Share Based Compensation

6 Months Ended

Jun. 30, 2011

5. SHARE-BASED COMPENSATION

Share-Based Compensation – Employees and Directors

For the three months ended June 30, 2011 and 2010, share-based compensation expense totaled approximately $95,000 and $132,000, respectively. For the six months ended June 30, 2011 and 2010, share-based compensation expense totaled approximately $186,000 and $658,000, respectively.

There was no related income tax benefit recognized because our deferred tax assets are fully offset by a valuation allowance.

During the three months ended June 30, 2011, the compensation committee granted options to purchase 16,000 shares of our common stock to members of our Senior Advisory Board pursuant to the terms of their independent consultant agreements. As of June 30, 2011, $252,000 of total unrecognized compensation cost related to restricted stock and restricted stock units is expected to be recognized over a weighted average period of approximately 2.6 years.

We determine the fair value of share-based awards at their grant date, using a Black-Scholes-Merton Option-Pricing Model applying the assumptions in the following table.

	Six Months Ended June 30,
	2011	2010
Expected life (years)	2.5 years	2.9 - 3 years
Dividend yield	0.0%	0.0%
Expected volatility	93.6%	93.6%
Risk free interest rates	.85% - 1.105%	1.5%
Weighted average fair value of options at grant date	$0.48	$0.24

During the six months ended June 30, 2011, 4,326 shares of restricted stock vested or were forfeited, options to purchase 48,084 shares were exercised, and options to purchase 108,916 shares were forfeited.

Warrants – Non-Employees

At June 30, 2011 and December 31, 2010 there were outstanding warrants to purchase approximately 1.0 million shares of common stock, which were issued in connection with the August 2006 financing. The exercise price of the warrants is $9.15. On August 8, 2011, all outstanding warrants expired unexercised.