Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

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Stockholders' Equity
 3 Months Ended
Mar. 31, 2013
Stockholders' Equity [Text Block]

Note 8. Stockholders’ Equity

          At March 31, 2013, there are 500,000,000 shares of authorized common stock. Total common stock outstanding at March 31, 2013 and December 31, 2012, was 12,548,935 and 12,526,240 shares, respectively. At March 31, 2013, there were no shares reserved for future issuance, 1,034,996 stock warrants, 1,639,842 stock options outstanding and 22,601 total unvested shares of restricted stock, all totaling 15,246,374 of total stock and stock equivalents outstanding at March 31, 2013.

Stock-based Compensation – Stock Options and Restricted Stock

Stock Plan

          We have a stock-based compensation plan to reward for services rendered by officers, directors, employees and consultants. On July 17, 2006, we amended this stock plan. We have reserved 2,500,000 shares of common stock of our unissued share capital for the stock plan. Other limitations are as follows:

(i)

No more than an aggregate of 1,250,000 shares can be granted for the purchase of restricted common shares during the term of the stock plan;

   
(ii)

The maximum number of shares of common stock with respect to which options may be granted to any one person during any fiscal year may not exceed 266,667 shares; and

   
(iii)

The maximum number of restricted shares that may be granted to any one person during any fiscal year may not exceed 166,667 common shares.

          Total stock options outstanding at March 31, 2013 and 2012, were 1,639,842 of which 1,588,685 and 1,523,536 of these options were vested at March 31, 2013 and December 31, 2012, respectively. Stock option expense was approximately $0.1 million and approximately $0.2 million for the three months ended March 31, 2013 and 2012, respectively.

 

Stock option transactions to the employees, directors, advisory board members and consultants are summarized as follows for the three months ended March 31, 2013:

          Weighted     Weighted  
          Average     Average  
    Options     Exercise     Fair  
    Outstanding     Price     Value  
                   
Beginning of the year   1,639,842   $ 11.46   $ 10.85  
Granted                  
Exercised                  
Forfeited       $     $    
Expired       $     $    
                   
End of year   1,639,842   $ 11.46   $ 10.85  
                   
Options exercisable   1,588,685   $ 11.64   $ 11.03  

          Stock option transactions to the employees, directors, advisory board members and consultants are summarized as follows for the year ended December 31, 2012:

          Weighted     Weighted  
          Average     Average  
    Options     Exercise     Fair  
    Outstanding     Price     Value  
                   
Beginning of the year   1,674,065   $ 11.37   $ 10.74  
Granted                  
Exercised                  
Forfeited   (167 ) $ 6.30   $ 5.67  
Expired   (34,056 ) $ 9.42   $ 7.48  
                   
End of period   1,639,842   $ 11.46   $ 10.85  
                   
Options exercisable   1,523,536   $ 11.82   $ 11.22  

The above tables include options issued and outstanding as of March 31, 2013 as follows:

i)

A total of 229,558 non-qualified 5 - 10 year options have been issued, and are outstanding, to advisory board members at exercise prices of $4.50 to $14.40 per share.

   
ii)

A total of 1,136,748 non-qualified 8 - 10 year options have been issued, and are outstanding, to our directors, officers and employees at exercise prices of $5.42 to $23.85 per share. From this total, 665,088 options are outstanding to the Chief Executive Officer who is also a director, with remaining contractual lives of 2.7 years to 8.0 years. All other options issued to directors, officers and employees have a remaining contractual life ranging from 3.3 years to 8.0 years.

   
iii)

A total of 273,536 non-qualified 8 - 10 year options have been issued, and are outstanding, to our consultants at exercise prices of $5.70 to $19.20 per share.

          The following table provides certain information with respect to the above-referenced stock options that are outstanding and exercisable at March 31, 2013:

 

    Stock Options Outstanding     Stock Options Vested  
    Weighted                 Weighted              
    Average                 Average              
    Remaining           Weighted     Remaining           Weighted  
    Contractual     Number     Average     Contractual     Number     Average  
    Life     of     Exercise     Life     of     Exercise  
    -Years     Awards     Price     -Years     Awards     Price  
                                     
Exercise Prices                                    
$4.50 - $8.70   6.02     844,801   $ 6.33     5.92     793,644   $ 6.36  
$9.00 - $12.90   4.70     130,037   $ 10.46     4.70     130,037   $ 10.46  
$13.50 - $18.90   3.06     358,336   $ 14.17     3.06     358,336   $ 14.17  
$19.20 - $23.85   2.40     306,668   $ 22.84     2.40     306,668   $ 22.84  
Total   4.59     1,639,842   $ 11.46     4.49     1,588,685   $ 11.64  

