We have both an employee and director stock incentive plan, which are described more fully in Note 10 to the financial statements in our 2013 Annual Report on Form 10-K, as amended. As of May 31, 2014, we had approximately 1,808,000 shares of common stock reserved for future issuance under the stock incentive plans.

Stock-based compensation cost is measured at the grant date based on the value of the award granted using the Black-Scholes option pricing model, and recognized over the period in which the award vests. For stock awards no longer expected to vest, any previously recognized stock compensation expense is reversed in the period of termination. The stock-based compensation expense has been allocated to the various categories of operating costs and expenses in a manner similar to the allocation of payroll expense as follows:

	Three Months Ended				Nine Months Ended
	May 31, 2014		May 31, 2013		May 31, 2014		May 31, 2013

Cost of sales	$	15,312	$	16,022	$	46,299	$	48,067
Research and development		45,641		50,285		137,730		150,855
Selling, general and administrative		155,335		219,875		450,830		663,592

Total	$	216,288	$	286,182	$	634,859	$	862,514

During the nine months ended May 31, 2014, we granted employees a total of 127,000 stock options at a weighted-average exercise price of $1.19 with one third vesting each year for the next three years. The estimated weighted average grant date fair value per share of this stock option was $0.62, and our weighted average assumptions used in the Black-Scholes valuation model to determine this estimated fair value are as follows:

Unrecognized stock-based compensation expense expected to be recognized over the estimated weighted-average amortization period of .85 years is approximately $975,000 as of May 31, 2014.

A summary of the time-based stock option awards as of May 31, 2014, and changes during the nine months then ended, is as follows:

	Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contract Term (Years)		Aggregate Intrinsic Value

Outstanding as of August 31, 2013		4,212,573		$	2.85
Granted		127,000			1.19
Exercised		-			-
Forfeited or expired		(446,654	)		2.22

Outstanding as of May 31, 2014		3,892,919		$	2.87		6.59	$	350

Exercisable as of May 31, 2014		2,406,761		$	3.72		5.16	$	-

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on our closing stock price of $1.04 as of May 30, 2014. There were no exercisable, in-the-money options as of that date.