STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2011

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

10. STOCK-BASED COMPENSATION

        The Company has two stockholder-approved equity-based compensation plans under which stock options have been granted—the BioSante Pharmaceuticals, Inc. Amended and Restated 1998 Stock Plan (1998 Plan) and the BioSante Pharmaceuticals, Inc. Second Amended and Restated 2008 Stock Incentive Plan (2008 Plan) (collectively, the Plans). The 2008 Plan replaced the 1998 Plan except with respect to options outstanding under the 1998 Plan. As of December 31, 2011, the number of shares of the Company's common stock authorized for issuance under the 2008 Plan, subject to adjustment as provided in the 2008 Plan, was 1,000,000 plus the number of shares subject to options outstanding under the 1998 Plan as of the effective date of the 2008 Plan but only to the extent that such outstanding options are forfeited, expire or otherwise terminate without the issuance of such shares. Of such authorized shares, 3,416 shares had been issued and 587,666 shares were subject to outstanding stock options as of December 31, 2011.

        Outstanding employee stock options generally vest over a period of three or four years and have 10-year contractual terms. Upon exercise of an option, the Company issues new shares of its common stock. From time to time, the Company grants employee stock options that have performance condition-based vesting provisions which result in expense when such performance conditions are probable of being achieved. None of these options were outstanding as of December 31, 2011. The non-cash, stock-based compensation cost that was incurred by the Company in connection with the 1998 Plan and the 2008 Plan was $1,177,683, $992,757 and $1,254,503 for the years ended December 31, 2011, 2010 and 2009, respectively. No income tax benefit was recognized in the Company's statements of operations for stock-based compensation arrangements due to the Company's net loss position.

        The weighted average fair value of the options at the date of grant for options granted during 2011, 2010 and 2009 was $7.32, $6.66 and $6.24 per share, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:

	2011	2010			2009
Expected option life (years)	5.5 - 6.25		6.00			6.00
Risk-free interest rate	1.175% - 2.57%		2.42	%		2.74	%
Expected stock price volatility	69.07% - 72.16%		76.05	%		76.75	%
Dividend yield	—		—			—

        The Company uses the simplified method to estimate the life of options. The risk-free interest rate used is the yield on a United States Treasury note as of the grant date with a maturity equal to the estimated life of the option. The Company calculated a volatility rate based on the closing price for its common stock at the end of each calendar month as reported by the NASDAQ Global Market. The Company has not in the past issued a cash dividend nor does it have any current plans to do so in the future; and therefore, an expected dividend yield of zero was used.

        The following table summarizes the stock option compensation expense for employees and non-employees recognized in the Company's statements of operations for each period:

	2011		2010		2009
Research and development	$	423,925	$	325,208	$	361,773
General and administrative		753,758		667,549		892,730
Total stock-based compensation expense	$	1,177,683	$	992,757	$	1,254,503

        A summary of activity under the Plans during the year ended December 31, 2011 is presented below:

Options	Option Shares		Weighted Average Exercise Price		Weighted Average Remaining Term		Aggregate Intrinsic Value
Outstanding December 31, 2010		619,572	$	22.14		6.74	$	162,892
Granted		346,541	$	11.40
Exercised		3,194	$	10.14
Forfeited or expired		56,059	$	17.70
Outstanding December 31, 2011		906,860	$	18.36		6.97	$	0
Exercisable at December 31, 2011		474,671	$	25.14		5.40	$	0
Vested or expected to vest at December 31, 2011		879,777	$	18.36		6.95	$	0

        There is no aggregate intrinsic value of the Company's outstanding and exercisable options as of December 31, 2011.

        As of December 31, 2011, there was $2,089,729 of total unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under the Plans. The cost is expected to be recognized over a weighted-average period of 2.76 years.

        The intrinsic value of options exercised during the year ended December 31, 2011 and 2010 was $22,106 and $974, respectively. The Company did not receive a tax benefit related to the exercise of these options because of its net operating loss position. The total fair value of shares vested during the years ended December 31, 2011, 2010 and 2009 was $667,171, $764,921 and $788,461, respectively.