercised 18,750 options at an exercise price of $0.32 per share of common stock for $6,000 and 25,000 options at an exercise price of $0.60 per share of common stock for $15,000 during the three months ended June 30, 2013. One former non-employee member of the board forfeited 25,000 stock options on May 29, 2013. On August 19, 2013, the Company issued 250,000 stock options to its re-elected members of the board. All of the stock options issued in 2013 vest on the date of grant and have an exercise price equal to the fair market price on the date of issuance.

One employee of the Company exercised 25,000 options at an exercise price of $0.95 per share of common stock for $23,750, 14,248 options at an exercise price of $0.75 per share of common stock for $10,686 and 600,000 options at an exercise price of $0.93 per share of common stock for $558,000 during the three months ended March 31, 2014. Another employee of the Company exercised 300,000 options at an exercise price of $1.10 per share of common stock for $330,000 during the three months ended March 31, 2014. Another employee of the Company exercised 189,624 options at an exercise price of $1.10 per share of common stock for $208,586 during the three months ended March 31, 2014. One employee of the Company forfeited 300,000 stock options on February 26, 2014. One employee of the Company exercised 25,000 options at an exercise price of $0.95 per share of common stock for $23,750 during the three months ended June 30, 2014. Another employee of the Company exercised 100,000 options at an exercise price of $1.25 per share of common stock for $125,000 during the three months ended June 30, 2014. A former non-employee member of the board of directors exercised 25,000 options at an exercise price of $0.95 per share of common stock for $23,750 during the three months ended June 30, 2014. One employee of the Company forfeited 25,000 stock options on May 27, 2014. On July 29, 2014, the Company issued a total of 150,000 stock options to its three re-elected non-employee members of the board of directors. All of the stock options issued in 2014 vested on the date of grant and have an exercise price equal to the fair market price on the date of issuance. One employee of the Company exercised 96,875 options at an exercise price of $0.64 per share of common stock for $62,000, and 126,361 options at an exercise price of $0.64 per share of common stock for $80,871 during the three months ended December 31, 2014. Three employees of the Company had fully vested options rescinded during the three months ended December 31, 2014 due to the terms of the settlement discussed in Note 9.

The compensation cost relating to share-based payment transactions is measured based on the fair value of the equity or liability instruments issued. For purposes of estimating the fair value of each stock option on the date of grant, the Company utilized the Black-Scholes option-pricing model. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions including the expected volatility factor of the market price of the Company’s common stock (as determined by reviewing its historical public market closing prices). Included in the results for the year ended December 31, 2014, is $115,645 of stock-based compensation expense which relates to the fair value of stock options vested in 2014. Included in the results for the year ended December 31, 2013, is $142,310 of stock-based compensation expense which relates to the fair value of stock options vested in 2013. Included in the results for the year ended December 31, 2012, is $183,028 of stock-based compensation expense which relates to the fair value of stock options vested in 2012.

The following table summarizes the options granted, exercised, outstanding and exercisable as of December 31, 2012, 2013 and 2014:


	Shares			Exercise Price Per Share		Weighted Average Exercise Price
Outstanding at January 1, 2012		14,890,956		$	0.32 – 1.50	$	0.98
Granted		250,000		$	0.84 – 0.93	$	0.86
Exercised		—			—		—
Forfeited		—			—		—

Outstanding and exercisable at December 31, 2012		15,140,956		$	0.32 – 1.50	$	0.97

Outstanding at January 1, 2013		15,140,956		$	0.32 – 1.50	$	0.97
Granted		250,000		$	0.67	$	0.67
Exercised		(43,750	)	$	0.32 – 0.60	$	0.48
Forfeited		(25,000	)	$	0.60	$	0.60

Outstanding and exercisable at December 31, 2013		15,322,206		$	0.62 – 1.50	$	0.97

Outstanding at January 1, 2014		15,322,206		$	0.62 – 1.50	$	0.97
Granted		150,000		$	0.88	$	0.88
Settlement		(2,800,000	)	$	0.93 – 1.00	$	0.97
Exercised		(1,502,108	)	$	0.64 – 1.25	$	0.96
Forfeited		(325,000	)	$	0.95 – 1.10	$	1.09

Outstanding and exercisable at December 31, 2014		10,845,098		$	0.64 – 1.50	$	0.97

The following table summarizes information about stock options outstanding at December 31, 2014 in order of issuance from oldest to newest.


