Stock-Based Compensation, Options and Restricted Stock Activity and Net Loss per Weighted Average Common Share Outstanding

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation, Options and Restricted Stock Activity and Net Loss per Weighted Average Common Share Outstanding

Stock-Based Compensation, Options and Restricted Stock Activity and Net Loss per Weighted Average Common Share Outstanding

12. Stock-Based Compensation, Options and Restricted Stock Activity and Net Loss per Weighted Average Common Share Outstanding

Warrants

In connection with Caliper’s 2006 acquisition of Xenogen, Caliper granted Xenogen stockholders an aggregate of 4,701,733 warrants, and reserved an additional 411,814 warrants for potential issuance upon the exercise of Xenogen warrants which were assumed by Caliper. Upon the potential exercise of these assumed warrants, the holders are entitled to receive that number of Caliper shares and warrants that such holder would have been entitled to receive as a Xenogen stockholder as of the acquisition date.  Each warrant granted permits the holder to acquire one Caliper common share at an exercise price of $6.79 per share through August 9, 2011. The termination date of the Caliper warrants that are to be issued upon the eventual exercise of the assumed Xenogen warrants may not be extended beyond the 5 year expiration date for the Caliper warrants.

During the six months ended June 30, 2011, 575,547 Caliper warrants were exercised resulting in 4,151,226 warrants outstanding as of June 30, 2011.  In addition, during the six months ended June 30, 2011, 111,340 of the assumed Xenogen warrants were exercised resulting in 296,203 assumed warrants outstanding as of June 30, 2011.  Collectively, the net effect of the Caliper and Xenogen warrant exercises including the effect of “net or cashless exercises” was the issuance of 82,002 shares of Caliper common stock.  In July 2011 and through August 5, 2011, the net effect of Caliper and Xenogen warrant exercises including the effect of “net or cashless exercises,” was the issuance of 1,117,108 shares of Caliper common stock.  These exercises generated approximately $5.4 million in cash proceeds subsequent to June 30, 2011.

The following table summarizes information with respect to warrants assumed from Xenogen which remain outstanding and exercisable at June 30, 2011:

Expiration Date	Exercise Price		Number of Xenogen Warrants	Equivalent Caliper Warrants (.2249 exchange ratio)	Equivalent Caliper Shares (.5792 exchange ratio)
April 30, 2013	$	3.64	288,044	64,777	166,831
October 18, 2011	$	40.74	8,159	1,834	4,725
			296,203	66,611	171,556

Stock Plans

Caliper’s stock plans are disclosed within Note 13 to the consolidated financial statements included in Caliper’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 11, 2011.  In June 2011, Caliper’s stockholders adopted the 2011 Employee Stock Purchase Plan (the “2011 Purchase Plan”). The initial number of shares reserved was 1.5 million shares, subject to adjustment, and the term of the 2011 Purchase Plan is ten years.  Under the 2011 Purchase Plan, employees have the option to purchase shares of Caliper’s common stock at 85% of the closing price on the first trading day of each offering period or the last trading day of each offering period (as defined in the 2011 Purchase Plan), whichever is lower, up to specified limits. Eligible employees are given the option to purchase shares of Caliper’s common stock, on a tax-favored basis, through regular payroll deductions in compliance with Section 423 of the Internal Revenue Code of 1986, as amended. The 2011 Purchase Plan will replace Caliper’s 1999 Employee Stock Purchase Plan, which will be terminated upon the expiration of the offering period ending November 30, 2011.

Stock-Based Compensation

Caliper recognizes all share-based payments, including grants of stock options, in the income statement as an operating expense, based on their fair values. Caliper estimates the fair value of each option award on the date of grant using a Black-Scholes-Merton based option-pricing model.  Stock-based compensation expense is included within costs and expenses as follows (in thousands):

	Three Months Ended June 30				Six Months Ended June 30
	2011		2010		2011		2010
Cost of product revenue	$	68	$	61	$	142	$	151
Cost of service revenue	15		12		28		28
Research and development	141		125		285		270
Selling, general and administrative	735		592		1,494		1,353
Restructuring charge	—		—		65		—
Total	$	959	$	790	$	2,014	$	1,802

On June 30, 2011, Caliper had share-based compensation plans (the “Plans”), which are described within Note 13 to the consolidated financial statements included in Caliper’s Annual Report on Form 10-K for the year ended December 31, 2010, filed with the SEC on March 11, 2011.

