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Stock-Based Compensation | 6 Months Ended
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Jun. 30, 2012
Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract] |
Stock-Based Compensation | 7. Stock-Based Compensation We have three approved stock option plans for which stock options and restricted stock awards are available to grant to employees, consultants and directors. All employee and director stock options granted under our stock option plans have an exercise price equal to the market value of the underlying common stock on the grant date. There are no vesting provisions tied to performance conditions for any options, as vesting for all outstanding option grants was based only on continued service as an employee, consultant or director. All of our outstanding stock options and restricted stock awards are classified as equity instruments. Stock Options As of June 30, 2012, we had two equity incentive plans:
● | The 1998 Non-Officer Stock Option Plan (the 1998 Plan), which expired in June 2008 ;
● | The 2006 Equity Incentive Plan (the 2006 Plan).
We also had one non-employee director stock option plan as of June 30, 2012:
● | The 2001 Non-Employee Director Stock Option Plan (the Director Plan), which expired in March 2011.
A summary of the combined activity under all of the stock option plans is set forth below:
|  | Number of Options Outstanding |  |  | Weighted Average Exercise Price |
Outstanding at January 1, 2012 |  |  | 19,324 |  |  | $ | 92.19 |
Granted |  |  | 1,460,000 |  |  |  | 4.26 |
Cancelled or expired |  |  | (8,124 | ) |  |  | 69.36 |
Exercised |  |  | --- |  |  |  | --- |
Outstanding at June 30, 2012 |  |  | 1,471,200 |  |  | $ | 6.79 |
|  | For the Six
|  | Months Ended June 30, 2012
Annual dividend yield |  |  | -- |
Expected life (years) |  |  | 3.8 |
Risk-free interest rate |  |  | 0.55% - 0.57% |
Expected volatility |  |  | 186% - 187% |
The assumptions above were used to value stock options granted to employees and directors during the six months ended June 30, 2012. The aggregate intrinsic value of the 1,471,200 stock options that are outstanding, vested and expected to vest at June 30, 2012 is $2.8 million. The 1998 Plan terminated effective June 15, 2008 and the Director Plan terminated effective March 2011. Although we can no longer issue stock options out of the plans, the outstanding options at the date of termination will remain outstanding and vest in accordance with their terms. Options granted under the Director Plan vested over a one to four-year period, expire five to seven years after the date of grant and have exercise prices reflecting market value of the shares of our common stock on the date of grant. Stock options granted under the 1998 and 2006 Plans are exercisable over a maximum term of ten years from the date of grant, vest in various installments over a one to four-year period and have exercise prices reflecting the market value of the shares of common stock on the date of grant. During the three and six months ended June 30, 2011, the Company recorded $35,000 and $70,000, respectively, of stock option expense related to the vesting of stock options. We did not grant any options to purchase shares of our common stock to employees or members of our Board of Directors (Board) during the six months ended June 30, 2011. During the three months ended June 30, 2012, we granted 1.1 million options to purchase shares of our common stock to employees and 360,000 options to purchase shares of our common stock to members of our Board. The options have a 7-year life and 1/3 of the options vested on the date of grant with the remaining vesting monthly over the following 24-months. During the three and six months ended June 30, 2012, we recorded $2.3 million of stock based compensation expense related to vesting of such options. Warrants On December 3, 2010, we issued 120,000 warrants at an exercise price of $1.625 per share to an employee. The fair value of the warrants was $198,000 on the date of grant, using the Black-Scholes option pricing model, which is to be amortized over 24 months. During the three and six months ended June 30, 2012 and 2011, we recorded $25,000 and $50,000, respectively, of stock based compensation expense related to vesting of such warrants. We issued 80,000 five-year stock purchase warrants at an exercise price of $2.50 per share to our legal advisor during the six months ended June 30, 2011. We also issued 20,000 three-year stock purchase warrants at an exercise price or $2.00 per share to our US based employee during the six months ended June 30, 2011. The warrants to purchase an aggregate of 100,000 shares of our common stock vested on the date of grant. The vested warrants granted to the employee and legal advisor had an aggregate fair value on the date of grant of $230,000 and is included in general and administrative expense for the three and six months ended June 30, 2011. The fair value of stock-based compensation related to the employee warrants is calculated using the Black-Scholes option pricing model as of the grant date of the underlying warrant. On September 12, 2011, we issued 20,000 warrants at an exercise price of $3.90 per share to an employee. The fair value of the warrants was $75,000 on the date of grant, using the Black-Scholes option pricing model, which is to be amortized over 24 months. During the three and six months ended June 30, 2012, we recorded $9,000 and $18,000, respectively, of stock based compensation expense related to vesting of such warrants. The stock-based compensation expense reflects the fair value of the vested portion of options and warrants for the recipients at the date of issuance plus the amortization of the unvested portion of the stock options and warrants. Stock-based compensation expense related to stock options and warrants in the accompanying consolidated statements of operations is as follows (in thousands):
