NOTE 8 —
STOCKHOLDERS’ EQUITY
Preferred
Stock
The Board of
Directors, without further stockholder authorization, may issue
from time to time up to 1,000,000 shares of the Company’s
preferred stock. Of the 1,000,000 shares of preferred stock,
500,000 shares are designated as Series B Junior Participating
Cumulative Preferred Stock. As of December 31, 2012 and 2011,
none of the preferred stock was outstanding.
The Company has
a stockholder rights plan under which one preferred stock purchase
right was distributed on January 11, 1999 with respect to each
share of common stock outstanding at the close of business on
December 31, 1998. The rights provide, among other things,
that in the event any person becomes the beneficial owner of 15% or
more of the Company’s common stock while the rights are
outstanding, each right will be exercisable to purchase shares of
common stock having a market value equal to two times the then
current exercise price of a right (initially $30.00). The rights
also provide that, if on or after the occurrence of such event, the
Company merges with any other corporation or 50% or more of its
assets or earning power are sold, each right will be exercisable to
purchase common stock of the acquiring corporation having a market
value equal to two times the then current exercise price of such
stock. The rights are subject to redemption at $0.001 per right at
any time prior to the first date upon which they become exercisable
to purchase common shares. The rights had an original expiration
date of December 31, 2008, which was amended further extending
the term to December 31, 2018.
Common
Stock
At
December 31, 2012, the Company had 33,248,000 shares of common
stock issued with 31,284,000 shares outstanding. The Company
currently has 50,000,000 shares of common stock authorized for
issuance and 1,964,000 shares of common stock in its
treasury.
Offering
Agreement, Shelf Registration, and Securities Purchase
Agreement
On
December 23, 2010, the Company entered into a Controlled
Equity Offering Agreement (the “Offering Agreement”)
with Ascendiant, as sales agent. In accordance with the terms of
the Offering Agreement, the Company was able to issue and sell up
to 3,000,000 shares of its common stock under the 2010 Shelf
Registration Statement with a fee of 3.75% of the gross proceeds in
a series of transactions over time as the Company directed in
privately negotiated transactions and/or any other method permitted
by law, including sales deemed to be an “at the market”
offering as defined in Rule 415 under the Securities Act of 1993.
“At the market” sales include sales made directly on
the NASDAQ Capital Market, the existing trading market for the
Company’s common stock, or sales made to or through a market
maker other than on an exchange.
During the year
ended December 31, 2011, the Company sold approximately
2.2 million shares of common stock with gross proceeds of
approximately $7.5 million and net proceeds of approximately $7.2
million, net of commissions and direct costs, through the Offering
Agreement with Ascendiant.
On
April 7, 2011, the Company entered into an agreement with
Rodman & Renshaw, LLC (“Rodman &
Renshaw”), pursuant to which Rodman & Renshaw
arranged for the sale of shares of its common stock in a registered
direct placement (the “April 2011 Registered Direct
Placement”) pursuant to the 2010 Shelf Registration Statement
with a fee of 4.5% of the aggregate gross proceeds. In addition, on
April 7, 2011, the Company and certain institutional investors
entered into a securities purchase agreement arranged by
Rodman & Renshaw, pursuant to which the Company sold in an
aggregate of 320,000 shares of the Company’s common stock in
the April 2011 Registered Direct Placement with a purchase price of
$5.60 per share for gross proceeds of approximately $1.8 million.
The net proceeds to the Company from the April 2011 Registered
Direct Placement totaled approximately $1.7 million. The costs
associated with the April 2011 Registered Direct Placement of
approximately $124,000 were paid in April 2011 upon the closing of
the transaction. The shares of common stock sold in connection with
the April 2011 Registered Direct Placement were issued pursuant to
a prospectus supplement dated April 11, 2011 to the 2010 Shelf
Registration Statement, which was filed with the SEC.
The
transactions described above exhausted the securities available for
sale under the Company’s 2010 Shelf Registration
Statement.
