COMMON STOCK | 12 Months Ended |
Jun. 30, 2014 |
Common Stock [Abstract] | ' |
COMMON STOCK | ' |
12. COMMON STOCK |
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The Company’s Board of Directors has authorized various compensation plans. Activity for these plans during the years ended June 30, 2014, 2013, and 2012 are as follows: |
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On June 15, 2010, the Company’s shareholders approved the 2010 Stock Incentive Plan to allow up to 300,000 shares of Common Stock to be available for issuance to future or current employees, directors and consultants of the Company. During the years ended June 30, 2014, 2013 and 2012, the Company issued 6,668, 62,942 and 120,472 shares under the plan totaling $6,024, $68,723 and $248,851, respectively based on the grant date fair value of the shares. As of June 30, 2014, no more shares under this plan are available for future issuance. |
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On June 13, 2011, the Company’s shareholders approved the 2011 Stock Incentive Plan to allow up to 300,000 shares of Common Stock to be available for issuance to future or current employees, directors and consultants of the Company. During the years ended June 30, 2014, 2013 and 2012, the Company issued 51,667, 96,665 and 141,666 shares under the plan totaling $17,366, $157,645 and $335,636, respectively based on the grant date fair value of the shares. As of June 30, 2014, 10,002 shares under the plan have been granted, but have not been issued as they are subject to various vesting provisions, and no more shares are available for future issuance. |
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On June 28, 2012, the Company’s shareholders approved the 2012 Stock Incentive Plan to allow up to 500,000 shares of Common Stock to be available for issuance to future or current employees, directors and consultants of the Company. During the years ended June 30, 2014 and 2013, the Company issued 131,203 and 279,806 shares under the plan totaling $505,651 and $276,539, respectively based on the grant date fair value of the shares. During the year ended June 30, 2012, the Company did not issue any shares under the plan and recorded $197,613 related to the vesting of shares to be issued under this plan. As of June 30, 2014, 33,809 shares under the plan have been granted, but have not been issued as they are subject to various vesting provisions, and 31,484 shares are available for future issuance. |
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On June 21, 2013, the Company’s shareholders approved the 2013 Stock Incentive Plan to allow up to 500,000 shares of Common Stock to be available for issuance to future or current employees, directors and consultants of the Company. During the years ended June 30, 2014 and 2013, the Company did not grant or issue any shares under the plan. As of June 30, 2014, 500,000 shares are available for future issuance. |
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On September 27, 2011 the Company and Mr. Jensen, the Company’s former Chief Executive Officer, entered into an amended and restated employment agreement (the “Jensen Employment Agreement”) and on October 14, 2011 a Separation Agreement and Release (the “Separation Agreement”). |
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The Jensen Employment Agreement provided for the issuance of an aggregate of 150,000 shares of common stock to Mr. Jensen under its stock incentive plans which were to vest as follows: 50,000 on the date the agreement was signed (September 27, 2011) by Mr. Jensen and the Company; 50,000 on the first anniversary of the date of signing (September 27, 2012); and 50,000 on the second anniversary of the date of signing (September 27, 2013). |
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Pursuant to the Separation Agreement, Mr. Jensen resigned as Chairman, Chief Executive Officer and as a Director of the Company, effective October 14, 2011. Under the Separation Agreement, the Company issued to Mr. Jensen 41,667 shares of its common stock which were awarded in connection with the signing of an amendment to his employment agreement in April 2011, which would not have otherwise vested until April 2012; and 50,000 shares of the Company’s common stock which were awarded to Mr. Jensen in connection with the signing Jensen Employment Agreement and which would not have otherwise vested until September 2012. |
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Pursuant to the Separation Agreement, 41,667 shares of common stock that would have vested in April 2013 in connection with the signing of an amendment to Mr. Jensen’s employment agreement in April 2011 and 50,000 shares of common stock that would have vested in September 2013 in connection with the signing of his amended and restated employment agreement in September 2011 were forfeited. |
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On September 27, 2011, the Company and Mr. Herbert entered into a second amendment to his employment agreement. The Company issued an aggregate of 100,000 shares of common stock to Mr. Herbert under its stock incentive plans which vest as follows: 33,333 on the date the agreement was signed by Mr. Herbert and the Company (September 27, 2011); 33,333 on the first anniversary of the date of signing (September 27, 2012); and 33,334 on the second anniversary of the date of signing (September 27, 2013). |
