Stockholders' Equity

6 Months Ended

Jun. 30, 2012

Stockholders' Equity [Abstract]

Stockholders' Equity

Note 7. Stockholders’ Equity

Common Stock

On February 3, 2012, the Company completed a private placement of its common stock under a Securities Purchase Agreement, dated as of January 31, 2012, by and among the Company and the Purchasers (as defined therein), pursuant to which the Company issued shares of common stock for an aggregate purchase price of $3.0 million, at a per share price of $1.01. The price of each share of common stock is based on the January 31, 2012 consolidated closing bid price of the Company’s common stock on the NASDAQ Global Market of $1.01 per share. The net proceeds to the Company, after deducting expenses of $0.1 million, were $2.9 million. The total number of shares of common stock issued in connection with the transaction was 2,969,685.

2007 Stock Plan

The Company’s 2007 Stock Plan provides for the grant of incentive stock options by the Company’s board of directors to employees and for the grant of nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and performance shares to its employees, directors and consultants.

During the six months ended June 30, 2012, the Company granted options, to purchase a total of 2.0 million shares of the Company’s common stock to employees, officers and members of the Company’s board of directors with a fair value of $0.9 million, which is expected to be amortized through 2016. In addition, during the six months ended June 30, 2012, 0.3 million restricted stock units were granted to the Company’s employees with a grant date fair value of $0.3 million which is being amortized over the vesting period.

On March 5, 2012, the Company’s board of directors committed to a restructuring plan whereby the Company reduced its workforce by 43 individuals. A portion of the severance given included a full acceleration of vesting on the affected employees’ restricted stock units (“RSUs”) and an extension of the exercise period for vested stock options. The expense for the acceleration of RSUs and extension of vesting period was approximately $0.1 million. See Note 10 for further discussion.

2011 Inducement Stock Plan

On September 20, 2011, the Company’s board of directors adopted the 2011 Inducement Stock Plan (the “Inducement Plan”). The purposes of the Inducement Plan are to provide a material inducement for the best available individuals to enter into the employment of the Company and thereby to promote the success of the Company’s business. The Inducement Plan provides for the grant of nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, performance units and performance shares by the Company’s board of directors to its employees. The term of the Inducement Plan is ten years from the date adopted by the board of directors.

The Company’s independent compensation committee has the authority to determine the terms of the awards, including exercise price, the number of shares subject to each such award, individuals to whom awards may be granted, the exercisability of the awards and consideration payable upon exercise. Upon adoption of the plan, the Company reserved 1.0 million shares of its common stock for issuance under the Inducement Plan. In connection with the hiring of the Company’s new Chief Executive Officer on January 2, 2012, the Company issued 0.6 million shares under the Inducement Plan. At June 30, 2012, 0.4 million shares remain available for grant under the Inducement Plan.

Stock-Based Compensation Expense

The Company recognizes stock-based compensation expense for all share-based payments. Stock-based compensation expense for awards made to employees and directors is measured at the date of grant, based on the fair value of the award, and is recognized as expense on a straight-line basis over the requisite service period. The Company has elected to use the Black-Scholes option valuation model to estimate the fair value of stock options for all options granted except for the market-based stock options granted in February 2011. The Company used the Monte Carlo valuation method to estimate the fair value of market-based stock options.

The following table shows the assumptions used to compute stock-based compensation expense for stock options granted to employees and members of the board of directors, excluding market-based stock option grants, and the assumptions used to compute stock-based compensation expense for the Company’s Employee Stock Purchase Plan (“ESPP”) for the three and six months ended June 30, 2012 and 2011 using the Black-Scholes valuation model:

	Three Months Ended June 30,		Six Months Ended June 30,
	2012	2011	2012	2011
Stock Options
Expected dividend yield	0%	0%	0%	0%
Expected volatility	72%	66%	73%	66%
Expected life (in years)	6.0	6.0	6.0	6.0
Risk-free interest rate	0.9%	2.2%	0.9 – 1.1%	2.2 – 2.5%
ESPP
Expected dividend yield	0%	0%	0%	0%
Expected volatility	65 – 72%	55 – 58%	58 – 74%	55 – 58%
Expected life (in years)	0.5 – 1.0	0.5 – 1.0	0.5 – 1.0	0.5 – 1.0
Risk-free interest rate	0.2 – 0.2%	0.1 – 0.4%	0.1 – 0.2%	0.1 – 0.4%

Stock-based compensation expense included in operating expenses for the three and six months ended June 30, 2012 and 2011 was as follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Research and development	$	125	$	253	$	234	$	456
Selling, general and administrative		449		593		980		968
	$	574	$	846	$	1,214	$	1,424

In connection with the previously mentioned restructuring plan that was implemented in March 2012, the Company recorded a stock-based compensation charge of $0.1 million related to modifications to the impacted employees’ equity awards.