NOTE 15: STOCK BASED COMPENSATION

Stock Options and Incentive Plan

On September 28, 2010, the Board of Directors approved the adoption of the 2010 Stock Option and Incentive Plan, or the 2010 Plan, to provide for the grant of equity-based awards to employees, officers, non-employee directors and other key persons providing services to the Company. Awards of incentive options may be granted under the 2010 Plan until September 2020. No other awards may be granted under the 2010 Plan after the date that is 10 years from the date of stockholder approval. An aggregate of 1,000,000 shares were initially reserved for issuance in connection with awards granted under the 2010 Plan. ,

The following table presents the automatic additions to the 2010 Plan since inception pursuant to the “evergreen” terms of the 2010 Plan:

January 1,	Number of shares
2012		450,275
2013		516,774
2014		742,973
2015		983,362
2016		1,306,290
Total additional shares		3,999,674

The Company granted options to purchase 1,885,822 shares of common stock to employees and directors and issued zero shares of common stock in connection with the exercise of directors stock options during the year ended December 31, 2015. There are 1,049,440 options available for grant under the 2010 Plan as of December 31, 2015, and as a result of the evergreen provision contained in the 2010 Plan, an additional 1,306,290 shares were added to the 2010 Plan on January 1, 2016.

Compensation costs associated with the Company’s stock options are recognized, based on the grant-date fair values of these options, over the requisite service period, or vesting period. Accordingly, the Company recognized stock based compensation expense of $840,103 and $556,288 for the years ended December 31, 2015 and 2014, respectively.

	Year Ended December 31,
	2015		2014

General and administrative	$	747,255	$	556,288
Research and development		67,475		-
Selling		25,373		-
Total stock compensation expense	$	840,103	$	556,288

The following table presents information concerning stock option grants for the year ended December 31, 2015:

	Employees			Executives & Officers			Directors

Fair value of common stock on date of grant	$	0.79 – 1.59		$	0.62 – 1.59			$ 0.66 – 1.25
Exercise price of the options	$	0.96 – 1.88		$	0.76 – 1.88			$ 0.79 – 1.49
Expected life of the options (years)		5.31 – 6.13			6.06			6.06 – 6.11
Dividend yield		0.00	%		0.00	%		0.00	%
Expected volatility		107.78 – 115.00	%		107.57 – 113.56	%		105.69 – 111.28	%
Risk-free interest rate		1.64 – 1.81	%		1.70 – 1.74	%		1.72 – 1.81	%
Expected forfeiture per year (%)		10.00	%		10.00	%		10.00	%
Weighted average fair value of the options per unit	$	1.25		$	1.50		$	0.96

Options issued and outstanding as of December 31, 2015 and their activities during the year then ended are as follows:

	Number of Underlying Shares		Weighted- Average Exercise Price Per Share		Weighted- Average Contractual Life Remaining in Years		Aggregate Intrinsic Value
Outstanding as of January 1, 2015		3,675,634	$	2.86			$	344,000
Granted		1,845,822		1.43				-
Forfeited		(1,557,512)		1.78				63,223
Expired		(350,000)		5.00				-
Outstanding as of December 31, 2015		3,613,944		2.40		8.40	$	-
Exercisable as of December 31, 2015		1,726,781		3.14		7.80	$	-
Vested and expected to vest ⁽¹⁾		3,391,660	$	2.45		8.34	$	-

⁽¹⁾ vested shares and unvested shares after a forfeiture rate is applied

At December 31, 2015, there were 1,907,163 unvested options outstanding and the related unrecognized total compensation cost associated with these options was $1,593,528. This expense is expected to be recognized over a weighted-average period of 2.62 years.

Issuance of Restricted Common Stock and Stock Options for Directors’ and Executives’ Compensation

On May 6, 2014, options to purchase a total of 15,000 shares of common stock, with exercise prices of $1.22 per share, which was the fair market value on the date of grant, were also granted under the 2010 Plan to each of our four non-employee directors for service on the Board during the year following our 2014 annual meeting of stockholders. On that date, options to purchase 665,000 shares of stock, exercisable at $1.22 per share, which was the fair market value on the date of grant, were granted to senior officers under the 2010 Plan. The options granted to non- employee directors vest quarterly over one year and options granted to the senior officers vest quarterly over four years.

In May 2014, 200,000 stock options were granted outside the 2010 Plan to the Vice President of Clinical Research and Development. The options have an exercise price of $1.25, which was the fair market value on the date of grant, and vest 25% at the end of the first year and vest quarterly thereafter over the following three years.

In June 2014, 200,000 stock options were granted outside the 2010 Plan to the Senior Vice President of Global Regulatory Affairs and Quality Assurance. The options have an exercise price of $1.41, which is the fair market value on the date of grant, and vest 25% at the end of the first year and vest quarterly thereafter over the following three years.

In September 2014, 200,000 stock options were granted outside the 2010 Plan to the Senior Vice President of Operations as an inducement grant material to hiring a new employee in this position. The options have an exercise price of $1.86, which was the fair market value on the date of grant, and vest 25% at the end of the first year and vest quarterly thereafter over the following three years.

In December 2014, 200,000 stock options were granted outside the 2010 Plan to the Vice President of European Commercial Operations as an inducement grant material to hiring a new employee in this position. The options have an exercise price of $0.96 per share, which was the fair market value on the date of grant, and vest 25% at the end of the first year and vest quarterly thereafter over the following three years.

During the 2015 annual meeting, options to purchase 475,000 shares of stock (275,000 Dr. Quay and 200,000 Mr. Guse), exercisable at $1.88 per share, which was the fair market value on the date of grant, were granted to senior officers under the 2010 Plan. The options granted vest quarterly over four years.

In May 2015, 200,000 stock options were granted outside the 2010 Plan to the Vice President of Sales and Marketing. The options have an exercise price of $1.44, which is the fair market value on the date of grant, and vest 25% at the end of the first year and vest quarterly thereafter over the following three years.

In May 2015, 100,000 stock options were granted outside the 2010 Plan to the Senior Director of Medical Affairs. The options have an exercise price of $1.49, which is the fair market value on the date of grant, and vest 25% at the end of the first year and vest quarterly thereafter over the following three years.

In October 2015, 200,000 stock options were granted outside the 2010 Plan to the Senior Vice President of Global Regulatory Affairs and Quality Assurance. The options have an exercise price of $0.79, which is the fair market value on the date of grant, and vest 25% at the end of the first year and vest quarterly thereafter over the following three years.

In September, 2015, in connection with Mr. Youmans’ promotion to the Chief Operating Officer, Mr. Youmans was awarded an option to purchase a total of 50,000 shares of our common stock, pursuant to our 2010 Stock Option and Incentive Plan, as amended, with an exercise price of $0.76 per share which was the fair market value on the date of grant. The option will vest quarterly over a four-year period and will expire one year after Mr. Youmans departure on February 2017.