Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation

Note 4 – Stock-Based Compensation

The Company has granted equity awards under several plans. Under the 2005 Stock Incentive Plan (the “2005 Plan”), equity awards may be granted to officers, directors, employees, consultants and advisors to the Company and any present or future subsidiary. The 2005 Plan, approved in May 2005 and amended in June 2007, June 2011 and June 2012 by the Company’s stockholders, currently authorizes the grant of equity awards for up to 18,312,192 shares of common stock, which included, at the time of approval of the 2005 Plan, a maximum 5,746,468 shares of common stock subject to stock options outstanding under the Company’s 1995 Stock Option Plan (the “1995 Plan”) that may revert to and become issuable under the 2005 Plan if such options should expire or otherwise terminate unexercised. The term of the Company’s 1995 Plan has expired. Outstanding stock options remain in existence in accordance with their terms and no new awards will be made under the 1995 Plan.

Under the 2005 Plan and the 1995 Plan, incentive stock options, having a maximum term of 10 years, can be or were granted at no less than 100% of the fair value of the Company’s common stock at the time of grant and are generally exercisable over periods ranging from six months to four years. There is no minimum exercise price for non-statutory stock options.

The Company recorded stock-based compensation expense in the statements of operations as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Research and development	$	236	$	150	$	419	$	273
General and administrative		353		553		757		862
Total stock-based compensation expense	$	589	$	703	$	1,176	$	1,135

Stock Options Awards

The following is a summary of option activity under the 2005 Plan and the 1995 Plan for the six months ended June 30, 2012:

	2005 Stock Incentive Plan					1995 Stock Option Plan
	Stock Options			Weighted-Average Exercise Price		Stock Options			Weighted-Average Exercise Price
Outstanding at January 1, 2012		7,412,746		$	2.22		474,650		$	4.38
Granted		3,428,000		$	1.28		—		$	—
Exercised		(47,034	)	$	0.56		—		$	—
Canceled		(1,370,312	)	$	2.28		(184,000	)	$	4.00
Outstanding at June 30, 2012		9,423,400		$	1.88		290,650		$	4.59
Shares exercisable at June 30, 2012		3,148,169		$	2.39		290,650		$	4.59
Shares available for grant a June 30, 2012		5,437,536

The fair value of stock options granted was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
Weighted-average fair value of stock options granted	$	0.71		$	1.09		$	0.71		$	1.23
Risk-free interest rate		0.59	%		0.83%-1.91	%		0.59%-1.54	%		0.83%-1.91	%
Dividend yield		0	%		0	%		0	%		0	%
Volatility		75.47%-75.52	%		73.28%-80.02	%		75.47%-80.48	%		73.28%-80.48	%
Expected term (in years)		4.24			3.34-4.47			3.34-7.09			3.26-4.47
Expected forfeiture rate		0%-23.15	%		0%-23.15	%		0%-23.15	%		0%-23.15	%

The aggregate intrinsic value and weighted-average remaining contractual term of stock options outstanding as of June 30, 2012 was approximately $1.5 million and 7.9 years, respectively. The aggregate intrinsic value and weighted-average remaining contractual term of stock options exercisable as of June 30, 2012 was approximately $0.4 million and 5.5 years, respectively. The aggregate intrinsic value represents the total 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 all option holders exercised their options on June 30, 2012. This amount is subject to change based on changes to the fair value of the Company’s common stock. The aggregate intrinsic value of options exercised for the six months ended June 30, 2012 and 2011 was less than $0.1 million and $0.1 million, respectively.

Restricted Stock Awards

Under the 2005 Plan, the Company has granted restricted stock awards subject to certain performance-based and time-based vesting conditions which, if not met, would result in forfeiture of the shares and reversal of any previously recognized related stock-based compensation expense.

The following is a summary of restricted stock awards activity for the six months ended June 30, 2012:

	Number of Shares		Per Share Weighted-Average Grant-Date Fair Value
Outstanding at January 1, 2012		53,333	$	1.63
Restricted stock granted		—	$	—
Restricted stock vested		—	$	—
Restricted stock forfeited		—	$	—
Outstanding at June 30, 2012		53,333	$	1.63

As of June 30, 2012, there was approximately $3.9 million of total unrecognized compensation expense (net of estimated forfeitures) related to unvested options and restricted stock awards. This unrecognized compensation expense is expected to be recognized over a weighted-average period of 1.7 years. This estimate does not include the impact of other possible stock-based awards that may be made during future periods.