9. STOCKHOLDERS’ EQUITY

Stock Option Plan

At December 31, 2014, we have one stock option plan, the Amended and Restated 2001 Plan (“2001 Plan”). Under the 2001 Plan, qualified incentive stock options and non-qualified stock options may be granted to purchase up to an aggregate of 2,050,000 shares of the Company's common stock, subject to certain anti-dilution provisions. The exercise price per share of common stock may not be less than 100% (110% for qualified incentive stock options granted to stockholders owning at least 10% of common shares) of the fair market value of the Company's common stock on the date of grant. In general, the options vest and become exercisable in four equal annual installments following the date of grant, although the Company’s board of directors, at its discretion, may provide for different vesting schedules. The options expire ten years (five years for qualified incentive stock options granted to stockholders owning at least 10% of common shares) after such date. As of December 31, 2014, options to purchase 759,958 shares of common stock were outstanding under the 2001 Plan, and a total of 239,098 shares remain available for grant under the 2001 Plan.

Stock-Based Compensation

ASC 718 requires that employee stock-based compensation costs to be recognized over the requisite service period, or the vesting period, in a manner similar to all other forms of compensation paid to employees. The allocation of employee stock-based compensation costs to each operating expense line are estimated based on specific employee headcount information at each grant date and estimated stock option forfeiture rates and revised, if necessary, in future periods if actual employee headcount information or forfeitures differ materially from those estimates. As a result, the amount of employee stock-based compensation costs we recognize in each operating expense category in future periods may differ significantly from what we have recorded in the current period.

Stock-based compensation expense recognized under ASC 718 was as follows:

	December 31,
	2014		2013		2012
Research and development	$	-	$	92,249	$	171,217
General and administrative		21,416		19,387		57,268
Total stock-based compensation expense	$	21,416	$	111,636	$	228,485

We account for stock options granted to persons other than employees or directors at fair value using the Black-Scholes option-pricing model in accordance with Accounting Standards Codification 505-50, Equity Based Payments to Non-Employees (“ASC 505-50”). Stock options granted to such persons and stock options that are modified and continue to vest when an employee has a change in employment status are subject to periodic revaluation over their vesting terms. We recognize the resulting stock-based compensation expense during the service period over which the non-employee provides services to us. The stock-based compensation expense related to non-employees for the year ended December 31, 2014 was zero. In 2013 and 2012 non-employee stock compensation of $79,049 and $109,479 was recorded to research and development, respectively.

Stock Options

15,000 stock options valued at approximately $123,000 were granted to a new member of the Board of Directors (Max Link, Ph.D.) during the year ended December 31, 2014. At the time of his sudden death on October 6, 2014, none of these options had vested and, in accordance with the applicable terms, they expired upon his death. For the years ended December 31, 2013 and 2012, an aggregate 30,000 and 15,000 stock options were granted, valued at approximately $165,000 and $109,000, respectively. The following table presents the assumptions used to estimate the fair values of the stock options granted in the periods presented:

	2014			2013			2012
Risk-free interest rate		1.66	%		1.21	%		0.69	%
Expected volatility		32	%		35	%		54	%
Expected life (in years)		5			5			5
Dividend yield		-			-			-

The summary of the stock options activity is as follows for year ended:

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2013		1,182,000		$	8.90		4.49	$	9,597,000
Grants		30,000			16.88		10.00		-
Exercised		(30,000	)		1.00		-		602,100
Forfeitures or expirations		(15,000	)		30.79		-		-
Outstanding at January 1, 2014		1,167,000			9.03		3.65		15,420,965
Grants		15,000			26.48		10.00		-
Exercised		(407,042	)		5.27		-		11,559,689
Forfeitures or expirations		(15,000	)		26.48		-		-
Outstanding at December 31, 2014		759,958			11.04		3.12		23,483,235

Vested and expected to vest at December 31, 2014		728,708			10.43		2.99		20,542,279
Exercisable at December 31, 2014		728,708		$	10.43		2.99	$	20,542,279

The following table summarizes information relating to stock options by exercise price at December 31, 2014:

		Outstanding Shares						Exercisable Shares
Option Exercise Price		Number of Shares		Weighted Average Life (years)		Weighted Average Exercise Price		Number of Shares	Weighted Average Option Price		Weighted Average Life (years)
	$0.83 - 1.00		247,500		1.38		$0.91	247,500		$0.91		1.38
	4.00 - 5.50		133,000		2.51		4.78	133,000		4.78		2.51
	13.24 - 15.85		121,958		4.46		14.05	121,958		14.05		4.46
	17.00 - 21.00		167,500		4.30		19.50	156,250		19.61		3.98
	26.43 - 29.21		90,000		4.84		28.28	70,000		28.02		4.82
			759,958		3.12		$11.04	728,708		$10.43		2.99

During the 2014, 2013 and 2012, $2,146,821, $30,000 and $148,425 proceeds were received from stock options exercised. Aggregate intrinsic value represents the total pre-tax intrinsic value, based on the closing price of our common stock of $38.62 on December 31, 2014, which would have been received by the option holders had all option holders exercised their options as of that date. Total unrecognized compensation cost related to non-vested stock options outstanding as of December 31, 2014 was approximately $58,000 which we expect to recognize over a weighted-average period of 2.75 years.