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In September 2012, the Board of Directors accepted the recommendation of the Compensation Committee and granted 71,429 shares of Common Stock with a grant date fair value of $100,000 to Mr. Herbert under the 2012 Stock Incentive Plan (the “2012 Plan”) to vest over a period of up to three years based on performance of the Company’s Common Stock. During the years ended June 30, 2014 and 2013, the Company issued 0 and 47,620 shares of Common Stock and recorded $0 and $66,668 of expense, respectively for this grant. As of June 30, 2014, 23,809 shares of Common Stock remain unvested for this grant. |
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On September 27, 2011, the Company and Mr. DeMedio entered into a fifth amendment to his employment agreement pursuant to which Mr. DeMedio was granted an aggregate of 25,000 shares of common stock which vest as follows: 8,333 on the date of signing the amendment (September 27, 2011); 8,333 on the first anniversary of such signing date (September 27, 2012); and 8,334 on the second anniversary of such signing date (September 27, 2013). |
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On September 15, 2011, at the recommendation of the Compensation Committee, the board of directors adopted the Fiscal Year 2012 Performance Share Plan (the “2012 Performance Plan”) covering the Company’s executive officers. Under the 2012 Performance Plan, each executive officer will be awarded common stock in the event the Company achieves target goals during the fiscal year ending June 30, 2012 relating to the total number of connections, total revenues, operating expenses, and operating earnings. Operating earnings is defined as earnings before interest and taxes (after bonus accruals and stock awards) and before non-operating gains or losses. The number of eligible shares to be awarded to the executives is based upon the following weightings: 30% by the total number of connections; 30% by total revenues; 10% by operating expenses; and 30% by operating earnings. No awards would be made under the 2012 Performance Plan if either (i) none of the minimum, threshold performance target goals have been achieved, or (ii) if operating earnings for the 2012 fiscal year are not equal or better than those during the 2011 fiscal year. |
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Notwithstanding the above description of the 2012 Performance Plan, the executives would receive shares from the Company pursuant to the 2012 Performance Plan only if and to the extent that shares would be available to be issued to the executives under the existing 2011 stock incentive plan or another stock plan that has been approved by the shareholders of the Company in accordance with NASDAQ Listing Rule 5635(c).If there would not be a sufficient number of shares available to be issued to the executives, the Company would pay to the executives an amount of cash equal to the value of those shares not available to be issued to the executives. In such event, the executives would be required to utilize the cash payment, net of any withholding, payroll or other taxes attributable to the cash payment, to purchase shares of common stock of the Company on the open market. |
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As of September 15, 2011 and through June 27, 2012, there were not sufficient shares available under the existing 2011 stock incentive plan or another stock plan that had been approved by the shareholders of the Company; consequently, the Company may have been required to deliver to the executives an amount of cash equal to the value of shares earned but not available to be issued to the executives. Therefore, in accordance with ASC Topic 718, “Stock Compensation”, this award was accounted for as a liability of the Company through June 27, 2012. On June 28, 2012, the Company’s shareholders approved the 2012 Stock Incentive Plan, which includes sufficient shares for the 2012 Performance Plan. Accordingly, for the fiscal year ended June 30, 2012 the Company recorded stock compensation expense of $197,613 for the vesting of 136,285 shares of Common Stock – 96,201 shares to Mr. Herbert and 40,084 shares to Mr. DeMedio. Final settlement of the award occurred in September 2012. |
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Pursuant to the Separation Agreement entered into by the Company and Mr. Jensen, Mr. Jensen is not entitled to earn shares under the 2012 Performance Plan, and therefore no award was estimated for Mr. Jensen for the fiscal 2012 year. |
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On September 5, 2012, at the recommendation of the Compensation Committee, the board of directors adopted the Fiscal Year 2013 Performance Share Plan (the “2013 Performance Plan”) covering the Company’s executive officers. Under the 2013 Performance Plan, each executive officer would be awarded common stock in the event the Company achieves certain performance goals during the fiscal year ended June 30, 2013. The metrics under the 2013 Performance Plan as well as the relative weightings of these metrics are identical to those originally set forth in the 2012 Performance Plan. No awards would be made under the 2013 Performance Plan if either (i) none of the minimum, threshold performance target goals has been achieved, or (ii) if operating earnings for the 2013 fiscal year are not equal or better than those during the 2012 fiscal year. |
