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Equity
 9 Months Ended
Sep. 30, 2016
Equity  
Equity

NOTE 10—EQUITY

 

(a) Acorn Stock Options

 

A summary of stock option activity for the nine months ended September 30, 2016 is as follows:

 

   

 

 

Number

of Options

(in shares)

    

Weighted

Average

Exercise

Price Per

Share

     Weighted Average Remaining Contractual Life       Aggregate Intrinsic Value  
Outstanding at December 31, 2015     2,364,918     $ 3.51                  
Granted     65,000     $ 0.15                  
Exercised     —       —                  
Forfeited or expired     (145,503 )   $ 4.18                  
Outstanding at September 30, 2016     2,284,415     $ 3.37       4.6 years     $ 3  
Exercisable at September 30, 2016     2,165,663     $ 3.49       4.6 years     $ 2  

 

In connection with the January 28, 2016 resignation of the Company’s then President and CEO (John A. Moore) (see Note 9), all of Mr. Moore’s unvested options at that time became fully vested.

 

The fair value of the options granted ($0.11 per option during the nine months ended September 30, 2016) was estimated on the grant dates using the Black-Scholes option-pricing model with the following weighted average assumptions:

 

Risk-free interest rate     1.5 %
Expected term of options     6.5 years  
Expected annual volatility     80 %
Expected dividend yield     — % 

 

The weighted average number of options and warrants that were excluded from the computation of diluted net income per share, as they had an antidilutive effect, was approximately 4,936,000 and 5,012,000 for the nine and three month periods ending September 30, 2016, respectively, and 5,003,000 and 5,035,000 for the nine and three month periods ending September 30, 2015, respectively.

 

(b) Stock-based Compensation Expense

 

Stock-based compensation expense included in Selling, general and administrative expenses in the Company’s Condensed Consolidated Statements of Operations for the nine month periods ended September 30, 2015 and 2016 was $523 and $243, respectively, and was $146 and $9 for the three month periods ended September 30, 2015 and 2016, respectively. In addition, $6 was recorded in the Company’s USSI subsidiary (included in Discontinued Operations) for the nine month period ended September 30, 2015 and $0 for the three month period ended September 30, 2015. See Note 4(b). The remaining unrecognized stock-based compensation expense at September 30, 2016 is de minimis.

 

(c) Warrants

 

The Company previously issued warrants at exercise prices equal to or greater than market value of the Company’s common stock at the date of issuance. A summary of warrant activity follows:

 

   

Number

of Warrants

(in shares)

    

Weighted

Average

Exercise Price

Per Share

    

Weighted

Average Remaining Contractual

Life

  
Outstanding at December 31, 2015     2,619,423     $ 1.48          
Granted     35,000       0.13          
Exercised     —       —          
Forfeited or expired     —       —          
Outstanding at September 30, 2016     2,654,423     $ 1.46       3.4 years  

  

The fair value of the warrants granted ($0.08 per warrant during the nine months ended September 30, 2016) was estimated on the grant dates using the Black-Scholes option-pricing model with the following weighted average assumptions:

 

Risk-free interest rate     1.79 %
Expected term of warrants     7.0 years  
Expected annual volatility     78 %
Expected dividend yield     — % 

 

(d) Shares Issued

 

(1)   Leap Tide Capital Partners III

 

On August 13, 2015, the Company executed a Loan and Security Agreement with Leap Tide Capital Partners III, LLC (“Leap Tide”), pursuant to which the Company borrowed $2,000 from Leap Tide (the “LT Loan”). Jan H. Loeb, the Company’s new President and CEO (see Note 9(b)) is the Manager of Leap Tide. Principal and accrued interest was due and payable on August 13, 2016. Interest accrued and was payable quarterly at a rate of 10% per annum. On April 29, 2016, following the receipt of the net proceeds from the DSIT Transaction, the Company repaid in full the $2,000 of principal and all accrued interest in full satisfaction of the cash due to Leap Tide under the LT Loan.

 

In addition to the interest payable in cash described above, Leap Tide received 850,000 shares of the Company’s common stock (the “Initial Shares”) at the closing and was entitled to vested rights to receive 179,167 additional shares of the Company’s common stock (each vested right to receive one share, a “Vested Share Right”) per month for each full month that the full principal amount of the LT Loan was outstanding. The number of Vested Share Rights that accrued in a given month was prorated to the extent less than the full principal amount was outstanding and/or for any partial month in which no principal amount was outstanding. Through April 29, 2016, the date of repayment, Leap Tide earned 1,531,396 Vested Share Rights.

 

Under the terms of the LT Loan, the Company had the right on or prior to 30 days after the repayment of the LT Loan (the “Cash Settlement Period”) to repurchase any or all Initial Shares and settle any or all Vested Share Rights accrued under the LT Loan for cash in lieu of stock. The cash repurchase/settlement price would have been $0.30 for each Initial Share so repurchased and each Vested Share Right so settled. The Company did not repurchase any of the Initial Shares or settle any of the accrued Vested Share Rights for cash and all 1,531,396 Vested Share Rights were converted into 1,531,396 shares of Common Stock of the Company after the expiration of the Cash Settlement Period.

 

(2)  Conversion of Director Loan

 

See Note 8.