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Stockholders' Equity | 12 Months Ended
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Dec. 31, 2012
Stockholders' Equity [Abstract] |
STOCKHOLDERS' EQUITY | NOTE 10—STOCKHOLDERS’ EQUITY Preferred Stock The Company has authorized the issuance of 10,000,000 shares of preferred stock, which may be issued from time to time in one or more series by the Board of Directors. In addition, the Board is authorized to set the rights, preferences, privileges and restrictions of these shares, including dividends rights, conversion rights, voting rights and liquidation preferences. These shares may have rights senior to those of the Company’s common stock holders. As of December 31, 2012 and 2011, the Company did not have any preferred shares outstanding. Common Stock The Company has authorized the issuance of 40,000,000 shares of common stock. As of December 31, 2012 and 2011, a total of 14,184,146 shares were outstanding. Stock Options and Warrants The Company has two stock-based compensation plans: the 2006 Equity Incentive Plan (“2006 Plan”) and the 2003 Stock Option Plan (“2003 Plan”). Each of the plans was approved by the Company’s stockholders. As of December 31, 2012, options to purchase 631,000 shares and 12,000 shares were outstanding under the 2006 Plan and the 2003 Plan, respectively, and a total of 717,000 shares were available for grant under the 2006 Plan. There are no options available for grant under the 2003 Plan. The Company is also a party to non-plan option agreements with several non-employee directors. The 2006 Plan was approved by stockholders in June 2006, with 1,000,000 shares of the Company’s common stock authorized for issuance there-under. An additional 348,208 shares of the Company’s common stock were rolled into the 2006 Plan from the 2003 Plan. The 2006 Plan is intended to provide incentives to key employees, officers, directors and consultants who provide significant services to the Company. The exercise price is determined by the Compensation Committee, but must be at least equal to the fair market value of the common stock on the date of grant of such option. The Compensation Committee also establishes the vesting schedule for each option granted and the term of each option, which cannot exceed 10 years from the date of grant. In the event of termination, vested shares must be exercised within three months. The 2006 Plan also provides for 100% vesting of outstanding options upon a change of control of the Company. The Company’s stock options vest on an annual or a monthly basis. The Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period of the award, which is generally the option vesting term. Options granted generally vest over a three-year period. Income tax effects of share-based payments are recognized in the financial statements for those awards which will normally result in tax deductions under existing tax law. Under current U.S. federal tax law, we would receive a compensation expense deduction related to non-qualified stock options only when those options are exercised and vested shares are received. Accordingly, the financial statement recognition of compensation expense for non-qualified stock options creates a deductible temporary difference which results in a deferred tax asset and a corresponding deferred tax benefit in the income statement. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants in 2012, 2011 and 2010: risk-free interest rates of 0.91%, 0.63% and 0.49%, respectively, based on the U.S. Treasury yields in effect at the time of grant; expected dividend yields of 0% as the Company has not, and does not intend to, issue dividends; and expected lives of 3 to 7 years based upon the historical life of the Company’s options. For grants in 2012, 2011 and 2010, the expected volatility used ranged from 108% to 109% based on the Company’s historical stock price fluctuations for a period matching the expected life of the options. A summary of option activity under all of the above plans for the year ended December 31, 2012 is as follows (shares and aggregate intrinsic value in thousands):
|  | Shares |  |  | Wtd. Avg. Exercise Price |  |  | Wtd. Avg. Remaining Contractual Life |  |  | Aggregate Intrinsic Value |
Outstanding at December 31, 2011 |  |  | 633 |  |  | $ | 0.90 |  |  |  |  |  |  |  |  |
Granted during fiscal year 2012 |  |  | 10 |  |  | $ | 0.74 |  |  |  |  |  |  |  |  |
Expired during fiscal year 2012 |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |
Forfeited during fiscal year 2012 |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2012 |  |  | 643 |  |  | $ | 0.90 |  |  |  | 4.63 years |  |  | $ | 19 |
Vested and expected to vest |  |  | 643 |  |  | $ | 0.90 |  |  |  | 4.63 years |  |  | $ | 19 |
Exercisable at December 31, 2012 |  |  | 504 |  |  | $ | 0.97 |  |  |  | 4.48 years |  |  | $ | 17 |