In June 2011,
the Company entered into a securities purchase agreement (the
“June 2011 Securities Purchase Agreement”) with certain
institutional investors (the “June 2011 Purchasers”)
under which the Company sold an aggregate of 1,625,947 shares of
the Company’s common stock at a price of $5.55 per share,
together with five-year warrants to purchase 812,974 shares of its
common stock having an exercise price of $6.50 per share (the
“June 2011 Warrants”). The June 2011 Warrants were not
exercisable for six months following their issuance. Gross proceeds
from the offering totaled approximately $9 million, and net
proceeds to the Company, after commissions and other offering
expenses of approximately $622,000, totaled approximately $8.4
million. The Company used the proceeds for working capital and
general corporate purposes. In connection with the June 2011
Securities Purchase Agreement, the Company entered into an
agreement with Rodman & Renshaw in which Rodman &
Renshaw agreed to act as the Company’s exclusive placement
agent for the offering and the Company paid Rodman &
Renshaw fees totaling approximately $451,000, and reimbursed
expenses of $50,000. The commissions and expenses paid to Rodman
and Renshaw were included in the offering expenses.
The common
stock and the June 2011 Warrants were offered and sold, and the
common stock issuable upon exercise of the June 2011 Warrants were
offered, pursuant to exemptions from registration set forth in
section 4(2) of the 1933 Act and Rule 506 of Regulation D
promulgated under the 1933 Act. As such, the common stock, the June
2011 Warrants, and the common stock issuable upon exercise of the
June 2011 Warrants was not permitted to be re-offered or resold
absent either registration under the 1933 Act or the availability
of an exemption from the registration requirements.
The June 2011
Securities Purchase Agreement was subject to a registration rights
agreement whereby the Company would have incurred penalties of up
to 3.0% of the offering proceeds if it was unable to file a
registration statement by July 19, 2011. The Company filed a
registration statement on Form S-3 with the SEC to register the
Registerable Securities (File No. 333-175664) on July 19,
2011 which was declared effective by the SEC on August 25,
2011, thereby satisfying the registration rights
agreement.
On
August 2, 2011, the Company repurchased 90,000 of the June
2011 Warrants for $99,900, or $1.11 per underlying share, plus
expenses of $30,000.
Additional
Warrants
On
November 8, 2012, the Company issued warrants to purchase up
to 50,000 shares of the Company’s common stock to an investor
relations consultant, at a price per share of $2.50. The warrants
vest and become exercisable only if the Company’s common
stock closing price on NASDAQ reaches or exceeds $7.00 by
November 7, 2013. The warrant expires November 7, 2015.
As of December 31, 2012, no stock-based compensation has been
recognized. The Company will reassess whether achievement of the
contingent exercise provision is probable on a quarterly basis and
recognize stock-based compensation when it is probable that the
market performance requirement will be achieved.
In May 2012,
the Company issued warrants to purchase up to 80,000 shares of the
Company’s common stock to Comerica Bank at a price per share
of $2.83, which was subsequently reduced to $2.00. See Note 5
— Lines of Credit and Other Borrowings for further
discussion.
During
September 2010, the Company issued warrants (the “IR
Warrants”) to purchase an aggregate of 50,000 shares of
common stock at a price per share of $0.74 to three service
providers who provide investor relations services. Pursuant to the
agreement, the service providers were also entitled to a second
tranche of IR Warrants to purchase an aggregate of 50,000 shares of
common stock at a price per share of $0.74. The IR Warrants were
fully exercised during the year ended December 31, 2012. In
connection with the issuance of the IR Warrants, the Company
recognized expenses of approximately $23,000 and $273,000 for the
years ended December 31, 2012 and 2011,
respectively.
In May 2010,
the Company granted warrants to purchase an aggregate of 101,694
shares of its common stock to MidCap Financial, LLC, and Silicon
Valley Bank at a price per share of $1.77, which was subsequently
reduced to $0.84. See Note 5 — Lines of Credit and Other
Borrowings for further discussion.
Stock
Options
As of
December 31, 2012, a total of 6,950,000 shares have been
authorized for issuance under the Company’s 2002 Stock
Incentive Plan, of which 2,498,000 shares have been issued for
options which have been exercised, 3,860,000 shares have been
reserved for options that are outstanding, and 592,000 shares are
available for the granting of additional options.
