Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Stock-Based Compensation

Stock-Based Compensation

3.   Stock-Based Compensation

The Company issues nonqualified and incentive stock options as well as other equity awards pursuant to its 2009 Omnibus Incentive Plan, as amended (Option Plan).  Such awards pursuant to the Option Plan may be granted by the Company’s Board of Directors to certain of the Company’s employees, directors and consultants.

During the nine months ended September 30, 2013, the Company granted 1,515,000 service-based options to purchase common stock.  These options were granted with exercise prices equal to the fair market value of the Company’s stock at the grant date, generally vest over four years (other than 285,000 non-employee options which vest over one year) and expire after ten years.  The weighted average grant-date fair value of service-based options granted under the Company’s Option Plan during the nine months ended September 30, 2012 and 2013 was $1.25 and $0.70, respectively.

The net compensation expense recorded for the service-based stock options related to employees and directors was $145,000 and $528,000 for the quarter and nine months ended September 30, 2013, respectively, compared to $1,127,000 and $3,166,000 for the corresponding periods ended September 30, 2012.  The September 30, 2013 compensation cost includes forfeiture adjustments, primarily due to restructuring activities announced on March 27, 2013, which reduced expense by $1,125,000.

The fair value of each service-based stock option grant for the reported periods is estimated on the date of the grant using the Black-Scholes option-pricing model using the weighted average assumptions noted in the following table.

	Nine Months Ended  September 30,
Service-Based Stock Options	2012	2013
Expected dividend rate	0%	0%
Expected stock price volatility	72.9 – 74.9%	74.0 – 87.9%
Risk-free interest rate	0.9 - 1.5%	0.1 - 2.1%
Expected life (years)	6.0 - 6.3	5.0 - 6.3

The following table summarizes the activity for service-based stock options for the indicated periods:

Service-Based Stock Options	Options		Weighted  Average  Exercise Price		Weighted Average  Remaining  Contractual Term  (Years)	Aggregate  Intrinsic Value
Outstanding at December 31, 2012	9,987,468		$	2.38	7.5	$	—
Granted	1,515,000		$	1.07
Exercised	—		$	—		$	—
Expired	(2,787,259	)	$	2.64
Forfeited	(2,275,186	)	$	2.27
Outstanding at September 30, 2013	6,440,023		$	1.99	7.6	$	—
Exercisable at September 30, 2013	2,982,001		$	2.35	6.1	$	—

As of September 30, 2013 there was $2,155,000 of total unrecognized compensation cost related to non-vested service-based stock options granted under the Option Plan.  That cost is expected to be recognized over a weighted-average period of 2.7 years.

The total fair value of options vested during the nine months ended September 30, 2012 and 2013 was $2,136,000 and $1,861,000, respectively.