Transactions Affecting Stockholders' Equity |
9 Months Ended |
|---|---|
Sep. 30, 2011 | |
| Stockholders Equity Note [Abstract] | |
| Stockholders' Equity Note Disclosure [Text Block] |
Note 5 – Transactions Affecting Stockholders’ Equity
Purchase of Treasury Stock
In September 2011, we entered into a redemption agreement with Phosphagenics. Under the terms of the redemption agreement, we redeemed 690,000 shares of our Common Stock held by Phosphagenics for the aggregate redemption price of $448,500 in cash. The redemption price is equal to $0.65 per share.
Stockholder Rights Plan
On September 8, 1998, our Board of Directors declared a dividend distribution of Common Stock Purchase Rights (each individually, a “Right” and collectively, the “Rights”) payable to the stockholders of record on September 25, 1998, thereby creating a Stockholder Rights Plan (the “Rights Agreement”). The Plan was amended effective May 23, 2008 (“First Amendment”) and further amended effective August 18, 2009 (“Second Amendment”). The Rights Agreement, as amended, provides that each Right entitles the stockholder of record to purchase from the Company that number of common shares having a combined market value equal to two times the Rights exercise price of $45. The Rights are not exercisable until the distribution date, which will be the earlier of a public announcement that a person or group of affiliated or associated persons has acquired 15% or more of the outstanding common shares, or the announcement of an intention by a similarly constituted party to make a tender or exchange offer resulting in the ownership of 15% or more of the outstanding common shares. The dividend has the effect of giving the stockholder a 50% discount on the share’s current market value for exercising such right. In the event of a cashless exercise of the Right, and the acquirer has acquired less than 50% beneficial ownership of the Company, a stockholder may exchange one Right for one common share of the Company. The Rights Agreement, as amended, includes a provision pursuant to which our Board of Directors may exempt from the provisions of the Rights Agreement an offer for all outstanding shares of our Common Stock that the directors determine to be fair and not inadequate and to otherwise be in the best interests of the Company and its stockholders, after receiving advice from one or more investment banking firms. The expiration date of the Rights Agreement, as amended, is September 25, 2018.
Equity Compensation Plans
Our shareholders have approved and we maintain three different equity compensation plans, (i) the 1997 Option Plan, as amended, (the “1997 Plan”), (ii) the 2010 Equity Compensation Plan, as amended, (the “2010 Plan”) and (iii) the 2010 Directors Equity Compensation Plan (the “Directors’ Plan”), together known as our “Equity Compensation Plans”.
The 1997 Plan, which was amended in 2005, provided for the granting of up to 4.5 million shares of Common Stock. Under the 1997 Plan, we were permitted to grant options to employees, officers or directors of the Company at variable percentages of the market value of stock at the date of grant. No incentive stock option could be exercisable more than ten years after the date of grant or five years after the date of grant where the individual owns more than ten percent of the total combined voting power of all classes of stock. At December 31, 2009, we are precluded from issuing any additional options or grants in the future under the 1997 Plan pursuant to the terms of the plan document. Options previously granted continue to be available for exercise at any time prior to such options’ respective expiration dates, but in no event later than ten years from the date granted. At September 30, 2011, there are 207,250 options outstanding under the 1997 Plan with various expiration dates ranging from October 2011 through December 2015, depending upon the date of grant.
The 2010 Plan provides that the total number of shares of Common Stock, as adjusted, that may be issued is equal to an aggregate of 1.8 million shares. All of our employees, including employees who are officers or members of the Board are eligible to participate in the 2010 Plan. Consultants and advisors who perform services for us are also eligible to participate in the 2010 Plan.