Exercise Price	Number Outstanding at December 31, 2014		Weighted Average Remaining contractual Life		Outstanding Weighted Average Exercise price		Number Exercisable at December 31, 2014		Exercisable Weighted Average Exercise Price
$0.64		376,764		0.00 years	$	0.64		376,764	$	0.64
$0.75		708,334		0.42 years	$	0.75		708,334	$	0.75
$0.94		575,000		0.92 years	$	0.94		575,000	$	0.94
$1.02		4,135,000		1.50 years	$	1.02		4,135,000	$	1.02
$1.50		200,000		2.50 years	$	1.50		200,000	$	1.50
$1.16		50,000		3.42 years	$	1.16		50,000	$	1.16
$1.00		150,000		3.50 years	$	1.00		150,000	$	1.00
$1.04		250,000		4.50 years	$	1.04		250,000	$	1.04
$1.16		250,000		5.50 years	$	1.16		250,000	$	1.16
$1.00		1,600,000		5.50 years	$	1.00		1,600,000	$	1.00
$1.04		250,000		6.50 years	$	1.04		250,000	$	1.04
$0.99		50,000		6.50 years	$	0.99		50,000	$	0.99
$0.93		1,600,000		6.67 years	$	0.93		1,600,000	$	0.93
$0.93		50,000		7.38 years	$	0.93		50,000	$	0.93
$0.84		200,000		7.50 years	$	0.84		200,000	$	0.84
$0.67		250,000		8.71 years	$	0.67		250,000	$	0.67
$0.88		150,000		9.67 years	$	0.88		150,000	$	0.88

		10,845,098		3.85 years	$	0.97		10,845,098	$	0.97

The total intrinsic value of options exercised during the year ended December 31, 2014 which were in the money was $1,327,300.

The total intrinsic value of options exercised during the year ended December 31, 2013 which were in the money was $7,000.

There were no options exercised during the year ended December 31, 2012.

The following is a summary of nonvested stock option activity for the year ended December 31, 2014:


	Number of Shares			Weighted Average Grant-Date Fair Value
Nonvested at December 31, 2013		—		$	—
Granted		150,000		$	0.77
Vested		(150,000	)	$	0.77
Canceled		—			—

Nonvested at December 31, 2014		—		$	—

As of December 31, 2014, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Plan.

The following is a summary of the aggregate intrinsic value of shares outstanding and exercisable at December 31, 2014. The aggregate intrinsic value of stock options outstanding and exercisable is defined as the difference between the market value of the Company’s stock as of the end of the period and the exercise price of the stock options which are in the money.


	Number of Shares		Aggregate Intrinsic Value
Outstanding and Exercisable at December 31, 2014		10,845,098	$	128,199

Warrants

The following table summarizes the warrants granted, exercised, outstanding and exercisable as of December 31, 2012, 2013 and 2014.


	Warrants			Exercise Price Per Warrant		Weighted Average Exercise Price
Outstanding at January 1, 2012		25,119,247		$	0.91 – 2.00	$	1.15
Granted		10,399,414		$	0.68 – 1.50	$	1.00
Exercised		—			—		—
Forfeited		(5,480,644	)	$	0.91 – 1.50	$	1.29

Outstanding and exercisable at December 31, 2012		30,038,017		$	0.68 – 2.00	$	1.05

Outstanding at January 1, 2013		30,038,017		$	0.68 – 2.00	$	1.05
Granted		53,675,050		$	0.68 – 1.12	$	1.00
Exercised		(8,379,845	)	$	0.68 – 1.25	$	0.93
Forfeited		(2,295,806	)	$	0.68 – 1.12	$	0.87

Outstanding and exercisable at December 31, 2013		73,037,416		$	0.68 – 2.00	$	1.03

Outstanding at January 1, 2014		73,037,416		$	0.68 – 2.00	$	1.03
Granted		9,415,673		$	1.00 – 3.00	$	1.61
Exercised		(17,524,498	)	$	0.68 – 1.50	$	1.01
Forfeited		(1,692,635	)	$	0.95 – 1.25	$	1.07

Outstanding and exercisable at December 31, 2014		63,235,956		$	0.68 – 3.00	$	1.12

The following table summarizes information about warrants outstanding at December 31, 2014.


Exercise Price	Number Outstanding and Exercisable at December 31, 2014		Weighted Average Remaining Contractual Life in Years		Weighted Average Exercise Price
$0.68		134,994		1.00	$	0.68
$0.95		187,467		0.00	$	0.95
$1.00		48,844,755		3.30	$	1.00
$1.12		1,793,036		1.42	$	1.12
$1.25		8,782,703		2.98	$	1.25
$1.50		670,001		1.30	$	1.50
$1.75		200,000		1.00	$	1.75
$2.00		323,000		2.25	$	2.00
$2.50		300,000		4.33	$	2.50
$3.00		2,000,000		4.33	$	3.00

		63,235,956		3.19	$	1.12