The fair value of each option award issued under the Plans is estimated on the date of grant using a Black-Scholes-Merton based option pricing model that uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of Caliper’s stock. The expected term of the options is based on Caliper’s historical option exercise data taking into consideration the exercise patterns of the option holders during the option’s life. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the date of the grant.

	Six Months Ended June 30,
	2011		2010
Expected volatility (%)	81-92		83-94
Risk-free interest rate (%)	1.05-2.15		1.43-2.18
Expected term (years)	3.6-4.9		3.4-4.6
Expected dividend yield (%)	—		—
Weighted average grant date fair value	$	4.51	$	2.32

Options and Restricted Stock Activity

A summary of stock option and restricted stock activity under the Plans as of June 30, 2011, and changes during the six months then ended is as follows:

Stock Options	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
						(in thousands)
Outstanding at December 31, 2010	9,011,204		$	4.45	6.02	$	18,101
Granted	946,630		6.91		—	—
Exercised	(207,583	)	4.48		—	490
Canceled	(85,802	)	6.75		—	—
Outstanding at June 30, 2011	9,664,449		$	4.67	5.93	$	33,716
Exercisable at June 30, 2011	6,809,217		$	4.80	4.77	$	23,034
Vested and expected to vest at June 30, 2011	9,523,023		$	4.68	5.89	$	33,184

Restricted Stock Units	Shares		Weighted Average Grant Date Fair Market per Share Value
Outstanding and non-vested at December 31, 2010	1,432,089		$	1.92
Granted	240,122		6.62
Vested	(388,214	)	2.75
Forfeited	—		—
Outstanding and non-vested at June 30, 2011	1,283,997		$	2.55

Restricted stock units do not carry an exercise price and typically vest over a four-year period, although the vesting period of certain awards may vary. As of June 30, 2011, the weighted average remaining vesting term is 2.15 years and the aggregate intrinsic value of outstanding and non-vested restricted stock is approximately $10.4 million.

During the six months ended June 30, 2011, Caliper granted 946,630 options at a weighted average grant date fair value, using the Black-Scholes-Merton option pricing model, of $4.51 per share, and 240,122 restricted stock units at a weighted average grant date fair value of $6.62 per share. The total fair value of restricted stock that vested during the six months ended June 30, 2011 was approximately $1.1 million.

As of June 30, 2011, there was $9.8 million of total unrecognized compensation cost related to unvested stock-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted-average remaining service period of approximately 3.1 years.

Common Share Issuances

During the six months ended June 30, 2011, Caliper issued 710,446 shares of common stock as a result of stock option and warrant exercises, issuances of shares under Caliper’s 1999 Employee Stock Purchase Plan and vesting of restricted stock.

Net Loss per Weighted Average Common Share Outstanding

Basic net income (loss) per share is calculated based upon net income (loss) divided by the weighted-average number of common shares outstanding during the period. The calculation of diluted net income per share gives effect to the dilutive effect of common stock equivalents consisting of stock options, unvested restricted stock, unvested restricted stock units and warrants (calculated using the treasury stock method).  Potentially dilutive securities are excluded from the diluted earnings per share computation to the extent they have an antidilutive effect due to Caliper’s net loss.

A reconciliation of shares used in the calculations is as follows (in thousands):

	Three Months Ended  June 30		Six Months Ended  June 30
	2011	2010	2011	2010
Weighted-average shares of common stock outstanding, basic	52,417	50,070	52,236	49,776
Dilutive options and restricted stock — based on the treasury stock method	—	1,932	—	2,036
Weighted-average shares used in dilutive computations of net income per share	52,417	52,002	52,236	51,812

The following outstanding options, restricted stock and warrants (prior to the application of the treasury stock method) were excluded from the computation of diluted net loss per share as they had an antidilutive effect (in thousands):

	Three Months Ended  June 30		Six Months Ended  June 30
	2011	2010	2011	2010
Options and restricted stock	10,948	6,299	10,948	6,668
Warrants	4,389	6,165	4,389	6,165
	15,337	12,464	15,337	12,833