Shared-Based Compensation - Note 6

6 Months Ended

Jun. 30, 2011

Disclosure Of Compensation Related Costs

Share-Based Compensation

6. SHARE-BASED COMPENSATION

We use the straight-line attribution method to allocate the fair value of share-based compensation awards over the requisite service period for each award. The following table shows the amount of stock-based employee compensation expense included in the consolidated statements of operations:

		Three Months Ended				Six Months Ended
		June 30,				June 30,
		2011		2010		2011		2010
Cost of contract revenue	$	30,000	$	2,000	$	40,000	$	7,000
Cost of product revenue		31,000		19,000		40,000		30,000
Research and development expense		564,000		575,000		739,000		810,000
Sales, marketing, general and administrative expense		697,000		844,000		889,000		1,242,000
Total share-based employee compensation expense	$	1,322,000	$	1,440,000	$	1,708,000	$	2,089,000

As part of our 2011 plan to conserve cash used in operations, we implemented two share-based compensation programs during the three months ended June 30, 2011. In May 2011, we issued 418,000 shares of our common stock as incentive awards to non-executive employees under the 2006 Incentive Plan. The shares were valued using our closing stock price on the date of grant. We expensed $560,000 of share-based employee compensation for these awards at grant.

In June 2011, we implemented a voluntary program in which certain non-executive senior professional employees could elect to receive a portion of their 2011 salary in stock instead of cash. We issued 510,000 shares of our common stock under the 2006 Incentive Plan as prepayment of salary for future service. The shares were valued using our closing stock price on the date of grant. The total share-based compensation expense for these awards was $627,000, of which $179,000 was amortized during the three months ended June 30, 2011 for service completed as of that date. The remaining $448,000 of share-based compensation expense will be amortized over the three months ending September 30, 2011 when the service is provided. Program participants who voluntarily leave employment prior to completion of the service period must repay the pro-rata portion of the prepaid salary for the uncompleted service period.

Options Activity and Positions

The following table summarizes shares, weighted average exercise price, weighted average remaining contractual term and aggregate intrinsic value of options outstanding and options exercisable as of June 30, 2011:

				Weighted
				Average
			Weighted	Remaining
			Average	Contractual		Aggregate
			Exercise	Term		Intrinsic
Options	Shares		Price	(years)		Value
Outstanding as of June 30, 2011	8,119,000	$	3.26	5.8	$	5,250
Exercisable as of June 30, 2011	6,314,000	$	3.54	5.1	$	-

As of June 30, 2011, our unamortized share-based employee compensation was $2.6 million which we plan to amortize over the next 2.4 years, and our unamortized nonvested equity share-based employee compensation was $1.3 million which we plan to amortize over the next 2.4 years.