STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 28, 2014 |
STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION [Abstract] | ' |
STOCKHOLDERS' EQUITY AND STOCK-BASED COMPENSATION | ' |
NOTE 6—STOCKHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION |
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Public Offering |
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On December 19, 2013, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Roth Capital Partners, LLC as representative of several underwriters to the Underwriting Agreement relating to a public offering of an aggregate of 8,325,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share at a public offering price of $1.42 per share. The Shares are accompanied by the associated rights to purchase shares of Series A Junior Preferred Stock, par value $0.001 per share, of the Company created by the Rights Agreement, dated December 16, 2011, between the Company and the American Stock Transfer & Trust Company, LLC, as Rights Agent (the “Rights Agreement”). Under the terms of the Underwriting Agreement, the Company granted the Underwriters a 30 day option to purchase up to an additional 1,248,750 shares of common stock to cover over-allotments. |
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On December 24, 2013, the Company completed its public offering of 9,573,750 newly issued shares of common stock at a price to the public of $1.42 per share. The number of shares sold in the offering included the underwriter’s full exercise on December 24, 2013 of their over-allotment option of 1,248,750 shares of common stock. The net proceeds to the Company from the offering was approximately $12.3 million which consisted of $12.5 million after underwriting discounts, commissions and expenses less an additional $250,000 for legal, accounting, registration and other transaction costs related to the public offering. |
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Common and Preferred Stock |
In December 2008, the Company’s stockholders approved an amendment to the Certificate of Incorporation to authorize 50,000,000 shares of common stock of par value $0.001. In addition, the Company is authorized to issue 1,000,000 shares of preferred stock of $0.001 par value of which 300,000 shares have been designated Series A Junior Preferred Stock with powers, preferences and rights as set forth in the certificate of designation dated December 16, 2011; the remainder of the shares of preferred stock are undesignated, for which the Board of Directors is authorized to fix the designation, powers, preferences and rights. As of September 28, 2014 and December 31, 2013, there were no shares of preferred stock issued or outstanding. |
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2008 Equity Incentive Plan |
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In December 2008, the Company adopted the 2008 Equity Incentive Plan (the “2008 Plan”) for directors, employees, consultants and advisors to the Company or its affiliates. Under the 2008 Plan, 2,500,000 shares of common stock were reserved for issuance upon the completion of a merger with Lumera Corporation (“Lumera”) on December 9, 2008. On January 1 of each year, starting in 2009, the aggregate number of shares reserved for issuance under the 2008 Plan increase automatically by the lesser of: (i) 5% of the number of shares of common stock outstanding as of the Company’s immediately preceding fiscal year, or (ii) a number of shares determined by the Board of Directors. The maximum number of shares of common stock to be granted is up to 21,000,000 shares. Forfeited options or awards generally become available for future awards. As of December 31, 2013, the stockholders had approved 15,021,253 shares for future issuance. On January 1, 2014, there was an automatic increase of 1,603,381 shares. As of September 28, 2014, 10,664,161 options to purchase common stock and restricted stock were outstanding and 3,511,707 shares are authorized for future issuance under the 2008 equity incentive plan. |
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Under the 2008 Plan, the exercise price of a stock option is at least 100% of the stock’s fair market value on the date of grant, and if an ISO is granted to a 10% stockholder at least 110% of the stock’s fair market value on the date of grant. Vesting periods for awards are recommended by the chief executive officer and generally provide for stock options to vest over a four-year period, with a one year vesting cliff of 25%, and have a maximum life of ten years from the date of grant. The Company has also issued restricted stock units (“RSUs”) which generally vest over a one to four-year period. |
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2007 Equity Incentive Plan |