Stock Options and Stock Grants Pursuant to Equity Compensation Plans
On April 21, 2011, the Compensation Committee of the Board of Directors approved an amendment to Chief Executive Officer Ted Karkus’ employment agreement, dated August 19, 2009 (the “Amendment”) to lower his annual salary by $150,000 (or $12,500 per month) in exchange for a grant of restricted stock equal in value to the salary reduction. Pursuant to the Amendment, Mr. Karkus’ annual base salary was decreased from $750,000 per year to $600,000 per year, effective May 1, 2011 thru July 15, 2012, which is the end of the term of his employment agreement, as amended. As a consequence of the Amendment, a restricted stock grant under the 2010 Plan equal to $12,500 of shares per month thru the end of the term (14.5 months). The restricted stock grant was made in an upfront grant of 161,830 shares, subject to certain future vesting conditions, at a value of $181,000 as of the grant date. The grant was made on April 21, 2011, and the amount of the shares issued was calculated based on the average closing price of our Common Stock for the last five (5) trading days prior to and including the issuance date of April 21, 2011. For the three months and nine months ended September 30, 2011, we have charged to operations $37,500 and $62,500, respectively, as share-based compensation expense for the restricted stock grant and we have unrecognized compensation expense of $118,750 at September 30, 2011 that will be charged to operations in equal monthly installments of $12,500 over the remaining vesting period ending July 15, 2012.
In addition, on April 21, 2011, the Compensation Committee of the Board of Directors granted Mr. Karkus 133,928 shares of Common Stock under the 2010 Plan as payment for his Fiscal 2010 bonus. Mr. Karkus agreed to accept his Fiscal 2010 cash bonus of $150,000 in shares of our Common Stock. Furthermore, Mr. Karkus agreed to convert into shares of our Common Stock $144,000 of deferred cash compensation owed to him thru April 2011, resulting in an issuance of 128,571 shares under the 2010 Plan. The amount of these shares issued to Mr. Karkus was calculated based on the average closing price of the Company’s shares for the last five (5) trading days prior to and including the issuance dates of April 21, 2011. Furthermore in May 2011, we granted to certain employees 100,000 options to acquire our Common Stock under the 2010 Plan with an exercise price of $1.08 per share and an aggregate fair value, at the time of grant, of $57,000. Each of the stock options vests over a four year period and, as a consequence, the fair value of the stock granted is charged to operations over the vesting period.
At September 30, 2011, there are 1,074,000 options outstanding and subject to vesting over a three to six year period under the 2010 Plan. At September 30, 2011, 43,500 of such options have vested and 1,030,500 options are subject to vesting. At September 30, 2011, there are 301,671 shares available for future grant under the 2010 Plan. For the three months and nine months ended September 30, 2011, we charged to operations $34,000 and $94,000, respectively, for share-based compensation expense relating to stock options. At September 30, 2011, the unrecognized share-based compensation expense related to stock options granted but not vested was approximately $552,000 which will be recognized over a weighted average period of approximately 4.3 years.
The primary purpose of the 2010 Directors’ Plan is to provide us with the ability to pay all or a portion of the fees of directors in restricted stock instead of cash. The 2010 Directors’ Plan provides that the total number of shares of Common Stock that may be issued under the 2010 Directors’ Plan is equal to 250,000. For the three months and nine months ended September 30, 2011, we issued 49,160 shares and 114,010 shares, respectively, of our Common Stock valued at $41,000 and $122,000, respectively, for share-based director compensation expense. For the nine months ended September 30, 2010, we issued 35,835 shares, of our Common Stock valued at $49,000 for share-based director compensation expense. At September 30, 2011, there are 68,365 shares available for future grant under the 2010 Directors’ Plan.
Stock Option Exercise and Other Grants
During the nine months ended September 30, 2011 no options were exercised. For the nine months ended September 30, 2010, we derived net proceeds of $133,000 as a consequence of the exercise of options to acquire 130,500 shares of our Common Stock.
Pursuant to the terms of Mr. Cuddihy’s, our Chief Operating Officer and Chief Financial Officer, employment agreement, Mr. Cuddihy receives an annual grant of shares of Common Stock that is equal to $50,000, payable quarterly, promptly following the close of each quarter. For the three months ended September 30, 2011 and 2010, Mr. Cuddihy earned 15,665 and 9,811 shares, respectively, valued each at $12,500 as share-based compensation. For the nine months ended September 30, 2011 and 2010, Mr. Cuddihy earned 40,885, and 25,106 shares, respectively, valued each at $37,500 as share-based compensation.
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