STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2013 |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ' |
Disclosure of Compensation Related Costs, Share-based Payments [Text Block] | ' |
NOTE 11 - STOCK-BASED COMPENSATION |
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Stock Option Plans |
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The Company adopted the 1995 Stock Option Plan, pursuant to which the Company had the right to grant options to purchase up to an aggregate of 1,250,000 shares of common stock. The Company also adopted the 1999 Stock Option Plan, pursuant to which the Company had the right to grant stock awards and options to purchase up to 2,813,000 shares of common stock. The Company also adopted the 1999 Director Option Plan, pursuant to which the Company had the right to grant options to purchase up to an aggregate of 600,000 shares of common stock. The 1995 Stock Option Plan and 1999 Stock and Director Option Plans expired and the Company cannot issue additional options under these plans. |
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The Company adopted the 2007 Equity Compensation Plan, pursuant to which, as amended, the Company may grant options to purchase up to an aggregate of 2,500,000 shares of common stock. The Company also adopted the 2009 Non-Employee Director Equity Compensation Plan, pursuant to which, as amended, the Company may grant options to purchase up to an aggregate of 600,000 shares of common stock. The plans are administered by the Compensation Committee of the Company’s Board of Directors, which has the authority to determine, among other things, the term during which an option may be exercised (not more than 10 years), the exercise price of an option and the vesting provisions. |
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The Company recognizes all employee share-based payments in the statement of operations as an operating expense, based on their fair values on the applicable grant date. As a result, the Company recorded stock-based compensation expense of $155,000 and $457,000, respectively, for the three- and nine-month periods ended September 30, 2012 and $120,000 and $444,000, respectively, for the three- and nine-month periods ended September 30, 2013, in connection with awards made under the stock option plans. |
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The following table summarizes the activity relating to the Company’s stock options for the nine-month period ended September 30, 2013: |
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| | | | | | Weighted- | | | |
| | | | Weighted- | | Average | | | |
| | | | Average | | Remaining | | Aggregate | |
| | | | Exercise | | Contractual | | Intrinsic | |
| | Options | | Price | | Term | | Value | |
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Outstanding at beginning of year | | | 2,568,000 | | $ | 7.33 | | | | | | |
Granted | | | 367,000 | | | 5.63 | | | | | | |
Exercised | | | -63,000 | | | 3.41 | | | | | | |
Expired | | | -25,000 | | | 5.89 | | | | | | |
Forfeited | | | -53,000 | | | 5.13 | | | | | | |
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Outstanding at end of period | | | 2,794,000 | | $ | 7.24 | | 5 years | | $ | 2,942,000 | |
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Exercisable at end of period | | | 1,925,000 | | $ | 8.19 | | 3 years | | $ | 2,062,000 | |
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The fair value of each option grant on the date of grant is estimated using the Black-Scholes option-pricing model reflecting the following weighted-average assumptions: |
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| | September 30, | | | | | | |
| | 2012 | | | 2013 | | | | | | |
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Expected volatility | | | 44 | % | | | 44.4% - 54.8 | % | | | | | |
Expected life of options | | | 3.0 years | | | | 4.0 - 5.0 years | | | | | | |
Risk free interest rate | | | 1 | % | | | 1 | % | | | | | |
Dividend yield | | | 0 | % | | | 0 | % | | | | | |
Weighted average fair value of options granted during the period | | $ | 1.81 | | | $ | 2.17 | | | | | | |
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Expected volatility is based on historical volatility of the Company’s common stock and the expected life of options is based on historical data with respect to employee exercise periods. |
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The fair value of options vested during the nine-month periods ended September 30, 2012 and 2013 was $566,000 and $537,000, respectively. The total intrinsic value of options exercised during the nine-month periods ended September 30, 2012 and 2013 was $70,000 and $199,000, respectively. |
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As of September 30, 2013, there was approximately $1,118,000 of unrecognized compensation cost related to non-vested options granted under the Company’s stock option plans. That cost is expected to be recognized over a weighted-average period of 2.97 years. |
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The Company estimates forfeitures at the time of valuation and reduces expense ratably over the vesting period. This estimate is adjusted periodically based on the extent to which actual forfeitures differ, or are expected to differ, from the previous estimate. |
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Restricted Stock |
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In 2006, the Company began granting restricted stock to employees, whereby the employees are contractually restricted from transferring the shares until they are vested. The stock is unvested stock at the time of grant and, upon vesting, there are no contractual restrictions on the stock. The fair value of each share is based on the Company’s closing stock price on the date of the grant. A summary of all non-vested restricted stock for the nine-month period ended September 30, 2013 is as follows: |
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| | | | | Weighted- | | | | | | | |
| | | | | Average | | | | | | | |
| | Non-vested | | Grant Date | | | | | | | |
| | Shares | | Fair Value | | | | | | | |
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Restricted stock, non-vested, beginning of year | | | 293,000 | | $ | 3.79 | | | | | | | |
Granted | | | 101,000 | | | 5.67 | | | | | | | |
Vested | | | -165,000 | | | 3.24 | | | | | | | |
Forfeited | | | -11,000 | | | 4.92 | | | | | | | |
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Restricted stock, non-vested, end of period | | | 218,000 | | $ | 5.02 | | | | | | | |
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The Company recorded stock-based compensation expense of $124,000 and $383,000, respectively, for the three- and nine-month periods ended September 30, 2012 and $120,000 and $393,000, respectively, for the three- and nine-month periods ended September 30, 2013, in connection with restricted stock grants. As of September 30, 2013, there was $650,000 of total unrecognized compensation cost related to non-vested shares. That cost is expected to be recognized over a weighted-average period of 1.80 years. |
