9.	STOCK-BASED COMPENSATION

The following table summarizes the components of the Company’s stock-based compensation included in net loss:

	Three Months Ended March 31,
	2015		2014
Employee stock options	$	186,471	$	182,724
Restricted stock awards		176,523		193,787
Consultant stock options		16,245		-
Income tax benefit		-		(67,697	)
Totals	$	379,239	$	308,814

No stock-based compensation was capitalized as a cost of inventory during the three months ended March 31, 2015 and 2014.

Stock Options - The following is a summary of the stock option activity for the three months ended March 31, 2015:

	Shares			Weighted Average Exercise Price
Outstanding, December 31, 2014		1,665,946		$	2.93
Granted		376,500		$	1.39
Exercised		(50,000	)	$	1.20
Forfeited		(34,684	)	$	4.67
Expired		(9,843	)	$	7.24
Outstanding, March 31, 2015		1,947,919		$	2.63

The weighted average grant-date fair value of stock options granted during the three months ended March 31, 2015 was $0.92. The total fair value of stock options that vested during the three months ended March 31, 2015 was approximately $202,000. The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted average assumptions for stock options granted during the three months ended March 31, 2015:

Dividend yield	0.0	%
Expected volatility	72.4	%
Risk-free interest rate	1.61	%
Expected lives (years)	5.75

Although the Company issued dividends in prior years, a dividend yield of zero was used due to the uncertainty of future dividend payments. Volatility is a measure of the amount by which a financial variable such as share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company estimates expected volatility giving primary consideration to the historical volatility of its common stock. The risk-free interest rate is based on the published yield available on U.S. Treasury issues with an equivalent term remaining equal to the expected life of the stock option. The expected lives of the stock options represent the estimated period of time until exercise or forfeiture and are based on historical experience of similar awards.

The following table summarizes information about stock options outstanding at March 31, 2015:

Options Outstanding					Options Exercisable						Options Vested or Expected to Vest
Balance as of 3/31/2015	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 3/31/2015		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 3/31/2015		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
1,947,919		7.61	$	2.63		1,135,660		6.43	$	2.69		1,852,134		7.51	$	2.64

As of March 31, 2015, the unrecognized stock-based compensation expense related to unvested stock options was approximately $1.09 million, which is expected to be recognized over a weighted average period of approximately 22 months.

The aggregate intrinsic value of stock options outstanding, exercisable, and vested or expected to vest at March 31, 2015 were each approximately $129,000. This amount is before applicable income taxes and represents the closing market price of the Company’s common stock at March 31, 2015 less the grant price, multiplied by the number of stock options that had a grant price that is less than the closing market price. This amount represents the amount that would have been received by the optionees had these stock options been exercised on that date. During the three months ended March 31, 2015, the aggregate intrinsic value of stock options exercised was approximately ($2,000).

Restricted Stock - The following is a summary of the restricted stock activity for the three months ended March 31, 2015:

	Shares			Weighted Average Grant Date Fair Value
Unvested, December 31, 2014		287,006		$	3.29
Granted		122,500		$	1.28
Vested		(62,247	)	$	2.53
Canceled		-		$	-
Unvested, March 31, 2015		347,259		$	2.71

As of March 31, 2015, the unrecognized stock-based compensation expense related to unvested restricted stock was approximately $515,000, which is expected to be recognized over a weighted average period of approximately 12 months.

Dividends - The Company has not paid any cash dividends in the current year through March 31, 2015.