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If all of the target goals are achieved under the 2013 Performance Plan, the executive officers would be awarded shares having the following value: Mr. Herbert – $275,000; and Mr. DeMedio – $100,000. If all of the minimum, threshold performance target goals are achieved, the executive officers would be awarded shares having the following value: Mr. Herbert – $75,000; and Mr. DeMedio – $25,000. If all of the maximum, distinguished performance target goals are achieved, the executive officers would be awarded shares having the following value: Mr. Herbert – $550,000; and Mr. DeMedio – $200,000. If the actual results for the fiscal year are less than the target goals (but greater than the minimum, threshold performance target goals), each executive would be awarded a lesser pro rata number of shares from the target goal, if actual results are between target and maximum, then a pro rata number of shares between target and maximum is earned, and if actual results are above maximum (distinguished) than pro rata shares above maximum is earned. |
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As of September 5, 2012 and through June 20, 2013, there were not sufficient shares for the maximum awards available under the existing 2012 stock incentive plan or another stock plan that had been approved by the shareholders of the Company; consequently, the Company may have been required to deliver to the executives an amount of cash equal to the value of shares earned but not available to be issued to the executives. Therefore, in accordance with ASC Topic 718, “Stock Compensation”, this award was accounted for as a liability of the Company through June 20, 2013. On June 21, 2013, the Company’s shareholders approved the 2013 Stock Incentive Plan, which includes sufficient shares for the 2013 Performance Plan. Accordingly, for the fiscal year ended June 30, 2013, the Company recorded stock compensation expense of $19,167 for the vesting of 11,016 shares of Common Stock – 8,142 shares to Mr. Herbert and 2,874 shares to Mr. DeMedio. Final settlement of the award occurred in September 2013. |
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On November 7, 2013, at the recommendation of the Compensation Committee, the Board of Directors approved a stock bonus to the Company’s Chief Financial Officer (“CFO”). The CFO was awarded 21,000 vested shares of common stock of the Company as a bonus in recognition of his performance during the 2013 fiscal year. For the year ended June 30, 2014, $38,220 was recorded as expense on account of the stock bonus under the 2012 Stock Incentive Plan. |
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On November 7, 2013, at the recommendation of the Compensation Committee, the Board of Directors approved the Fiscal Year 2014 Long-Term Stock Incentive Plan (the “2014 LTI Stock Plan”). The 2014 LTI Stock Plan provides that each executive officer would be awarded shares of common stock in the event that certain metrics relating to the Company’s 2014 fiscal year would result in specified ranges of year-over-year percentage growth. At the time of the establishment of the 2014 LTI Stock Plan, the Compensation Committee believed that the attainment of the target goals under the plan would represent a significant achievement for management, and were designed to stretch the Company’s and management’s performance during the fiscal year. |
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If none of the minimum threshold year-over-year percentage target goals are achieved, the executive officers would not be awarded any shares. If all of the year-over-year percentage target goals are achieved, the executive officers would be awarded shares having the following value: Chief Executive Officer (“CEO”) – $341,277 (100% of base salary); and CFO – $175,698 (75% of base salary). If all of the maximum distinguished year-over-year percentage target goals are achieved, the executive officers would be awarded shares having the following value: CEO – $682,554 (200% of base salary); and CFO – $351,396 (150% of base salary). Assuming the minimum threshold year-over-year percentage target goal would be achieved for a particular metric, the number of shares to be awarded for that metric would be determined on a pro rata basis, provided that the award would not exceed the maximum distinguished award for that metric. The shares awarded under the 2014 LTI Stock Plan would vest over a three year period following issuance as follows: one-third on the first anniversary; one-third on the second anniversary; and one-third on the third anniversary. For the fiscal year ended June 30, 2014, the Company recorded stock compensation expense of $71,963 for the vesting of 55,810 shares of Common Stock – 36,649 shares to Mr. Herbert and 19,161 shares to Mr. DeMedio on account of the 2014 LTI Stock Plan under the 2012 Stock Incentive Plan. |
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During the years ended June 30, 2014, 2013 and 2012, and as permitted under their employment agreements, executive officers cancelled an aggregate of 49,311, 64,847, and 38,749 shares of Common Stock, respectively, in order to satisfy an aggregate of $89,020, $121,052, and $51,381, respectively, of payroll tax withholding obligations related to shares of Common Stock which vested during the 2013 through 2014 fiscal years. |