Stock options
may be granted as incentive or nonqualified options; however, no
incentive stock options have been granted to date. The exercise
price of options is at least equal to the market price of the stock
as of the date of grant. Options may vest over various periods but
typically vest on a quarterly basis over three years. Options
expire after five years, ten years or within a specified time from
termination of employment, if earlier. The Company issues new
shares of common stock upon the exercise of stock options. The
following table summarizes option activity:
C:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares |
|
|
Weighted
Average
Exercise Price
Per
Share |
|
|
Weighted Average
Remaining
Contractual Term
(Years) |
|
|
Aggregate Intrinsic
Value(1) |
|
C: C:
Options outstanding,
January 1, 2010
|
|
|
3,650,000 |
|
|
$ |
4.50 |
|
|
|
|
|
|
|
|
|
Granted at fair market
value
|
|
|
434,000 |
|
|
$ |
1.77 |
|
|
|
|
|
|
|
|
|
Granted at above fair
market value
|
|
|
1,657,000 |
|
|
$ |
2.00 |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(225,000 |
) |
|
$ |
0.89 |
|
|
|
|
|
|
|
|
|
Forfeited, cancelled, or
expired
|
|
|
(1,386,000 |
) |
|
$ |
3.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding,
December 31, 2010
|
|
|
4,130,000 |
|
|
$ |
3.60 |
|
|
|
|
|
|
|
|
|
Granted at fair market
value
|
|
|
1,151,000 |
|
|
$ |
4.11 |
|
|
|
|
|
|
|
|
|
Granted at above fair
market value
|
|
|
— |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(657,000 |
) |
|
$ |
2.08 |
|
|
|
|
|
|
|
|
|
Forfeited, cancelled, or
expired
|
|
|
(766,000 |
) |
|
$ |
4.92 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding,
December 31, 2011
|
|
|
3,858,000 |
|
|
$ |
3.75 |
|
|
|
|
|
|
|
|
|
Granted at fair market
value
|
|
|
614,000 |
|
|
$ |
1.80 |
|
|
|
|
|
|
|
|
|
Granted at above fair
market value
|
|
|
568,000 |
|
|
$ |
0.95 |
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(214,000 |
) |
|
$ |
2.12 |
|
|
|
|
|
|
|
|
|
Forfeited, cancelled, or
expired
|
|
|
(966,000 |
) |
|
$ |
3.63 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding,
December 31, 2012
|
|
|
3,860,000 |
|
|
$ |
3.48 |
|
|
|
3.96 |
|
|
$ |
199,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable,
December 31, 2012
|
|
|
2,314,000 |
|
|
$ |
4.02 |
|
|
|
3.86 |
|
|
$ |
195,000 |
|
Vested options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested options expired
during the twelve months ended December 31, 2012
|
|
|
208,000 |
|
|
$ |
4.84 |
|
|
|
|
|
|
$ |
— |
|
C:
(1) |
The intrinsic value
calculation does not include negative values. This can occur when
the fair market value on the reporting date is less than the
exercise price of a grant. |
The following
table summarizes additional information for those options that are
outstanding and exercisable as of December 31,
2012:
|
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|
|
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|
|
|
|
|
|
|
|
|
|
Options
Outstanding |
|
|
Exercisable |
|
Range of Exercise Prices
|
|
Number
of
Shares |
|
|
Weighted
Average
Exercise Price |
|
|
Weighted
Average
Remaining
Life (Years) |
|
|
Number
of
Shares |
|
|
Weighted
Average
Exercise Price |
|
$ 0.72 —
$1.99
|
|
|
456,000 |
|
|
$ |
1.43 |
|
|
|
5.50 |
|
|
|
379,000 |
|
|
$ |
1.35 |
|
$ 2.00 —
$2.99
|
|
|
2,175,000 |
|
|
$ |
2.28 |
|
|
|
3.91 |
|
|
|
917,000 |
|
|
$ |
2.08 |
|
$ 3.00 —
$3.99
|
|
|
159,000 |
|
|
$ |
3.20 |
|
|
|
3.50 |
|
|
|
75,000 |
|
|
$ |
3.20 |
|
$ 4.00 —
$4.99
|
|
|
268,000 |
|
|
$ |
4.25 |
|
