Shared-Based Compensation - Note 6

9 Months Ended

Sep. 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				Nine Months Ended
		September 30,				September 30,
		2011		2010		2011		2010
Cost of contract revenue	$	56,000	$	5,000	$	97,000	$	12,000
Cost of product revenue		60,000		7,000		100,000		37,000
Research and development expense		337,000		274,000		1,075,000		1,084,000
Sales, marketing, general and administrative expense		447,000		415,000		1,337,000		1,657,000
Total share-based employee compensation expense	$	900,000	$	701,000	$	2,609,000	$	2,790,000

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 under which we issued shares of our common stock as compensation instead of cash.

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 May 2011.

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. In June 2011 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 and the remaining $448,000 was amortized during the three months ended September 30, 2011 for service completed as of that date. In September 2011, we issued 241,000 shares of our common stock under this program. A total of $212,000 of share-based compensation expense for these awards will be amortized during the fourth quarter of 2011. 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 September 30, 2011:

				Weighted
				Average
			Weighted	Remaining
			Average	Contractual		Aggregate
			Exercise	Term		Intrinsic
Options	Shares		Price	(years)		Value
Outstanding as of September 30, 2011	7,898,000	$	3.24	5.8	$	-
Exercisable as of September 30, 2011	6,024,000	$	3.57	5.0	$	-

As of September 30, 2011, our unamortized share-based employee compensation was $2.3 million which we plan to amortize over the next 2.3 years, and our unamortized nonvested equity share-based employee compensation was $968,000 which we plan to amortize over the next 1.7 years.