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In August 2007, GigOptix LLC adopted the GigOptix LLC Equity Incentive Plan (the "2007 Plan"). The 2007 Plan provided for grants of options to purchase membership units, membership awards and restricted membership units to employees, officers and non-employee directors, and upon the completion of the merger with Lumera were converted into grants of up to 632,500 shares of stock. Vesting periods are determined by the Board of Directors and generally provide for stock options to vest over a four-year period and expire ten years from date of grant. Vesting for certain shares of restricted stock is contingent upon both service and performance criteria. The 2007 Plan was terminated upon the completion of merger with Lumera on December 9, 2008 and the remaining 864 stock options not granted under the 2007 Plan were cancelled. No shares of the Company’s common stock remain available for issuance of new grants under the 2007 Plan other than for satisfying exercises of stock options granted under this plan prior to its termination. As of September 28, 2014, options to purchase a total of 376,436 shares of common stock and 4,125 warrants to purchase common stock were outstanding. |
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Lumera 2000 and 2004 Stock Option Plan |
In December 2008, in connection with the merger with Lumera, the Company assumed the existing Lumera 2000 Equity Incentive Plan and the Lumera 2004 Stock Option Plan (the “Lumera Plan”). All unvested options granted under the Lumera Plan were assumed by the Company as part of the merger. All contractual terms of the assumed options remain the same, except for the converted number of shares and exercise price based on merger conversion ratio of 0.125. As of September 28, 2014, no additional options can be granted under the Lumera Plan, and options to purchase a total of 66,428 shares of common stock were outstanding. |
Warrants |
As of December 31, 2013, the Company had a total of 1,468,239 warrants to purchase common stock outstanding under all warrant arrangements. During the nine months ended September 28, 2014, no warrants were exercised and 809,999 warrants expired. As a result, as of September 28, 2014, the Company had 658,240 warrants to purchase common stock outstanding under all warrant arrangements. Some of the warrants have anti-dilution provisions which adjust the number of warrants available to the holder such as, but not limited to, stock dividends, stock splits and certain reclassifications, exchanges, combinations or substitutions. These provisions are specific to each warrant agreement. |
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Stock-based Compensation Expense |
The following table summarizes the Company’s stock-based compensation expense for the three and nine months ended September 28, 2014 and September 29, 2013 (in thousands): |
| | Three Months Ended | | | Nine Months Ended | |
| | 28-Sep-14 | | | 29-Sep-13 | | | 28-Sep-14 | | | 29-Sep-13 | |
Cost of revenue | | $ | 85 | | | $ | 57 | | | $ | 249 | | | $ | 196 | |
Research and development expense | | | 278 | | | | 224 | | | | 845 | | | | 778 | |
Selling, general and administrative expense | | | 705 | | | | 466 | | | | 2,092 | | | | 1,619 | |
Restructuring expense | | | - | | | | - | | | | 9 | | | | 662 | |
| | $ | 1,068 | | | $ | 747 | | | $ | 3,195 | | | $ | 3,255 | |
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For the nine months ended September 28, 2014, included in the $3.2 million of stock-based compensation expense is $9,000 in restructuring expense to modify the exercise period and accelerate the vesting of RSUs (see Note 7). |
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For the nine months ended September 29, 2013, included in the $3.3 million of stock-based compensation expense is $662,000 in restructuring expense to modify the exercise period and accelerate the vesting of stock options and RSUs (see Note 7). |
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During the three months ended September 29, 2013, the Company granted options to purchase 35,000 of common stock with an estimated total grant-date fair value of $32,000 or $0.91 per share. During the three months ended September 28, 2014, the Company did not issue any option grants. |
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During the three months ended September 28, 2014 and September 29, 2013, the Company granted 135,000 and 1,008,527 RSUs, respectively, with a grant-date fair value of $185,000 or $1.37 per share and $1.3 million or $1.33 per share, respectively. |
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During the nine months ended September 28, 2014 and September 29, 2013, the Company granted options to purchase 25,000 and 645,010 of common stock, respectively, with an estimated total grant-date fair value of $28,000 or $1.10 per share and $391,000 or $0.61 per share, respectively. |
