Equity (Deficit)

9 Months Ended

Sep. 30, 2012

Equity (Deficit)

Equity (Deficit)

15.  Equity (Deficit)

Registered offering

On September 19, 2012, the Company completed a registered offering (the “Offering”) of 5,497,504 shares (the “Shares”) of the Company’s common stock, par value $0.01 per share, and warrants (the “Warrants”) to purchase 2,748,752 shares of the Company’s common stock. The Shares and Warrants were sold in units (“Units”) at a price of $5.75 per Unit, with each Unit consisting of one Share of the Company’s common stock and a Warrant to purchase 0.50 of a share of the Company’s common stock. The Warrants become exercisable on March 20, 2013, at an exercise price of $8.42 per share and will expire on September 19, 2017, five years from the date of issuance. The Shares and the Warrants are immediately separable and were issued separately. The underwriter purchased the Units at a price of $5.4625 per Unit, which was net of the underwriting discount of 5 percent. The Company received net proceeds from the Offering of approximately $29.4 million after the underwriter discount of approximately $1.6 million and other costs of approximately $0.6 million.

Private placement

On September 19, 2012 the Company also completed a private placement (the “Private Placement”) with The Sentient Group (“Sentient”), the Company’s largest stockholder, pursuant to which Sentient purchased, pursuant to Regulation S under the U.S. Securities Act of 1933, a total of 1,365,794 Units, with each Unit consisting of one share of the Company’s common stock and a Warrant to purchase 0.50 of a share of the Company’s common stock. The Warrants become exercisable on March 20, 2013, at an exercise price of $8.42 per share and will expire on September 19, 2017, five years from the date of issuance. Each Unit was priced at $5.4625, the same discounted price paid by the underwriter in the Offering. The Company received net proceeds from the Private Placement of approximately $7.5 million after the discount of approximately $0.4 million. Following the completion of the Private Placement and the Offering, Sentient continues to hold approximately 19.9% of the Company’s outstanding common stock (excluding restricted common stock held by the Company’s employees).

Equity Incentive Plans

In April 2009, the Company adopted the 2009 Equity Incentive Plan (the “Equity Plan”) pursuant to which awards of the Company’s common stock may be made to officers, directors, employees, consultants and agents of the Company and its subsidiaries.  The Company recognizes stock-based compensation costs using a graded vesting attribution method whereby costs are recognized over the requisite service period for each separately vesting portion of the award.

The following table summarizes the status of the Company’s restricted stock grants issued under the Equity Plan at September 30, 2012 and changes during the nine months then ended:

Restricted Stock Grants	Number of Shares		Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2011	223,000		$	11.54
Granted during the period	30,000		8.23
Restrictions lifted during the period	(90,667	)	11.67
Forfeited during the period	(5,000	)	6.19
Outstanding at September 30, 2012	157,333		$	11.00

The restricted stock granted during the period was granted to a new officer and an employee hired during the period. One third of the restricted stock granted vests on each of the first, second and third anniversaries of the grant dates, provided the officer or employee continues to serve the Company at that time. Restrictions were lifted during the period on the first anniversary of grants made to certain officers and employees and to a Company officer as a result of his retirement.

For the nine months ended September 30, 2012 the Company recognized approximately $0.7 million of compensation expense related to the restricted stock grants. The Company expects to recognize additional compensation expense related to these awards of approximately $0.6 million over the next 28 months.

The following table summarizes the status of the Company’s stock option grants issued under the Equity Plan at September 30, 2012 and changes during the nine months then ended:

Equity Plan Options	Number of Shares	Weighted Average Exercise Price Per Share
Outstanding at December 31, 2011	136,810	$	8.01
Granted during period	—	—
Forfeited or expired during period	—	—
Exercised during period	—	—
Outstanding at September 30, 2012	136,810	8.01
Exercisable at end of period	136,810	8.01
Granted and vested	136,810	8.01

As a result of the ECU Transaction (see Note 20) all of the stock options outstanding on the September 2, 2011 closing date vested on that date, and the awards were fully expensed at that time. Consequently no compensation expense related to stock option grants was recorded during the nine month period ended September 30, 2012.

Also, pursuant to the Equity Plan, the Company’s board of directors adopted the Non-Employee Director’s Deferred Compensation and Equity Award Plan (the “Deferred Compensation Plan”). Pursuant to the Deferred Compensation Plan the non-employee directors receive a portion of their compensation in the form of Restricted Stock Units (“RSUs”) issued under the Equity Plan. The RSUs vest on the first anniversary of the grant and each vested RSU entitles the director to receive one unrestricted share of common stock upon the termination of the director’s board service.

The following table summarizes the status of the RSU grants issued under the Deferred Compensation Plan at September 30, 2012 and changes during the nine months then ended:

Restricted Stock Units	Number of Underlying Shares	Weighted Average Grant Date Fair Value Per Share
Outstanding at December 31, 2011	63,781	$	11.57
Granted during the period	80,214	3.74
Restrictions lifted during the period	—	—
Forfeited during the period	—	—
Outstanding at September 30, 2012	143,995	$	7.21

The RSUs granted during the period are all related to a portion of the annual compensation paid to the directors.

For the nine months ended September 30, 2012 the Company recognized approximately $0.2 million of compensation expense related to the RSU grants. The Company expects to recognize additional compensation expense related to these awards of approximately $0.2 million over the next 8 months.