7. Share-based Compensation

3 Months Ended

Mar. 31, 2015

Notes to Financial Statements

7. Share-based Compensation

Stock Options

The following is a summary of stock option activity for the three month period ended March 31, 2015, and the status of stock options outstanding at March 31, 2015:

	Three Month Period Ended
	March 31, 2015
				Wtd. Avg.
				Exercise
	Options			Price
Outstanding at beginning of year		1,390,770		$	1.50
Exercised		(22,242	)		1.12
Outstanding at March 31, 2015		1,368,528		$	1.51
Stock options exercisable at March 31, 2015		1,233,272		$	1.34

As of March 31, 2015, there was $523,956 of aggregate intrinsic value of outstanding stock options, including $514,621 of aggregate intrinsic value of exercisable stock options.  Intrinsic value is the total pretax intrinsic value for all “in-the-money” options (i.e., the difference between the Company’s closing stock price on the last trading day of the quarter and the exercise price, multiplied by the number of shares) that would have been received by the option holders had all option holders exercised their options on March 31, 2015.  This amount will change based on the fair market value of the Company’s stock.  There were no options granted in the three months ended March 31, 2015 and 2014. During the quarter ended March 31, 2015 intrinsic value of awards exercised was $20,937.

The fair value of share-based payments made with stock options to employees and non-employee directors was estimated on the measurement date using the Black-Scholes model using the following weighted average assumptions.

We recorded stock compensation expense related to options for the three month periods ended March 31, 2015 and 2014, as follows

	Three Month Period Ended
	March 31,
	2015		2014
Research and development costs	$	6,944	$	8,135
Sales and marketing costs		5,755		2,723
General and administrative costs		7,773		26,165
Cost of product sales		13,037		14,596
Total	$	33,509	$	51,619

Management applies an estimated forfeiture rate that is derived from historical employee termination data.  The estimated forfeiture rate applied for the three month periods ended March 31, 2015 and 2014 was approximately 7%.

As of March 31, 2015, we had approximately $294,196 of unrecognized compensation expense related to unvested stock options.  We expect to recognize this compensation expense over a weighted average period of approximately 2.75 years.

During the three months ended March 31, 2014, we issued or committed to issue common stock of the Company with a value of $80,000 for services rendered during the period. These costs were recorded in general and administrative expenses during the period.

On May 4, 2015 the Board of Directors approved the grant of stock options exercisable into approximately 1.2 million shares to be granted to executive and directors following shareholder approval of proposed amendments to the Company’s 2013 Performance Incentive Plan at the Company’s annual meeting on May 4, 2015. 

Restricted Stock

At March 31, 2015, there were no unvested restricted stock units outstanding.