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Performance Shares |
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The Company grants performance shares to key employees pursuant to the 2007 Equity Compensation Plan, as amended. The issuance of the shares of the Company’s common stock underlying the performance shares is subject to the achievement of stock price targets of the Company’s common stock at the end of a three-year measurement period from the date of issuance, with the ability to achieve prorated performance shares during interim annual measurement periods. The annual measurement period is based on a trading day average of the Company’s stock after the announcement of annual results. If the stock price performance triggers are not met, the performance shares will not vest and will automatically be returned to the plan. If the stock price performance triggers are met, then the shares will be issued to the employees. Under the applicable accounting guidance, stock compensation expense at the fair value of the shares expected to vest is recorded even if the aforementioned stock price targets are not met. Stock-based compensation expense related to these performance shares for the three- and nine-month periods ended September 30, 2012 and 2013 was insignificant. |
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The following table summarizes the activity relating to the Company’s performance shares for the nine-month period ended September 30, 2013: |
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| | Non-vested | | | | | | | | | | |
| | Shares | | | | | | | | | | |
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Performance shares, non-vested, beginning of year | | | 134,000 | | | | | | | | | | |
Granted | | | - | | | | | | | | | | |
Vested | | | - | | | | | | | | | | |
Forfeited | | | -50,000 | | | | | | | | | | |
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Performance shares, non-vested, end of period | | | 84,000 | | | | | | | | | | |
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Warrants |
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In connection with the Purchase Agreement with Avis Budget Group, Inc. (“Avis Budget Group”) entered into on August 22, 2011 (the “Effective Date”), the Company issued and sold to Avis Budget Group a warrant (the “Warrant”) to purchase up to an aggregate of 600,000 shares of the Company’s common stock (collectively, the “Warrant Shares”) at an exercise price of $10.00 per share of common stock. The Warrant is exercisable (i) with respect to 100,000 of the Warrant Shares, at any time after the Effective Date and on or before the fifth (5th) anniversary thereof, and (ii) with respect to 500,000 of the Warrant Shares, at any time on or after the date (if any) on which Avis Budget Car Rental, LLC, a Delaware limited liability company (“ABCR”) and the subsidiary of Avis Budget Group that is the counterparty under the Master Agreement (described in Note 2 to the Unaudited Condensed Consolidated Financial Statements), executes and delivers to the Company SOW#2 (as defined in the Master Agreement) and on or before the fifth (5th) anniversary of the Effective Date. |
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The Warrant may be exercised by means of a “cashless exercise” solely in the event that on the later of (i) the one-year anniversary of the Effective Date and (ii) the date on which the Warrant is exercised by the holder, the Company is eligible to file a registration statement on Form S-3 to register the Warrant Shares for resale by the holder and a re-sale registration statement on Form S-3 registering the Warrant Shares for resale by the holder is not then declared effective by the Securities and Exchange Commission (the “SEC”) and available for use by the holder. The Company has agreed to file such a registration statement (on Form S-3 only, or a successor thereto) within 30 days of the holder’s request therefor, and to have such registration statement declared effective within 90 days of such request, if there is no review by the Staff of the SEC, and within 120 days, if there has been a review by the Staff of the SEC. As of September 30, 2013, the Company has not yet been requested to file such a registration statement. |
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The exercise price of the Warrant and, in some cases, the number of shares of our common stock issuable upon exercise, are subject to adjustment in the case of stock splits, stock dividends, combinations of shares, similar recapitalization transactions and certain pro-rata distributions to holders of common stock. In the event of a fundamental transaction involving the Company, such as a merger, consolidation, sale of substantially all of the Company’s assets or similar reorganization or recapitalization, the holder will be entitled to receive, upon exercise of the Warrant, any securities or other consideration received by the holders of the Company’s common stock pursuant to such fundamental transaction. |
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The Company is required to reserve a sufficient number of shares of common stock for the purpose enabling the Company to issue the Warrant Shares pursuant to any exercise of the Warrants. As of September 30, 2013, the Company has sufficient shares reserved. |
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The fair value of the 100,000 Warrant Shares which vested on the Effective Date was recorded as reduction of product revenue during the third quarter of 2011. The remaining 500,000 Warrant Shares underlying the Warrant, which vest upon the execution of SOW#2, have not been valued at this time since the Company has not determined that it is probable that SOW#2 will be executed and that the Warrant will become exercisable for these remaining 500,000 Warrant Shares. Since there is no penalty for failure to execute SOW#2, there is no performance commitment date and, therefore, there is no measurement date for these 500,000 Warrant Shares underlying the Warrant until SOW#2 is executed. |
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Shares withheld |
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During the nine-month periods ended September 30, 2012 and 2013, 51,000 and 46,000 shares, respectively of the Company’s common stock were withheld to satisfy minimum tax withholding obligations in connection with the vesting of restricted shares and to pay the exercise price of stock options in the aggregate amount of $247,000 and $245,000, respectively. |
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