Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Share-Based Compensation and Employee Stock Purchases [Abstract]

Stock-Based Compensation

(8) Stock-Based Compensation

The Company recognizes all share-based payments to employees and directors as expense in the statements of operations and comprehensive loss based on their fair values. The Company records compensation expense over an award’s requisite service period, or vesting period, based on the award’s fair value at the date of grant. The Company’s policy is to charge the fair value of stock options as an expense, adjusted for forfeitures, on a straight-line basis over the vesting period, which is generally four years for employees and three years for directors. Prior to December 2011, the vesting of all of the Company’s stock options was based on the passage of time and the employees’ continued service. In December 2011 and January 2012, the Company granted performance-based stock options to purchase 697,500 shares of common stock to employees. As of the grant date of such options, options to purchase 174,375 shares were to vest immediately upon the achievement of various performance conditions and options to purchase 523,125 shares were to vest over a three year service period upon the achievement of the same performance conditions. During 2012, three of the specified performance conditions were achieved. As a result, options to purchase 80,213 shares vested immediately, and options to purchase 240,640 shares began vesting over a three-year period in accordance with the terms of the performance-based options. In addition, as of March 31, 2013, five of the specified performance conditions were not met by their deadlines resulting in the cancellation of 265,597 performance-based options. The Company recognizes expense over the implicit and explicit service periods for awards with performance conditions when the Company determines the achievement of the performance conditions to be probable.

The Company recorded charges of $253,000 and $588,000 for the three months ended March 31, 2013 and 2012, respectively for stock-based compensation expense attributable to share-based payments made to employees and directors. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model. The following assumptions apply to the options to purchase 37,500 shares of common stock granted during the three months ended March 31, 2012:

	Three Months Ended March  31, 2012
Average risk free interest rate		1.1	%
Expected dividend yield		—
Expected lives (years)		5.8
Expected volatility		67.0	%
Weighted average grant date fair value of options granted during the period (per share)		$ 0.69
Weighted average exercise price of options granted during the period (per share)		$ 1.15

The Company did not grant any stock options during the three months ended March 31, 2013. The expected lives and the expected volatility of the options are based on historical experience. All options granted during the three months ended March 31, 2012 were granted at exercise prices equal to the fair market value of the common stock on the dates of grant.