Delaware
|
13-3899021
|
|
(State of incorporation)
|
(IRS Employer
|
|
|
Identification No.)
|
Large accelerated filer
|
o
|
|
Accelerated filer
|
o
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Non-accelerated filer
|
o
|
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Smaller reporting company
|
x |
PART I.
|
|
FINANCIAL INFORMATION
|
|
PAGE
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Item 1.
|
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Financial Statements
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2 | |
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3 | |
4 | ||||
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5 | |
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7 | |
Item 2.
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22 | |
Item 3.
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31 | |
Item 4.
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31 | |
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PART II.
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|
OTHER INFORMATION
|
|
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Item 1.
|
|
|
32 | |
Item 1A.
|
|
|
32 | |
Item 2.
|
|
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32 | |
Item 3.
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32 | |
Item 4.
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32 | |
Item 5.
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32 | |
Item 6.
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32 | |
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Signatures
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|
33 |
· | the success of our new products depends on a number of factors including market acceptance and our ability to manage the risks associated with product introduction; |
· | Local, regional, and national and international economic conditions and events, and the impact they may have on us and our customers; |
· | our revenue could be adversely impacted if any of our significant customers reduces its order levels or fails to order during a reporting period; and |
· | other factors, including, but not limited to, those set forth under Item 1A, “Risk Factors” in our Annual Report, as amended, on Form 10-K/A for the year ended December 31, 2012, which was filed with the SEC on April 12, 2013, and in other documents we have filed with the SEC. |
Assets
|
(Unaudited)
June 30, 2013 |
December 31, 2012
|
||||||
Current Assets:
|
||||||||
Cash
|
$
|
4,761,000
|
$
|
3,960,600
|
||||
Accounts receivable, net
|
752,900
|
865,900
|
||||||
Prepaid expenses
|
104,000
|
150,200
|
||||||
Total Current Assets
|
5,617,900
|
4,976,700
|
||||||
|
||||||||
Capitalized software development costs, net
|
604,500
|
223,100
|
||||||
Property and equipment, net
|
354,500
|
358,900
|
||||||
Other assets
|
32,400
|
46,900
|
||||||
Total Assets
|
$
|
6,609,300
|
$
|
5,605,600
|
||||
|
||||||||
Liabilities and Stockholders’ Equity (Deficit)
|
||||||||
Current Liabilities:
|
||||||||
Accounts payable and accrued expenses
|
$
|
866,400
|
$
|
739,100
|
||||
Deferred revenue
|
2,759,800
|
2,921,600
|
||||||
Severance liability
|
206,400
|
209,500
|
||||||
Deferred rent
|
28,800
|
26,700
|
||||||
Total Current Liabilities
|
3,861,400
|
3,896,900
|
||||||
|
||||||||
Warrants liability
|
1,317,500
|
7,390,100
|
||||||
Deferred revenue
|
517,800
|
570,400
|
||||||
Severance liability
|
—
|
52,900
|
||||||
Deferred rent
|
112,400
|
127,500
|
||||||
Total Liabilities
|
5,809,100
|