          The following table provides certain information with respect to the above-referenced stock options that are outstanding and exercisable at December 31, 2012:

    Stock Options Outstanding     Stock Options Vested  
    Weighted                 Weighted              
    Average                 Average              
    Remaining           Weighted     Remaining           Weighted  
    Contractual     Number     Average     Contractual     Number     Average  
    Life     of     Exercise     Life     of     Exercise  
    -Years     Awards     Price     -Years     Awards     Price  
                                     
Exercise Prices                                    
$4.50 - $8.70   6.27     844,801   $ 6.33     6.04     728,495   $ 6.27  
$9.00 - $12.90   4.94     130,037   $ 10.46     4.94     130,037   $ 10.46  
$13.50 -$18.90   3.3     358,336   $ 14.17     3.3     358,336   $ 14.17  
$19.20 -$23.85   2.65     306,668   $ 22.84     2.65     306,668   $ 22.84  
Total   4.84     1,639,842   $ 11.46     4.62     1,523,536   $ 11.82  

          The aggregate intrinsic value of stock options outstanding at March 31, 2013 and December 31, 2012 was $0. Intrinsic value is calculated based on the difference between the exercise price of the underlying awards and the quoted price of our common stock as of the reporting date ($1.74 and $1.41 per share as of the close on March 31, 2013 and December 31, 2012, respectively).

Restricted Stock Award Activity

          Weighted  
          Average  
          Grant  
    Number of     Date Fair  
    Units     Value  
Total awards outstanding at December 31, 2012   43,032   $ 6.49  
Units granted       $    
Units Exercised/Released   (20,431 ) $ 7.61  
Units Cancelled/Forfeited       $    
Total awards outstanding at March 31, 2013   22,601   $ 5.47  
             
Total units vested            
Total units non-vested   22,601   $ 5.47  
Total shares outstanding at March 31, 2013   22,601   $ 5.47  

 

 

The following summarizes our restricted stock unit activity:

Scheduled vesting for outstanding restricted stock units at March 31, 2013 is as follows:

    Year Ended              
    December 31,              
    2013     2014     2015     2016     Thereafter     Total  
                                     
Scheduled vesting—restricted stock units   8,308     14,293     - -           - -     22,601  

          As of March 31, 2013 and December 31, 2012, there was $0.1 and $0.1 million of net unrecognized compensation cost related to unvested restricted stock-based compensation arrangements, respectively. This compensation is recognized on a straight line basis resulting in approximately $0.1 million of the compensation expected to be expensed in the next twelve months, and the total unrecognized has a weighted average recognition period of 1.0 years.

          We use the historical volatility of our stock price since January 5, 2006, the date we announced that we were becoming a public company, to estimate the future volatility of our stock. At this time we do not believe that there is a better objective method to predict the future volatility of our stock. We estimate the term of our option awards based on the full term of the award. To date we have had very few exercises of our options, and those exercises have occurred just before the expiration date of the awards. Since the strike price of most of our outstanding awards is greater than the price of our stock, generally awards have expired at the end of the term. We estimate the effect of future forfeitures of our grants based on an analysis of historical forfeitures of unvested grants, as we have no better objective basis for that estimate. The expense that we have recognized related to our grants of options and restricted stock includes the estimate for future pre-vest forfeitures. We will adjust the actual expense recognized as future pre-vest forfeitures as they occur. We have estimated that 1.4% and 3.0% of our option and restricted stock grants respectively, will be forfeited prior to vesting.

          There were no stock options granted for the three months ended March 31, 2013 and the year ended December 31, 2012. Assumptions used in the Black Scholes option-pricing model for the year ended December 31, 2011 were as follows:

  Year Ended
  12/31/2011
   
Average risk-free interest rate 3.35%
Average expected life- years 10
Expected volatility 94.32%
Expected dividends 0

          Stock-based compensation expense includes the expense related to (1) grants of stock options, (2) grants of restricted stock, (3) stock issued as consideration for some of the services provided by our directors and strategic advisory council members, and (4) stock issued in lieu of cash to pay bonuses to our employees and contractors. We record stock-based compensation expenses in the caption with all of our other general and administrative expenses. Grants of stock options and restricted stock are awarded to our employees, directors, consultants and board members, and we recognize the fair market value of these awards ratably as they are earned. The expense related to payments in stock for services is recognized as the services are provided.

          During the three months ended March 31, 2013 and 2012, approximately $0.1 million and $0.4 million respectively, were recorded as total stock-based compensation. Stock-based compensation expense is recorded under the caption general and administrative expenses in the accompanying consolidated statements of operations.