The aggregate intrinsic value in the stock option summary table above is based on our closing stock price of $0.65 per share as of December 31, 2012, which value would have been realized by the optionees had all options been exercised on that date. During the quarter ended June 30, 2010, the Company established a wholly owned subsidiary in Hong Kong to serve as the base for the Company’s sales and marketing efforts of its proprietary line of verykool® products in Asia Pacific. It also established a wholly owned subsidiary of the Hong Kong entity in China for the purpose of designing and developing verykool® products. The Company funded the combined operations of these entities with $1.0 million and agreed to invest up to $1.0 million in additional funding as needed. In order to provide incentives to the China development team, the Company granted a warrant exercisable for 38% of the equity ownership of the Hong Kong subsidiary to a management company for the benefit of the China employees. The Company also committed to reserve up to 5% additional equity interest to attract and retain employees as needed. The total exercise price of the warrant is $1.00, with vesting occurring one-third upon the first anniversary of the warrant and the remaining two-thirds occurring on a monthly basis over the succeeding 24 months. The warrant has a 6-year life, but will not be exercisable until the third anniversary of its issuance. The Company evaluated the warrant on its Hong Kong subsidiary in accordance with ASC 718-50 and concluded that because the warrants were issued to the management company for allocation at their discretion, the proper treatment of the warrants was as specified in ASC 505-50 as equity-based payments to non-employees in exchange for services. The Company also concluded that the estimated fair value of the warrant at the date of grant was $365,000. The Company is recording the expense for this warrant based upon its estimated fair value on a straight-line basis over the three-year performance period. The amount of expense recorded during the years ended December 31, 2012, 2011 and 2010 was $122,000, $122,000 and $81,000, respectively. A summary of the status of the Company’s non-vested options at December 31, 2012, and changes during the year then ended are presented below (shares in thousands):
|  | Shares |  |  | Weighted-average grant-date fair value |
Non-vested at December 31, 2011 |  |  | 349 |  |  | $ | 0.50 |
Granted |  |  | 10 |  |  | $ | 0.54 |
Vested |  |  | (220 | ) |  | $ | 0.50 |
Forfeited |  |  | — |  |  |  | — |
Non-vested at December 31, 2012 |  |  | 139 |  |  | $ | 0.50 |
The weighted-average per share grant-date fair value of options granted during 2012, 2011 and 2010 were $0.54, $0.47 and $0.58, respectively. There were no option exercises during the three years ended December 31, 2012. The unrecognized stock-based compensation expense for future periods as of December 31, 2012 is $66,000, which is expected to be recognized over a weighted-average period of approximately 0.64 years. Such amount may change as a result of future grants, forfeitures, modifications in assumptions and other factors. The total fair value of options that vested during 2012, 2011 and 2010 was $110,000, $79,000 and $41,000, respectively. The following table summarizes share-based compensation expense for the years ended December 31 (in thousands):
|  | 2012 |  |  | 2011 |  |  | 2010 |
Selling, general and administrative: |  |  |  |  |  |  |  |  |  |  |  |
Non-employee directors |  | $ | 18 |  |  | $ | 10 |  |  | $ | 6 |
Officers |  |  | 63 |  |  |  | 39 |  |  |  | 21 |
Others |  |  | 28 |  |  |  | 24 |  |  |  | 21 |
Total SG&A |  |  | 109 |  |  |  | 73 |  |  |  | 48 |
Research and development |  |  | 122 |  |  |  | 122 |  |  |  | 81 |
Total share-based compensation expense before taxes |  |  | 231 |  |  |  | 195 |  |  |  | 129 |
Related deferred income tax benefits |  |  | — |  |  |  | — |  |  |  | — |
Share-based compensation expense |  | $ | 231 |  |  | $ | 195 |  |  | $ | 129 |

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- Definition The entire disclosure for shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, if any, including other comprehensive income (as applicable). Including, but not limited to: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms, and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables, effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 04 -Article 3 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21488-112644 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 02 -Paragraph 29, 30, 31 -Article 5 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 4 -Section E Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Glossary Preferred Stock -URI http://asc.fasb.org/extlink&oid=6521494 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 11 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21564-112644 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section S99 -Paragraph 4 -Subparagraph (SAB TOPIC 4.C) -URI http://asc.fasb.org/extlink&oid=6959260&loc=d3e187143-122770 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21484-112644 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21506-112644 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6405834&loc=d3e23285-112656 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Research Bulletin (ARB) -Number 43 -Section B -Paragraph 7, 11A -Chapter 1 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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