12,037,800
|
||||||
|
||||||||
Commitments and contingencies
|
||||||||
|
||||||||
Stockholders' Equity (Deficit):
|
||||||||
Preferred stock, $0.01 par value, 5,000,000 shares authorized, no shares issued and outstanding
|
—
|
—
|
||||||
Common stock, $0.0001 par value, 195,000,000 shares authorized, 94,062,517 and 82,616,750 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively
|
9,400
|
8,300
|
||||||
Additional paid-in capital
|
70,254,500
|
62,425,400
|
||||||
Accumulated deficit
|
(69,463,700
|
)
|
(68,865,900
|
)
|
||||
Total Stockholders' Equity (Deficit)
|
800,200
|
(6,432,200
|
)
|
|||||
Total Liabilities and Stockholders' Equity (Deficit)
|
$
|
6,609,300
|
$
|
5,605,600
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
(Unaudited)
|
||||||||||||
Revenue
|
$
|
1,393,800
|
$
|
1,570,900
|
$
|
3,010,800
|
$
|
3,181,500
|
||||||||
Costs of revenue
|
137,300
|
132,400
|
249,100
|
270,900
|
||||||||||||
Gross profit
|
1,256,500
|
1,438,500
|
2,761,700
|
2,910,600
|
||||||||||||
|
||||||||||||||||
Operating expenses:
|
||||||||||||||||
Selling and marketing
|
561,200
|
604,800
|
1,060,200
|
1,179,300
|
||||||||||||
General and administrative
|
780,700
|
1,440,800
|
1,526,700
|
2,484,800
|
||||||||||||
Research and development
|
1,375,600
|
964,800
|
2,088,800
|
2,017,900
|
||||||||||||
Total operating expenses
|
2,717,500
|
3,010,400
|
4,675,700
|
5,682,000
|
||||||||||||
|
||||||||||||||||
Loss from operations
|
(1,461,000
|
)
|
(1,571,900
|
)
|
(1,914,000
|
)
|
(2,771,400
|
)
|
||||||||
|
||||||||||||||||
Other income - change in fair value of warrants liability
|
4,767,900
|
666,500
|
1,319,200
|
607,900
|
||||||||||||
Other income (expense), net
|
(200
|
)
|
1,100
|
(300
|
)
|
3,500
|
||||||||||
Income (loss) from continuing operations before provision for income tax
|
3,306,700
|
(904,300
|
)
|
(595,100
|
)
|
(2,160,000
|
)
|
|||||||||
Provision for income tax
|
1,600
|
1,000
|
2,700
|
2,000
|
||||||||||||
Income (loss) from continuing operations
|
$
|
3,305,100
|
$
|
(905,300
|
)
|
$
|
(597,800
|
)
|
$
|
(2,162,000
|
)
|
|||||
Loss from discontinued operations
|
—
|
(90,900
|
)
|
—
|
(121,300
|
)
|
||||||||||
Net income (loss)
|
3,305,100
|
(996,200
|
)
|
(597,800
|
)
|
(2,283,300
|
)
|
|||||||||
Earnings (loss) per share:
|
||||||||||||||||
Continuing operations – basic
|
$
|
0.04
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
|||||
Discontinued operations – basic
|
$
|
- |
$
|
(0.00
|
)
|
$
|
- |
|
$
|
(0.00
|
) | |||||
Basic earnings (loss) per share
|
$
|
0.04 |
$
|
(0.01 | ) |
$
|
(0.01 | ) |
$
|
(0.03 | ) | |||||
Continuing operations – diluted
|
$
|
0.03
|
$
|
(0.01
|
)
|
$
|
(0.01
|
)
|
$
|
(0.03
|
)
|
|||||
Discontinued operations – diluted
|
$
|
—
|
$
|
(0.00
|
)
|
$
|
—
|
$
|
(0.00
|
)
|
||||||
Diluted earnings (loss) per share – diluted
|
$
|
0.03 |
$
|
(0.01
|
)
|
$
|
(0.01
|
) |
$
|
(0.03
|
)
|
|||||
Average weighted common shares outstanding – basic
|
85,823,258
|
81,961,071
|
84,488,583
|
81,937,732
|
||||||||||||
Average weighted common shares outstanding – diluted |
101,323,745
|
81,961,071
|
84,488,583
|
81,937,732
|
|
Six Months Ended June 30,
|
|||||||
|
2013
|
2012
|
||||||
(Unaudited) | (Unaudited) | |||||||
Preferred stock – shares outstanding
|
||||||||
Beginning balance
|
—
|
—
|
||||||
Ending balance
|
—
|
—
|
||||||
|
—
|
—
|
||||||
Common stock – shares outstanding
|
||||||||
Beginning balance
|
82,616,750
|
81,886,926
|
||||||
Employee stock option issuances
|
751,378
|
130,813
|
||||||
Exercise of warrants
