NOTE K — STOCK OPTION PLANS

In July 2004, the Board of Directors approved the adoption of the 2004 Stock Option Plan. The 2004 Stock Option Plan provides for the grant of options to purchase up to 750,000 shares of Milestone Scientific’s common stock. Options may be granted to employees, officers, directors and consultants of Milestone Scientific for the purchase of common stock of Milestone Scientific at a price not less than the fair market value of the common stock on the date of the grant. In general, options become exercisable over a three-year period from the grant date and expire five years after the date of grant.

In December 2007, the Board of Directors authorized Milestone Scientific to issue up to $2 million of its common stock to vendors or employees, and to grant them piggy back registration rights in the usual form, at a value of not less than 90% of the market value on the date of the agreement for the vendor or employee to accept said shares. Such future shares are not included in the above noted shares reserved for future issuance.

In June 2011, the Shareholders of Milestone Scientific approved the 2011 Stock Option Plan (the “2011 Plan”) that provides for stock options to our employees, directors and consultants and incentive and non-qualified stock options to purchase up to 2,000,000 shares of common stock. Such future shares are included in the above noted shares reserved for future issuances.

Milestone Scientific recognizes compensation expense on a straight line basis over the requisite service period and in the case of performance based options over the period of the expected performance. During the years ended December 31, 2015 and 2014 Milestone Scientific recognized $637,108, and $429,131 of total employee compensation cost related to options that vested each year, respectively. As of December 31, 2015 and 2014, there was $1,167,865 and $569,641 of total unrecognized compensation cost related to non-vested options which Milestone Scientific expects to recognize over a weighted average period of 2.78 years and 3.23 years for December 31, 2015 and December 31, 2014, respectively.

A summary of option activity for employees under the plans as of December 31, 2015 and 2014, and changes during the year then ended is presented below:

	Number of Options			Weighted Averaged Exercise Price $		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Options Value $
Outstanding, January 1, 2014		1,484,499			1.03		2.88		-
Granted		390,470			2.25		4.87		-
Exercised		(312,293	)		0.93		-		-
Forfeited or expired		(90,546	)		1.30		-		-
Outstanding, December 31, 2014		1,472,130			0.79		3.23		1,430,231
Exercisable, December 31, 2014		1,036,185			1.10		2.75		1,244,074
Granted		157,306			3.01		4.18
Exercised during 2015		(200,000	)		1.00		-		-
Forfeited or expired		(10,000	)		1.00		-		-
Outstanding, December 31, 2015		1,419,436			1.56		2.78		1,220,338
Exercisable, December 31, 2015		1,041,680			1.29		2.41		1,135,819

	Number of Options			Weighted Averaged Exercise Price $
VESTED OPTIONS
Outstanding, January 1, 2014		1,115,006			0.97
Exercised		(312,293	)		0.93
Vested Options		324,018			1.45
Forfeited		(90,546	)		1.30
Outstanding, December 31, 2014		1,036,185			1.11
Exercised		(200,000	)		1.00
Vested Options		215,495			1.92
Forfeited		(10,000	)		1.00
Outstanding, December 31, 2015		1,041,680			1.29

NONVESTED OPTIONS
Nonvested, January 1, 2014		369,493			1.22
Granted		390,470			2.18
Vested		(324,018	)		1.45
Forfeited		-			-
Nonvested, December 31, 2014		435,945			1.87
Granted		157,306			3.01
Vested		(215,495	)		1.92
Forfeited		-			-
Nonvested, December 31, 2015		377,756			2.32

A summary of option activity for non-employees under the plans as of December 31, 2015 and 2014, and changes during the year ended is presented below:

	Number of Options			Weighted Averaged Exercise Price $		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Options Value $
Outstanding, January 1, 2014		173,332			0.48		0.59		210,833
Exercisable, December 31, 2014		173,332			0.48		0.59		210,833
Exercised		(151,666	)		0.38		-		-
Forfeited		(5,000	)		1.15		-		-
Outstanding, December 31, 2014		16,666			1.27		0.62		17,166
Exercisable, December 31, 2014		16,666			1.27		0.62		17,166
Granted		8,333			2.70		4.83		22,499
Exercised		(16,666	)		-		-		-
Outstanding, December 31, 2015		8,333			2.70		4.83		-
Exercisable, December 31, 2015		2,777			2.70		4.83		-

	Number of Options			Weighted Averaged Exercise Price $
VESTED OPTIONS
Outstanding, January 1, 2014		173,332			0.48
Exercised		151,666			0.38
Forfeited		5,000			1.15
Outstanding, December 31, 2014		16,666			1.27
Vested		5,556			2.70
Exercised		166,666			1.27
Forfeited		-			-
Outstanding, December 31, 2015		2,777			2.70

NONVESTED OPTIONS
Nonvested January 1, 2014		-			-
Granted		8,333			2.70
Vested during 2015		2,777			3.70
Outstanding, December 31, 2015		5,556			2.70

The fair value of the options was estimated on the date of grant using the Black Scholes option-pricing model. There were 8,333 non-employee options granted for the years ending December 31, 2015 and none granted during 2014. During the years ended December 31, 2015 and 2014, Milestone Scientific recognized $7,050 expense related to non-employee options that vested. At December 31, 2015 there was $15,000 of total unrecognized compensation cost related to non-vested options which Milestone Scientific expects to recognize over weighted average of 4.83 years.