7. SHARE BASED COMPENSATION

The Company accounts for the issuance of equity awards to employees in accordance with ASC Topic 718 and 505, which requires that the cost resulting from all share based payment transactions be recognized in the financial statements. These pronouncements establish fair value as the measurement objective in accounting for share based payment arrangements and requires all companies to apply a fair value based measurement method in accounting for all share based payment transactions with employees.

All stock-based compensation is included in operating expenses for the periods as follows:

	Three Months Ended
	March 31,
	2015		2014
Compensation cost recognized:
General & administrative	$	87,905	$	970
Research & development		620		1,316
	$	88,525	$	2,286

The Company uses the Black-Scholes option pricing model to value the options. The table below presents the weighted average expected life of the options in years. The expected life computation is based on the time to option expiration. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

The fair value of share-based payment units was estimated using the Black-Scholes option pricing model with the following assumptions and weighted average fair values as follows:

	Three Months Ended
	March 31, 2015
Valuation assumptions:
Grant price		$1.44 - $1.56
Exercise price		$1.44 - $1.56
Expected dividend yield		0	%
Expected volatility		99%-99.2	%
Expected life (in years)		5
Risk-free interest rate		1.37% - 1.39	%

Stock option activity under the 1998, 1999, 2001, 2003 and 2006 Stock Option Plans during the periods indicated below were as follows:

	Number of Shares Subject to Issuance		Weighted- average Exercise Price		Weighted- average Remaining Contractual Term		Aggregate Intrinsic Value

Outstanding at December 31, 2014		235,478	$	5.95		4.44 years	$	-

Granted		24,426	$	1.49		-		-
Forfeited or expired		(1,250)	$	3.12		-		-
Exercised		-		-		-		-
Outstanding at March 31, 2015		258,654	$	5.55		4.26 years	$	1,655

Exercisable at March 31, 2015		21,231	$	29.08		1.05 years		-

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on March 31, 2015. This amount changes based upon the fair market value of the Company’s stock.

As of March 31, 2015, the Company had 8,463 options available for future grants under the Plans.

Restricted Stock Units

The Company issues Restricted Stock Units (“RSUs”) which are equity-based instruments that may be settled in shares of common stock of the Company. During the three months ended March 31, 2015, the Company issued RSUs and to certain directors as compensation. RSU agreements vest with the passage of time. The vesting of all RSUs is contingent on continued board services.

The compensation expense incurred by the Company for RSUs is based on the closing market price of the Company’s common stock on the date of grant and is amortized ratably on a straight-line basis over the requisite service period and charged to general and administrative expense with a corresponding increase to additional paid-in capital. During the three months ended March 31, 2015 and 2014, charges associated with RSUs were $29,375 and $0, respectively.

	Number of Shares		Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value

Outstanding at December 31, 2014		31,807	$	3.93	$	-
Granted		43,402	$	1.11
Vested and Settled in Shares		(34,589)	$	3.36
Canceled / Expired		-	$	-		-

Outstanding at March 31, 2015		40,620	$	1.93	$	-

As of March 31, 2015, there was $37,564 of total unrecognized compensation cost related to non-vested share-based compensation arrangements from previously granted RSUs. That cost is expected to be recognized over a weighted-average period of one year.

As of March 31, 2015, there was $426,787 of total unrecognized compensation cost, net of estimated forfeitures, related to all unvested stock options and restricted stock units, which is expected to be recognized over a weighted average period of approximately four years.

Warrants

All previously granted warrants were issued with an exercise price that was equal to or above the fair market value of the Company’s common stock on the date of grant. As of March 31, 2015, the Company had 64,981 remaining warrants outstanding exercisable through 2019. No warrants were exercised for the three months ended March 31, 2015.