|  | Three months ended June 30, 2011 |  |  | Three months ended June 30, 2012 |
Stock-based compensation |  | $ | 183 |  |  | $ | 2,317 |
|  | Six months ended June 30, 2011 |  |  | Six months ended June 30, 2012 |  |  | Remaining unamortized expense at June 30, 2012 |
Stock-based compensation |  | $ | 472 |  |  | $ | 2,351 |  |  | $ | 3,607 |
The remaining unamortized expense related to stock options and warrants will be recognized on a straight line basis monthly as compensation expense over the remaining vesting period which approximates 22 months. See Note 5 for assumptions used to value warrants during the three and six months ended June 30, 2011. A summary of all warrant activity is set forth below:
|  | June 30, 2012
Outstanding and exercisable |  | Warrants |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Life
January 1, 2012 |  |  | 5,405,606 |  |  | $ | 1.57 |  |  |  | 2.45 |
Issued |  |  | -- |  |  | $ | -- |  |  |  | -- |
Expired/forfeited |  |  | -- |  |  |  | -- |  |  |  | -- |
Exercised |  |  | (223,500 | ) |  | $ | 0.61 |  |  |  | -- |
Outstanding and exercisable, June 30, 2012 |  |  | 5,182,106 |  |  | $ | 1.61 |  |  |  | 1.87 |
On March 16, 2012, John Reardon, a member of our board of directors, exercised a warrant to purchase 200,000 shares of common stock using the net exercise provision allowed in the warrant and received 174,798 shares of our common stock. During the three months ended June 30, 2012, a warrant holder exercised a warrant to purchase 21,000 shares of common stock using the net exercise provision allowed in the warrant and received 13,831 shares of our common stock. Another warrant holder exercised a warrant to purchase 2,500 shares of common stock and paid a cash exercise price of $3.13 per share for a total exercise price of $7,813. The fair value of stock-based awards to employees and directors is calculated using the Black-Scholes option pricing model, even though this model was developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which differ significantly from our stock options. The Black-Scholes model also requires subjective assumptions, including future stock price volatility and expected time to exercise, which greatly affect the calculated values. The expected term and forfeiture rate of options granted is derived from historical data on employee exercises and post-vesting employment termination behavior, as well as expected behavior on outstanding options. The risk-free rate is based on the U.S. Treasury rates in effect during the corresponding period of grant. The expected volatility is based on the historical volatility of our stock price. These factors could change in the future, which would affect fair values of stock options granted in such future periods, and could cause volatility in the total amount of the stock-based compensation expense reported in future periods.
Below is a summary of Outstanding Warrants to Purchase Common Stock as of June 30, 2012: |
Description | Issue Date |  | Exercise Price |  | Shares |  | Expiration Date |
September 2007 Investor Warrant | 9/26/2007 |  | $ | 31.75 |  | 233 |  |  | 9/26/2012 |
August 2009 Employee Warrants | 8/25/2009 |  | $ | 0.50 |  | 240,000 |  |  | 8/25/2016 |
January 2010 Investor Warrant | 1/28/2010 |  | $ | 1.00 |  | 40,000 |  |  | 1/28/2013 |
2007 Debt Extension Warrants | 9/22/2010 |  | $ | 1.00 |  | 16,000 |  |  | 9/22/2015 |
September 2010 Repricing Warrant | 9/28/2010 |  | $ | 1.38 |  | 4,000 |  |  | 9/28/2013 |
October 2010 Repricing Warrants | 10/18/2010 |  | $ | 1.38 |  | 2,434,830 |  |  | 10/18/2013 |
October 2010 Employee Warrants | 10/15/2010 |  | $ | 1.38 |  | 1,440,000 |  |  | 10/15/2013 |
December 2010 Employee Warrants | 12/3/2010 |  | $ | 1.63 |  | 200,000 |  |  | 12/3/2015 |
January 2011 Employee Warrant | 1/21/2011 |  | $ | 2.00 |  | 20,000 |  |  | 1/21/2014 |
February 2011 Legal Advisor Warrant | 2/22/2011 |  | $ | 2.00 |  | 80,000 |  |  | 2/22/2016 |
March 2011 Investor Warrants | 3/9/2011 |  | $ | 3.13 |  | 617,943 |  |  | 3/9/2016 |
March 2011 Investor Warrants | 4/7/2011 |  | $ | 3.13 |  | 49,100 |  |  | 4/7/2016 |
May 2011 Consultant Warrant | 5/17/2011 |  | $ | 4.05 |  | 20,000 |  |  | 5/17/2014 |
September 2011 Employee Warrant | 9/12/2011 |  | $ | 3.90 |  | 20,000 |  |  | 9/12/2014 |
Total Warrants Outstanding |  |  |  |  |  | 5,182,106 |  |  |  |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 + Details
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