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During June 2011, the Board of Directors accepted the recommendation of the Compensation Committee that each non-employee Director serving as of June 30, 2011 receive a stock award of 10,000 shares of Common Stock under the 2010 Stock Incentive Plan valued at $2.22 per share. A total of 50,000 shares of Common Stock were awarded, and the shares vest as follows: 16,665 on June 30, 2011; 16,665 on June 30, 2012; and 16,670 on June 30, 2013. In February 2012, a non-employee member of the Board of Directors forfeited and returned to the Company 6,667 and 3,333 shares of Common Stock, respectively, awarded under this grant in June 2011. As of June 30, 2012, 29,998 shares, net, have vested and been issued. In addition, due to the February 2012 forfeiture and return and changes in the composition of the Board of Directors as approved by shareholders at the Company’s annual meeting of shareholders on June 28, 2012, as of June 30, 2012, 10,002 shares of Common Stock remain reserved for future issuance and 10,000 shares will not vest under this June 2011 grant. As of June 30, 2013, 39,999 shares vested under this award and no shares remain unvested. |
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During March 2012, the Board of Directors accepted the recommendation of the Compensation Committee that each of the three non-employee Directors appointed to the Board in January 2012 receive a stock award of 10,000 shares of Common Stock under the 2010 Stock Incentive Plan valued at $0.94 per share. A total of 30,000 shares of Common Stock were awarded, and the shares vest as follows: 9,999 on April 1, 2012; 9,999 on April 1, 2013; and, 10,002 on April 1, 2014. Due to changes in the composition of the Board of Directors as approved by shareholders at the Company’s annual meeting of shareholders on June 28, 2012 and the resignation of a member of the Board of Directors in February 2014, as of June 30, 2014 19,999 shares vested under this award, 10,001 shares will not vest, and no shares remain unvested. |
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In July 2012, the Board of Directors accepted the recommendation of the Compensation Committee that each of the three non-employee Directors who joined the Board after March 31, 2012 receive a stock award of 10,000 shares of Common Stock. Under the 2011 Stock Incentive Plan (the “2011 Plan”) 30,000 shares of Common Stock were awarded with a grant date fair value of $1.45 per share, and vest as follows: 9,999 on August 10, 2012; 9,999 on August 10, 2013; and, 10,002 on August 10, 2014. As of June 30, 2014, 19,998 shares vested and 10,002 shares of Common Stock remain reserved for future issuance under this July 2012 grant. |
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During the years ended June 30, 2014, 2013, and 2012 certain Directors elected to receive compensation for service on the Company’s Board of Directors in Common Stock of the Company. For the years ended June 30, 2014, 2013, and 2012 the Company issued 75,632, 88,594, and 2,299 shares of Common Stock and recorded $140,000, $157,500, and $3,333 of expense, respectively, for this director compensation. The Company also issued to the lead independent director 37,287, 23,248, and 19,175 shares of common stock attributable to his service as lead independent director during the years ended June 30, 2014, 2013, and 2012, respectively. |
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As of June 30, 2014, the Company had reserved shares of Common Stock for future issuance for the following: |
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Exercise of Common Stock Warrants | | | 4,309,000 | | | | | |
Conversions of Preferred Stock and cumulative Preferred Stock dividends | | | 98,197 | | | | | |
Issuance under 2012 Stock Incentive Plan | | | 31,484 | | | | | |
Issuance under 2013 Stock Incentive Plan | | | 500,000 | | | | | |
Issuance under 2014 Stock Option Incentive Plan | | | 750,000 | | | | | |
Issuance to former Chief Executive Officer upon the occurrence of a USA Transaction | | | 140,000 | | | | | |
Total shares reserved for future issuance | | | 5,828,681 | | | | | |
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A summary of the status of the Company’s nonvested common shares as of June 30, 2014, 2013, and 2012, and changes during the years then ended is presented below: |
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| | | | | Weighted-Average | |
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| | Shares | | | Fair Value | |
Nonvested Shares | | | | | | |
Nonvested at June 30, 2011 | | | 187,335 | | | $ | 2.32 | |
Granted | | | 473,285 | | | | 1.58 | |
Vested | | | (380,282 | ) | | | 1.73 | |
Forfeited due to Separation Agreement | | | (91,667 | ) | | | 2 | |
Forfeited, Director changes | | | (16,668 | ) | | | 1.71 | |
Nonvested at June 30, 2012 | | | 172,003 | | | $ | 1.82 | |
Granted | | | 156,429 | | | | 1.45 | |
Vested | | | (204,587 | ) | | | 1.72 | |
Forfeited, Employee shares not earned | | | (26,699 | ) | | | 1.52 | |
Nonvested at June 30, 2013 | | | 97,146 | | | $ | 1.52 | |
Granted | | | 10,000 | | | | 2.17 | |
Vested | | | (55,001 | ) | | | 1.62 | |
Forfeited, Director changes | | | (3,334 | ) | | | 0.94 | |
Forfeited, Employee shares not earned | | | (5,000 | ) | | | 1.52 | |
Nonvested at June 30, 2014 | | | 43,811 | | | $ | 1.59 | |
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The 43,811 nonvested shares of Common Stock as of June 30, 2014 were granted under the 2011 and 2012 stock incentive plans and relate to employment agreements, other employee grants, and non-employee Board of Director grants. A discussion of assumptions used in calculating the number of shares and weighted-average grant date fair value is included above in Note 12. |