Stock-based Compensation

9 Months Ended

Sep. 30, 2011

Stock-based Compensation [Abstract]

STOCK-BASED COMPENSATION

5. STOCK-BASED COMPENSATION

The Company has one stock-based compensation plan, the 2005 Stock Incentive Plan (“2005 Plan”), under which the Board of Directors may currently grant incentives to employees, consultants, directors, officers and collaborating scientists in the form of incentive stock options, nonqualified stock options and restricted stock awards. The Company also has one other stock-based compensation plan pursuant to which stock options are outstanding but from which no new grants may be made.

Stock awards under the Company’s stock option plans have been granted at prices which are no less than the market value of the stock on the date of the grant. Options granted under the 2005 Plan are generally time-based or performance-based, and vesting varies accordingly. Options under this plan expire in up to a maximum of ten years from the date of grant.

The non-cash compensation expense recognized in the Statement of Operations in the third quarter of 2011 and 2010 for stock options amounted to $2,177 (of which $2,031 relates to performance milestones) and $197 (of which $12 relates to performance milestones), respectively. With the receipt of the PMA Approvable Letter from the FDA on September 22, 2011, approval of the PMA application by the FDA was deemed by the Company to be probable and $1,889 in non-cash compensation expense was recorded in the third quarter of 2011 for options which related to the FDA approval milestone.

For the nine months ended September 2011 and 2010, non-cash compensation expense recognized in the Statement of Operations for stock options amounted to $2,911 (of which $2,059 relates to performance milestones) and $563 (of which $23 relates to performance milestones), respectively. With the receipt of the PMA Approvable Letter from the FDA on September 22, 2011, approval of the PMA application by the FDA was deemed by the Company to be probable and $1,889 in non-cash compensation expense was recorded for the nine months ended September 30, 2011 for options which related to the FDA approval milestone.

There was no cash received from options and warrants exercised under all share-based payment arrangements for the three month periods ended September 30, 2011 and 2010, nor for the nine month period ended September 30, 2011. Cash received from options and warrants exercised under all share-based payment arrangements for the nine months ended September 30, 2010 was $1,718.

The fair value of each option award granted is estimated on the date of grant using the Black-Scholes option valuation model and assumptions as noted in the following table:

	For the Nine Months	For the Nine Months
	Ended September 30, 2011	Ended September 30, 2010
Expected life	6.5 years	5-10 years
Expected volatility	70.54-76.32%	61-67%
Risk-free interest rate	1.38-3.34%	2.26-3.56%
Dividend yield	0%	0%

The expected life of the options is based upon the expected time to full-vesting and term of the options. The expected volatility assumptions are determined based upon the historical volatility of the Company’s daily closing stock price. The risk-free interest rate is based on the continuous rates provided by the U.S. Treasury with a term equal to the expected life of the option. The expected dividend yield is zero as the Company has never paid dividends and does not currently anticipate paying any in the foreseeable future.

At September 30, 2011, stock options to purchase 2,126,804 shares of common stock at exercise prices ranging from $1.00 to $11.11 per share are outstanding and exercisable at various dates through 2021.

During the three months and nine months ended September 30, 2011, the weighted average fair value of options granted, estimated as of the grant date using the Black-Scholes option valuation model, was $1.61 and $2.14, respectively. For the three month and nine month periods ended September 30, 2010, the weighted average fair value of options granted was $5.03 and $4.73, respectively. For the three month and nine month periods ended September 30, 2011 and for the three months ended September 30, 2010 no options were exercised. For the nine months ended September 30, 2010 the total intrinsic value of options exercised was $18.

The status of the Company’s stock option plans at September 30, 2011 is summarized in the following table:

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual		Aggregate
	Number of			Price per		Term in		Intrinsic
	Shares			Share		Years		Value
Outstanding at December 31, 2010		2,132,879		$	5.19		5.4
Granted		496,050			3.18		9.6
Exercised		—
Forfeited or expired		(502,125	)		6.59		—
Outstanding at September 30, 2011		2,126,804		$	4.39		6.5	$	1,473
Vested and exercisable at September 30, 2011		874,041		$	4.48		5.6	$	644

			Options Outstanding
			Weighted-			Options Exercisable
			Average	Weighted				Weighted-
			Remaining	Average				Average
	Number		Contractual	Exercise		Number		Exercise
Range of Exercise Prices	Outstanding		Life	Price		Exercisable		Price
$1.00		48,952	1.2 years	$	1.00		48,952	$	1.00
$1.01-$4.50		1,635,202	7.2 years	$	3.63		620,539	$	3.67
$4.51-$11.11		442,650	4.5 years	$	7.56		204,550	$	7.79
$.01-$11.11		2,126,804	6.5 years	$	4.39		874,041	$	4.48

As of September 30, 2011, of the total 2,126,804 options outstanding, 1,252,763 have not vested. Of this total unvested amount, 914,438 options will vest upon the attainment of certain milestones, and the balance will vest over the requisite service period. The weighted average vesting period for the non-milestone, non-vested awards not yet recognized is 1.9 years

As of September 30, 2011, of the $1,046 total unrecognized non-cash compensation cost related to unvested options, $661 is to be recognized over a period to be determined by performance-based milestones, and $385 is to be recognized over the requisite service period through 2015.

As of September 30, 2011, there were 1,629,264 shares available for future grants under the Company’s 2005 Plan.