|
9,917,500
|
—
|
||||||
Vesting of restricted stock awards
|
776,889
|
—
|
||||||
Ending balance
|
94,062,517
|
82,017,739
|
||||||
|
||||||||
Common stock - amount
|
||||||||
Beginning balance
|
$
|
8,300
|
$
|
8,200
|
||||
Exercise of employee stock options
|
100
|
—
|
||||||
Exercise of warrants
|
800
|
—
|
||||||
Vesting of restricted stock awards
|
200
|
—
|
||||||
Ending balance
|
$
|
9,400
|
$
|
8,200
|
||||
|
||||||||
Additional paid-in capital
|
||||||||
Beginning balance
|
$
|
62,425,400
|
$
|
61,398,600
|
||||
Stock-based compensation expense
|
427,200
|
328,100
|
||||||
Stock-based compensation expense – severance agreement
|
—
|
237,400
|
||||||
Proceeds from exercise of employee stock options
|
112,400
|
8,100
|
||||||
Proceeds from exercise of warrants
|
2,550,200
|
—
|
||||||
Issuance of new warrants, per exercise agreement
|
514,800
|
—
|
||||||
New warrants recorded as cost of exercise agreement
|
(514,800
|
) |
—
|
|||||
Reclassification of warrants liability to equity from exercise of warrants
|
348,300
|
—
|
||||||
Reclassification of warrants liability to equity from amendment of warrants
|
4,391,000
|
—
|
||||||
Ending balance
|
$
|
70,254,500
|
$
|
61,972,200
|
||||
|
||||||||
Accumulated deficit
|
||||||||
Beginning balance
|
$
|
(68,865,900
|
)
|
$
|
(60,689,200
|
)
|
||
Net loss
|
(597,800
|
)
|
(2,283,300
|
)
|
||||
Ending balance
|
$
|
(69,463,700
|
)
|
$
|
(62,972,500
|
)
|
||
Total Stockholders’ Equity (Deficit)
|
$
|
800,200
|
$
|
(992,100
|
)
|
|
Six Months Ended June 30,
|
|||||||
|
2013
|
2012
|
||||||
Cash Flows Provided By (Used In) Operating Activities:
|
(Unaudited)
|
(Unaudited)
|
||||||
Net Loss
|
$
|
(597,800
|
)
|
$
|
(2,283,300
|
)
|
||
Loss from discontinued operations
|
—
|
121,300
|
||||||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Depreciation and amortization
|
135,500
|
124,500
|
||||||
Stock-based compensation expense
|
390,500
|
565,500
|
||||||
Change in fair value of derivative instruments - warrants
|
(1,319,200
|
)
|
(607,900
|
)
|
||||
Change in fair value of warrants liability for consulting services
|
(14,100
|
)
|
14,500
|
|||||
Revenue deferred to future periods
|
1,839,400
|
2,789,800
|
||||||
Recognition of deferred revenue
|
(2,053,800
|
)
|
(2,340,100
|
)
|
||||
Changes in severance liability
|
(56,000
|
)
|
408,500
|
|||||
Changes in deferred rent
|
(13,000
|
)
|
26,400
|
|||||
Changes to allowance for doubtful accounts
|
(9,300
|
)
|
12,900
|
|||||
Loss on disposal of fixed assets
|
—
|
600
|
||||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
122,300
|
(123,100
|
)
|
|||||
Prepaid expenses
|
46,200
|
5,900
|
||||||
Accounts payable and accrued expenses
|
127,300
|
(140,000
|
)
|
|||||
Other long term assets
|
14,500
|
10,200
|
||||||
Net Cash Used In Continuing Operations
|
(1,387,500
|
)
|
(1,414,300
|
)
|
||||
Net Cash Used in Discontinued Operations
|
—
|
(37,000
|
)
|
|||||
Net Cash Used in Operating Activities
|
(1,387,500
|
)
|
(1,451,300
|
)
|
||||
|
||||||||
Cash Flows Used In Investing Activities:
|
||||||||
Capital expenditures
|
(48,000
|
)
|
(238,700
|
)
|
||||
Capitalized software development costs
|
(427,800
|
)
|
—
|
|||||
Net Cash Used In Investing Activities - Continuing Operations
|
(475,800
|
)
|
(238,700
|
)
|
||||
Net Cash Used In Investing Activities - Discontinued Operations
|
—
|
—
|
||||||
Net Cash Used In Investing Activities
|
(475,800
|
)
|
(238,700
|
)
|
||||
|
Condensed Consolidated Statements of Cash Flows (Continued)
|
|
Six Months Ended June 30,