|
|
4.50 |
|
|
|
232,000 |
|
|
$ |
4.15 |
|
$ 5.00 —
$5.99
|
|
|
373,000 |
|
|
$ |
5.44 |
|
|
|
4.22 |
|
|
|
288,000 |
|
|
$ |
5.45 |
|
$ 6.00 —
$9.99
|
|
|
225,000 |
|
|
$ |
7.49 |
|
|
|
3.12 |
|
|
|
219,000 |
|
|
$ |
7.53 |
|
$ 10.00 —
$13.99
|
|
|
150,000 |
|
|
$ |
11.34 |
|
|
|
1.31 |
|
|
|
150,000 |
|
|
$ |
11.34 |
|
$ 14.00 —
$18.99
|
|
|
54,000 |
|
|
$ |
14.14 |
|
|
|
1.43 |
|
|
|
54,000 |
|
|
$ |
14.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
3,860,000 |
|
|
$ |
3.48 |
|
|
|
3.96 |
|
|
|
2,314,000 |
|
|
$ |
4.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash proceeds,
along with fair value disclosures related to grants, exercises, and
vesting options, are as follows for the years ended
December 31 (in thousands, except per share
amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months
Ended
December 31, |
|
|
|
2012 |
|
|
2011 |
|
|
2010 |
|
Proceeds from stock options
exercised
|
|
$ |
455 |
|
|
$ |
1,244 |
|
|
$ |
199 |
|
Tax benefit related to
stock options exercised(1)
|
|
|
N/A |
|
|
|
N/A |
|
|
|
N/A |
|
Intrinsic value of stock
options exercised(2)
|
|
$ |
91 |
|
|
$ |
1,328 |
|
|
$ |
111 |
|
Weighted-average fair value
of options granted
|
|
$ |
1.39 |
|
|
$ |
2.97 |
|
|
$ |
1.09 |
|
Total fair value of shares
vested during the year
|
|
$ |
1,737 |
|
|
$ |
1,259 |
|
|
$ |
713 |
|
(1) |
Excess tax benefits
received related to stock option exercises are presented as
financing cash inflows. Currently the Company does not receive a
tax benefit related to the exercise of stock options due to its net
operating losses. |
(2) |
The intrinsic value of
stock options exercised is the amount by which the market price of
the stock on the date of exercise exceeded the market price of the
stock on the date of grant. |
On May 7,
2012, the Board granted a non-qualified stock option to purchase
65,000 shares of the Company’s common stock to a consultant,
at a price per share of $2.55, the closing market price of the
Company’s common stock on the grant date. The option fully
vests and becomes exercisable upon the achievement of certain
specified performance conditions, as defined in the consulting
agreement with this consultant, and the option expires five years
from the grant date. As of December 31, 2012, no stock-based
compensation has been recognized. The Company will reassess whether
achievement of the performance conditions is probable on a
quarterly basis and recognize stock-based compensation when it is
probable that the performance conditions will be
achieved.
On
March 2, 2012, the Company’s Board of Directors (the
“Board”) accelerated the vesting period for options to
purchase 95,833 shares of common stock held by Federico Pignatelli,
the Company’s Chief Executive Officer (“CEO”).
The options were originally granted in December 2011 at $2.58 per
share with monthly vesting over four years. The Board accelerated
the vesting period to March 2, 2012, in part due to the
CEO’s continued commitment to maintain his annual salary of
one dollar for the year ending December 31, 2012. Accelerating
the vesting period of the common stock options resulted in the
Company recognizing unamortized compensation cost of approximately
$183,000 in March 2012. The transaction did not result in any
additional compensation cost primarily as the effects of the
decrease in the expected term and volatility offset the effects of
the difference between the stock price and the option price on the
date the vesting of the common stock options were
modified.