Annual report pursuant to Section 13 and 15(d)

STOCKHOLDERS' EQUITY

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STOCKHOLDERS' EQUITY
12 Months Ended
Dec. 31, 2012
Equity [Abstract]  
STOCKHOLDERS' EQUITY

Note D - Stockholders' Equity

 

[1] Stock options:

 

During 1996, the Board of Directors and stockholders approved the adoption of the 1996 Stock Option Plan (the "1996 Plan"). The 1996 Plan, as amended, provided for the granting of both incentive and non-qualified options to purchase common stock of the Company. A total of 4,000,000 were eligible to be issued under the 1996 Plan. As of March 2006, in accordance with the terms of the plan, no further options were eligible to be issued under the Plan.

 

The term of options granted under the 1996 Plan may not exceed ten years (five years in the case of an incentive stock option granted to an employee/director owning more than 10% of the voting stock of the Company) ("10% stockholder"). The option price for incentive stock options cannot be less than 100% of the fair market value of the shares of common stock at the time the option is granted (110% for a 10% stockholder). Option terms and vesting periods were set by the Compensation Committee (or the Board of Directors) in its discretion.

 

The fair value of options on the date of grant is estimated using the Black-Scholes option-pricing model utilizing the following weighted average assumptions:

 

  Year Ended
 

December 31,

 

2012

2011

     
Risk-free interest rates 0.71% - 1.75% 2.05% - 2.18%
Expected option life in years 5 years – 10 years 5 years
Expected stock price volatility 43.54% - 45.86% 42.04%
Expected dividend yield 0.00% 0.00%

 

The weighted average fair value on the option grant date during the years ended December 31, 2012 and 2011 was $0.59 and $0.63 per option, respectively.

 

 

The following table summarizes stock option activity for the years ended December 31:

 

 

2012

2011

    Weighted   Weighted
    Average   Average
  Options Exercise Options Exercise
 

Outstanding

Price

Outstanding

Price

         
Options outstanding at beginning of year 7,208,070

 

$0.69

7,947,613

 

        $0.62

Granted    925,000 $1.24    430,000         $1.60
Cancelled/expired/exercised (2,550,570) $0.66 (1,169,531)         $0.55
         
Options outstanding at end of year 5,582,500

 

$0.78

7,208,070

 

       $0.69

         
Options exercisable at end of year 4,826,250

 

$0.71

6,853,903

 

       $0.65

 

During the years ended December 31, 2012 and 2011, the Company granted an aggregate of 925,000 and 430,000 options to its officers, directors and consultants, respectively. The fair value of these options based on the Black-Scholes option-pricing model amounted to $549,000 and $271,000, respectively, for the 2012 and 2011 grants. The Company recorded non-cash compensation of $141,000 and $104,000 for the vesting portion of these options for the years ended December 31, 2012 and 2011, respectively. The Company also recognized non-cash compensation of $157,000 and $164,000 in 2012 and 2011, respectively, for the options that were granted in prior years but vested in 2012 and 2011.

During the year ended December 31, 2012, options to purchase an aggregate of 2,478,070 shares of the Company’s common stock were exercised at prices ranging from $0.14 per share to $0.68 per share, resulting in proceeds of $16,000. As certain of these options were exercised on a cashless basis, 962,537 shares of common stock were issued. In addition, an aggregate of 350,160 shares were delivered with a value of $487,000 to fund payroll withholding taxes on exercise.

On February 2, 2011, the Company extended for three years the expiration dates of certain outstanding options issued to a consultant to purchase an aggregate of 75,000 shares of common stock at $0.68 per share. The Company incurred non-cash compensation charges of $5,000 with respect to this option extension.

On May 20, 2011, the Company extended the expiration dates of options (expiring in 2011) for three years to purchase an aggregate of 745,218 shares of common stock held by officers, directors and a third party. The extensions of the expiration dates for an aggregate of 690,218 shares of such options were subsequently cancelled in December 2011 and the Company recorded non-cash compensation of $5,000 with respect to the option extensions which were not cancelled. (See Note H[3]).

During the year ended December 31, 2011, options to purchase an aggregate of 1,031,467 shares of the Company's common stock were exercised at prices of between $0.13 and $0.70 per share, for total proceeds to the Company of $163,028. As certain of these options were exercised on a cashless basis, 851,157 shares of common stock were issued. In addition, 230,234 shares were delivered with a value of $283,000 to fund payroll withholding taxes on exercise.

 

The following table presents information relating to all stock options outstanding and exercisable at December 31, 2012:

 

 

      Weighted    
    Weighted Average   Weighted
Range of   Average Remaining   Average
Exercise Options Exercise Life in Options Exercise

Price

Outstanding

Price

Years

Exercisable

Price

           
$0.21 - $1.60 5,582,500 $0.78          3.05   4,826,250 $   0.71
           
           
           
           

 

[2] Warrants:

 

As of December 31, 2012, the following are the outstanding warrants to purchase shares of the Company's common stock:

 

Number of Exercise  

Warrants

Price

Expiration Date

     
250,000 $0.68 October 8, 2013
     
     
     
   
 

On January 4, 2012, warrants to purchase 300,000 shares of the Company’s common stock were exercised (on a cashless basis) by an affiliated entity of the Company’s Chairman and Chief Executive Officer which resulted in the issuance of net shares of common stock of 128,572 shares.

During the year ended December 31, 2011, warrants to purchase an aggregate of 50,000 shares of the Company's common stock were exercised at a price of $0.68 per share, on a cashless basis resulting in the issuance of 24,815 shares.

On May 20, 2011, the Company extended for three years the expiration dates of warrants (expiring in 2011) to purchase an aggregate of 350,000 shares of common stock held by the Chief Executive Officer and a Director and the Company recorded non-cash compensation of $300,000 with respect to such extensions.