|
|||||||
|
2013
|
2012
|
||||||
|
(Unaudited)
|
(Unaudited)
|
||||||
Cash Flows Provided By Financing Activities:
|
||||||||
Proceeds from exercise of warrants
|
2,551,300
|
—
|
||||||
Proceeds from exercise of employee stock options | 112,400 |
8,100
|
||||||
Net Cash Provided By Financing Activities from Continuing Operations
|
2,663,700
|
8,100
|
||||||
Net Cash Provided By Financing Activities from Discontinued Operations
|
—
|
—
|
||||||
Net Cash Provided By Financing Activities
|
2,663,700
|
8,100
|
||||||
|
||||||||
Net Increase (Decrease) in Cash
|
800,400
|
(1,681,900
|
)
|
|||||
Cash - Beginning of Period
|
3,960,600
|
7,237,500
|
||||||
Cash - End of Period
|
$
|
4,761,000
|
$
|
5,555,600
|
· |
Persuasive evidence of an arrangement exists, (i.e., when we sign a non-cancellable license agreement wherein the customer acknowledges an unconditional obligation to pay, or upon receipt of the customer’s purchase order), and
|
· | Delivery has occurred or services have been rendered and there are no uncertainties surrounding product acceptance (i.e., when title and risk of loss have been transferred to the customer, which occurs when the media containing the licensed program(s) is provided to a common carrier or, in the case of electronic delivery, when the customer is given access to the licensed program(s)), and |
· |
The price to the customer is fixed or determinable, as typically evidenced in a signed non-cancellable contract, or a customer’s purchase order, and
|
· |
Collectability is probable. If collectability is not considered probable, revenue is recognized when the fee is collected.
|
· | Collectability is probable. If collectability is not considered probable, revenue is recognized when the fee is collected. |
|
Beginning Balance
|
Charge Offs
|
Recoveries
|
Provision
|
Ending Balance
|
|||||||||||||||
Three Months Ended June 30,
|
||||||||||||||||||||
2013
|
$
|
15,600
|
$
|
—
|
$
|
—
|
$
|
9,000
|
$
|
24,600
|
||||||||||
2012
|
25,200
|
—
|
—
|
12,700
|
37,900
|
|||||||||||||||
Six Months Ended June 30,
|
||||||||||||||||||||
2013
|
$
|
33,900
|
$
|
—
|
$
|
—
|
$
|
(9,300
|
)
|
$
|
24,600
|
|||||||||
2012
|
25,000
|
—
|
—
|
12,900
|
37,900
|
|
Three Months Ended June 30, 2013
|
Three Months Ended June 30, 2012
|
||||||||||||||
Customer
|
Sales |
Accounts
Receivable
|
Sales |
Accounts
Receivable
|
||||||||||||
GE
|
8.2
|
%
|
14.4
|
%
|
6.7
|
%
|
14.0
|
%
|
||||||||
Ericsson
|
7.7
|
%
|
36.7
|
%
|
7.2
|
%
|
15.1
|
%
|
||||||||
GAD
|
7.3
|
%
|
0.0
|
%
|
26.0
|
%
|
1.0
|
%
|
||||||||
Intellisis
|
6.5
|
%
|
0.0
|
%
|
0.0
|
%
|
0.0
|
%
|
||||||||
Total
|
29.7
|
%
|
51.1
|
%
|
39.9
|
%
|
30.1
|
%
|
|
Six Months Ended June 30, 2013
|
Six Months Ended June 30, 2012
|
||||||||||||||
Customer
|
Sales |
Accounts
Receivable
|
Sales |
Accounts
Receivable
|
||||||||||||
Ericsson
|
10.2
|
%
|
36.7
|
%
|
7.0
|
%
|
15.1
|
%
|
||||||||
Alcatel-Lucent
|
7.1
|
%
|
8.3
|
%
|
3.8
|
%
|
8.8
|
%
|
||||||||
GE
|
5.3
|
%
|
14.4
|
%
|
7.3
|
%
|
14.0
|
%
|
||||||||
IDS
|
5.0
|
%
|
0.0
|
%
|
4.0
|
%
|
0.0
|
%
|
||||||||
Total
|
27.6
|
%
|
59.4
|
%
|
21.1
|
%
|
37.9
|
%
|
· | Level 1: Defined as observable inputs, such as quoted (unadjusted) prices in active markets for identical assets or liabilities. |
· | Level 2: Defined as observable inputs other than quoted prices included in Level 1. This includes quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
· | Level 3: Defined as unobservable inputs to the valuation methodology that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, as well as significant management judgment or estimation. |
