NOTE 7. STOCK COMPENSATION PLANS

On July 11, 2011, at the Company’s Annual Meeting of Stockholders, the stockholders approved an amendment to increase the number of shares reserved under the 2004 Equity Incentive Plan (the “2004 Plan”) to a total of 70,974,213 shares. Additionally, an annual increase in the number of shares reserved under the plan was approved and certain prior increases in the number of shares reserved for issuance under the plan were ratified. Furthermore, on each of December 1, 2011 and on December 1, 2012, the number of shares reserved under the 2004 Plan was increased by an additional 1,500,000 shares pursuant to the provisions of the 2004 Plan. The purpose of the 2004 Plan is to provide a means by which eligible recipients of stock awards may be given the opportunity to benefit from increases in the value of the Company’s common stock through granting of incentive stock options (ISO), non-statutory stock options, stock purchase awards, stock bonus awards, stock appreciation rights, stock unit awards and other stock awards. As amended, there are no shares of common stock available for future awards under the 2004 Plan at February 28, 2014. Under the provisions of the 2004 Plan, the Plan terminated on March 2, 2014.

Generally accepted accounting principles for stock options require the recognition of the cost of employee services received in exchange for an award of equity instruments in the financial statements, which is measured based on the grant date fair value of the award, and require the stock option compensation expense to be recognized over the period during which an employee is required to provide service in exchange for the award (the vesting period), net of estimated forfeitures. The estimation of forfeitures requires significant judgment, and to the extent actual results or updated estimates differ from the current estimates, such resulting adjustment will be recorded in the period estimates are revised. No income tax benefit has been recognized for stock-based compensation arrangements and no compensation cost has been capitalized in the consolidated balance sheets.

A summary of the status of stock options granted by MultiCell at February 28, 2014, and changes during the three months then ended is presented in the following table:

				Weighted
		Weighted		Average
	Shares	Average		Remaining	Aggregate
	Under	Exercise		Contractual	Intrinsic
	Option	Price		Life	Value

Outstanding at November 30, 2013	50,399,503	$	0.0040	3.7 years	$	-
Granted	25,074,710		0.0008
Exercised	-		-
Expired or forfeited	-		-

Outstanding at February 28, 2014	75,474,213	$	0.0029	3.9 years	$	-

Exercisable at February 28, 2014	32,783,523	$	0.0055	2.9 years	$	-

On January 15, 2014, the MultiCell Board of Directors granted an option to each of the five members of its Board of Directors to purchase 4,600,000 shares of the Company’s common stock at $0.0008 per share. The options vest quarterly over one year, subject to continuing service as a director on each such vesting date, and expire five years after grant. Additionally, the Board of Directors granted an option to an employee to purchase 2,074,710 shares of common stock at $0.0008 per share. This option vests monthly over three years, subject to continuing service as an employee on each such vesting date, and expires five years after grant. No options were granted during the three months ended February 28, 2013. The fair value of stock option grants is estimated on the date of grant using the Black-Scholes option pricing model. The weighted-average fair value of stock options granted during the three months ended February 28, 2014 was $0.0007 per share. The weighted-average assumptions used for options granted during the three months ended February 28, 2014 were risk-free interest rate of 1.68%, volatility of 140%, expected life of 5.0 years, and dividend yield of zero. The assumptions employed in the Black-Scholes option pricing model include the following: (i) the expected life of stock options represents the period of time that the stock options granted are expected to be outstanding prior to exercise; (ii) the expected volatility is based on the historical price volatility of the Company’s common stock; (iii) the risk-free interest rate represents the U.S. Treasury Department’s constant maturities rate for the expected life of the related stock options; and (iv) the dividend yield represents anticipated cash dividends to be paid over the expected life of the stock options.

For the three months ended February 28, 2014 and 2013, MultiCell reported stock-based compensation expense for services related to stock options of $9,908 and $4,406, respectively. As of February 28, 2014, there is approximately $45,000 of unrecognized compensation cost related to stock-based payments that will be recognized over a weighted average period of approximately 1.2 years. The intrinsic values at February 28, 2014 are based on a closing price of $0.0008.

In October 2010, Xenogenics adopted the 2010 Stock Incentive Plan (the “2010 Plan”) which authorized the granting of stock awards toXenogenics’ employees, directors, and consultants. As originally adopted, the 2010 Plan provided that the number of shares of Xenogenics’ common stock that could be issued pursuant to stock awards that could not exceed 5,000,000 shares of common stock. On February 3, 2011, the 2010 Plan was amended such that the number of shares of Xenogenics’ common stock that could be issued pursuant to stock awards could not exceed 8,000,000 shares of common stock. The purpose of the 2010 Plan is to provide a means by which eligible recipients of stock awards may be given the opportunity to benefit from increases in the value of Xenogenics’ common stock through granting of incentive stock options (“ISO”), non-statutory stock options, stock bonus awards, stock appreciation rights, and rights to acquire restricted stock. ISO’s may be granted only to employees. The exercise price of each ISO granted under the plan must equal 100% of the market price of Xenogenics’ stock on the date of the grant. A 10% stockholder shall not be granted an ISO unless the exercise price of such option is at least 110% of the fair market value of Xenogenics’ common stock on the date of the grants and the option is not exercisable after the expiration of five years from the date of the grant. The Board of Directors of Xenogenics, in its discretion, shall determine the exercise price of each nonstatutory stock option. An option’s maximum term is 10 years.

A summary of the status of Xenogenics’ stock options at at February 28, 2014, and changes during the three months then ended is presented in the following table:

				Weighted
		Weighted		Average
	Shares	Average		Remaining
	Under	Exercise		Contractual
	Option	Price		Life

Outstanding at November 30, 2013	4,250,000	$	0.2460	2.3 years
Granted	-		-
Exercised	-		-
Expired or forfeited	-		-

Outstanding at February 28, 2014	4,250,000	$	0.2460	2.1 years

Exercisable at February 28, 2014	2,000,000	$	0.2460	2.2 years

For the three months ended February 28, 2014 and 2013, Xenogenics reported stock-based compensation expense for services related to stock options of $32,104 and $95,462, respectively. As of February 28, 2014, there was approximately $11,000 of unrecognized compensation cost related to stock-based payments that will be recognized over a weighted average period of approximately 0.1 years.