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During the nine months ended September 28, 2014 and September 29, 2013, the Company granted 1,610,085 and 1,578,373 RSUs, respectively, with a grant-date fair value of $2.7 million or $1.67 per share and $1.8 million or $1.16 per share, respectively. |
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As of September 28, 2014, the total compensation cost not yet recognized in connection with unvested stock options and RSUs under the Company’s equity compensation plans was approximately $2.0 million and $2.4 million, respectively. Unrecognized compensation will be amortized on a straight-line basis over a weighted-average period of approximately 1.50 years for stock options and approximately 2.45 years for RSUs. |
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Stock Option and RSU Activity |
The following is a summary of option activity for the Company’s equity incentive plans, including both the 2008 Plan and other prior plans for which there are outstanding options but no new grants since the 2008 Plan was adopted: |
| | Options | | | Weighted- | | | Weighted- | | | | | |
Average | Average | | | | |
Exercise Price | Remaining | | | | |
| Contractual | | | | |
| Term, in Years | | | | |
Outstanding, December 31, 2013 | | | 10,306,671 | | | $ | 2.34 | | | | 6.96 | | | | | |
Granted | | | 25,000 | | | | 1.59 | | | | | | | | | |
Exercised | | | (225,678 | ) | | | 1.02 | | | | | | | | | |
Forfeited/Expired | | | (999,546 | ) | | | 2.51 | | | | | | | | | |
Ending balance, September 28, 2014 | | | 9,106,447 | | | $ | 2.35 | | | | 6.2 | | | | | |
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Vested and exercisable and expected to vest, September 28, 2014 | | | 9,001,301 | | | $ | 2.35 | | | | 6.19 | | | | | |
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Vested and exercisable, September 28, 2014 | | | 7,562,900 | | | $ | 2.37 | | | | 5.93 | | | | | |
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The aggregate intrinsic value of options vested, exercisable and expected to vest, based on the fair value of the underlying stock options as of September 28, 2014 was approximately $459,000. The aggregate intrinsic value reflects the difference between the exercise price of the underlying stock options and the Company’s closing share price of $1.19 as of September 26, 2014. |
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The total intrinsic value of options exercised during the nine months ended September 28, 2014 and September 29, 2013 was approximately $84,000 and $1,000, respectively. |
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RSUs are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs is subject to the employee’s continuing service to the Company. RSUs generally vest over a period of one to four years and are expensed ratably on a straight line basis over their respective vesting period net of estimated forfeitures. The fair value of the RSUs granted is the product of the number of shares granted and the grant date fair value of the Company’s common stock. |
The following is a summary of restricted stock unit activity for the indicated periods: |
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| | Number of | | | Weighted- | | | Weighted- | | | Aggregate | |
Shares | Average Grant | Average | Intrinsic |
| Date Fair Value | Remaining | Value |
| | Vesting Term, | |
| | Years | |
| | | | | | | | | | | (in thousands) | |
Outstanding, December 31, 2013 | | | 1,313,801 | | | $ | 1.19 | | | | 1.85 | | | $ | 2,010 | |
Granted | | | 1,610,085 | | | | 1.67 | | | | | | | | | |
Released | | | (815,526 | ) | | | 1.33 | | | | | | | | | |
Forfeited/expired | | | (107,782 | ) | | | 1.43 | | | | | | | | | |
Outstanding, September 28, 2014 | | | 2,000,578 | | | $ | 1.51 | | | | 2.45 | | | $ | 2,381 | |
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The majority of the RSUs that vested in the nine months ended September 28, 2014 were net-share settled such that the Company withheld shares with value equivalent to the employees’ minimum statutory obligation for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. The total shares withheld were based on the value of the RSUs on their vesting date as determined by the Company’s closing stock price. These net-share settlements had the effect of share repurchases by the Company as they reduced and retired the number of shares that would have otherwise been issued as a result of the vesting and did not represent an expense to the Company. For the nine months ended September 28, 2014, 815,526 shares of RSUs vested with an intrinsic value of approximately $970,000. The Company withheld 249,000 shares to satisfy approximately $378,000 of employees’ minimum tax obligation on the vested RSUs. |