|
June 30, 2013
|
December 31, 2012 | ||||||
Equipment
|
$
|
1,219,900
|
$
|
1,171,900
|
||||
Furniture
|
380,200
|
380,200
|
||||||
Leasehold improvements
|
147,500
|
147,500
|
||||||
|
1,747,600
|
1,699,600
|
||||||
Less: accumulated depreciation and amortization
|
1,393,100
|
1,340,700
|
||||||
|
$
|
354,500
|
$
|
358,900
|
|
2011 Transaction
|
ipCapital
|
||||||||||||||
|
June 30, 2013
|
December 31, 2012
|
June 30, 2013
|
December 31, 2012
|
||||||||||||
Estimated volatility
|
136
|
%
|
159
|
%
|
135
|
%
|
163
|
%
|
||||||||
Annualized forfeiture rate
|
—
|
—
|
—
|
—
|
||||||||||||
Expected option term (years)
|
3.17
|
3.67
|
3.29
|
3.79
|
||||||||||||
Estimated exercise factor
|
4
|
10
|
4
|
10
|
||||||||||||
Risk-free interest rate
|
0.72
|
%
|
0.45
|
%
|
0.77
|
%
|
0.65
|
%
|
||||||||
Dividends
|
—
|
—
|
—
|
—
|
Warrants liability – December 31, 2012 fair value
|
$
|
7,390,100
|
||
Change in fair value of warrant liability recorded in other expenses
|
(1,319,200
|
)
|
||
Change in fair value of warrant liability recorded in general and administrative expense
|
(14,100
|
)
|
||
Reclassification of warrants liability to equity from exercise of warrants (1)
|
(348,300
|
)
|
||
Reclassification of warrants liability to equity from amendment to warrants (1)
|
(4,391,000
|
)
|
||
Warrants liability – June 30, 2013 fair value
|
$
|
1,317,500
|
(1) |
During the six-month period ended June 30, 2013, in addition to the warrant amendment, we also reduced our warrants liability by $348,300 as a result of the exercise of 917,500 warrants during such period, prior to the amendment to the warrants. The aggregate reduction in the liability, combining the warrant amendment and this exercise, was $4,739,300. See Note 13.
|
|
For the Three-Month Period Ended June 30, 2013
|
|||||||||||||||
|
Beginning Outstanding
|
Issued
|
Exercised
|
Ending Outstanding
|
||||||||||||
2011 Transaction
|
22,612,500
|
—
|
9,455,000
|
13,157,500
|
||||||||||||
ipCapital
|
400,000
|
—
|
—
|
400,000
|
||||||||||||
Exercise Agreement
|
—
|
4,500,000
|
—
|
4,500,000
|
||||||||||||
Total
|
23,012,500
|
4,500,000
|
9,455,000
|
18,057,500
|
|
For the Six-Month Period Ended June 30, 2013
|
|||||||||||||||
|
Beginning Outstanding
|
Issued
|
Exercised
|
Ending Outstanding
|
||||||||||||
2011 Transaction
|
23,075,000
|
—
|
9,917,500
|
13,157,500
|
||||||||||||
ipCapital
|
400,000
|
—
|
—
|
400,000
|
||||||||||||
Exercise Agreement
|
—
|
4,500,000
|
—
|
4,500,000
|
||||||||||||
Total
|
23,475,000
|
4,500,000
|
9,917,500
|
18,057,500
|
For the Three and Six-Month Period Ended June 30, 2012
|
||||||||||||||||
|
Beginning Outstanding
|
Issued
|
Exercised
|
Ending Outstanding
|
||||||||||||
2011 Transaction
|
23,075,000
|
—
|
—
|
23,075,000
|
||||||||||||
ipCapital
|
400,000
|
—
|
—
|
400,000
|
||||||||||||
Total
|
23,475,000
|
—
|
—
|
23,475,000
|
· | On the Release Effective Date, Mr. Dilworth’s outstanding unvested options became fully vested and exercisable, and his outstanding vested options were modified to extend the exercise period. All options will remain exercisable until the earlier of (i) the expiration dates of each of such options or (ii) the date that is 30 months after the Release Effective Date. The number of shares of common stock issuable upon exercise of such outstanding options is 2,000,000. We recognized $172,700 of non-cash stock-based compensation expense during 2012, as a result of the modification of Mr. Dilworth’s outstanding stock options. No expense was recognized during the three and six-month periods ended June 30, 2013 as a result of the modifications. |
