Note 9 – Stock Options:

Our Board of Directors adopted, and our stockholders approved, the 2013 Equity Incentive Plan (the “2013 Plan”), which provided for the issuance of incentive awards of up to 7,000,000 shares of Common Stock (until it was amended as provided below) to officers, key employees, consultants and directors.

The following is a summary of stock option activity under the stock option plans for the three months ended March 31, 2016:

					Weighted-
					Average
			Weighted-		Remaining		Aggregate
			Average		Contractual		Intrinsic
	Number of		Exercise		Term		Value
	Shares		Price		(Years)		(in thousands)
Options outstanding at January 1, 2016		8,582,952	$	1.32		7.5	$	0
Options granted		300,000	$	0.60
Less options forfeited		(280,418)	$	0.66
Less options expired		-	$	0.00
Less options exercised		-	$	0.00
Options outstanding at March 31, 2016		8,602,534	$	1.33		8.0	$	0
Options exercisable at March 31, 2016		6,004,722	$	1.40		7.4	$	0

The following is a summary of stock options outstanding under the plans as of March 31, 2016:

		Stock Options Outstanding					Stock Options Exercisable
			Weighted Avg.		Weighted Avg.				Weighted Avg.
Range of	Number of		Contractual Life		Exercise		Number of		Exercise
Exercise Prices	Shares		(years)		Price		Shares		Price
$ 0.01 - $ 0.71		828,082		9.12	$	0.61		603,082	$	0.60
$ 0.80 - $ 1.00		3,062,048		8.18	$	0.93		1,410,709	$	0.96
$ 1.11 - $ 1.55		1,120,000		7.99	$	1.32		815,013	$	1.24
$ 1.64 - $ 2.22		3,592,404		7.55	$	1.82		3,175,918	$	1.78
		8,602,534		7.98	$	1.32		6,004,722	$	1.40

As of March 31, 2016, there were approximately $1.7 million of total unrecognized compensation costs related to unvested stock options and restricted stock. These costs are expected to be recognized over a weighted average period of 2.56 years.

The Company used the Black-Scholes valuation model to calculate the fair value of stock options. Stock-based compensation expense is recognized over the vesting period using the straight-line method.

The fair value of stock options issued for the quarter ended March 31, 2016 was estimated at the grant date using the following weighted average assumptions: Dividend yield 0%; Volatility 90.18%; Risk-free interest rate 1.78%; weighted average grant date fair value of $0.33 per share. There is no current allowance for forfeitures.

The total stock option-based compensation recorded as operating expense was $205,046 and $61,822 for the three months ended March 31, 2016 and 2015, respectively. All of the stock option-based compensation expense was classified as stock based compensation expense. On September 28, 2015, the Company’s Board of Directors amended the option agreements granted to all its officers and directors to clarify that the options were to be deemed non-qualified stock options.