· | On the Release Effective Date, Mr. Dilworth was granted an option to purchase 500,000 shares of common stock at an exercise price of $0.20 per share. Such option has a term of 30 months from the date of grant and will vest and become exercisable at a rate of 62,500 shares per quarter commencing on July 1, 2012. We recognized $64,700 of non-cash stock-based compensation expense during 2012 as a result of the issuance of this stock option to Mr. Dilworth. No expense was recognized during the three and six-month periods ended June 30, 2013 as a result of the issuance. |
· | From May 2012 through April 2013, Mr. Dilworth will be paid $27,300 per month. From May 2013 through April 2014, Mr. Dilworth will be paid $13,600 per month. During the three-month period ended June 30, 2012, we recognized $433,700 compensation expense related to Mr. Dilworth’s separation agreement, which we recorded as a liability. Such amount represented the present value of the future salary and medical insurance (discussed below) continuation payments due Mr. Dilworth under the terms of the separation agreement. During the three-month and six month periods ended June 30, 2013, we made salary continuation payments aggregating $54,500 and $136,300, respectively, to Mr. Dilworth. As of June 30, 2013, the aggregate present value of the remaining future salary and medical insurance coverage continuation payments was $130,700, which was reported as a current liability. All interest expense associated with the salary and medical insurance continuation payments made are charged to general and administrative expenses as incurred. During the three and six-month periods ended June 30, 2013, we incurred interest charges of $5,700 and $13,800 respectively. |
· | From May 2012 through October 2013, we will pay the premium costs to continue medical coverage for Mr. Dilworth and his spouse under the Employment Retirement Income Security Act of 1974. Such premiums aggregated $5,800 for May 2012 and June 2012, and will approximate $1,300 per month thereafter. During the three and six-month periods ended June 30, 2013 we made medical insurance coverage continuation payments of $3,900 and $7,900 respectively. During the three and six-month periods ended June 30, 2013, we incurred interest charges of $300 and $700, respectively. |
· | We paid Mr. Dilworth $15,000 as reimbursement for a portion of his legal fees in connection with negotiation of the separation agreement and the release. |
|
Estimated Volatility
|
Annualized Forfeiture Rate
|
Expected Option Term (Years)
|
Estimated Exercise Factor
|
Risk-Free Interest Rate
|
Dividends
|
||||||||||||||||||
Modified options
|
70% - 157
|
%
|
0.00
|
%
|
0.25 – 2.5
|
10
|
0.08% - 0.29
|
%
|
—
|
|||||||||||||||
New option
|
157
|
%
|
0.00
|
%
|
2.5
|
10
|
0.29
|
%
|
—
|
|
Compensation
|
Medical Coverage
|
Total
|
|||||||||
Balance at December 31, 2012
|
$
|
250,100
|
$
|
12,300
|
$
|
262,400
|
||||||
Separation agreement entered into in 2013 | 60,000 | 15,700 | 75,700 | |||||||||
Accrued interest
|
13,800
|
700
|
14,500
|
|||||||||
Payments
|
(136,300
|
)
|
(9,900
|
)
|
(146,200
|
)
|
||||||
Balance at June 30, 2013
|
$
|
187,600
|
$
|
18,800
|
$
|
206,400
|
Component
|
Current Liabilities
|
Long-Term Liabilities
|
Total
|
|||||||||
Deferred rent expense
|
$
|
4,800
|
$
|
40,400
|
$
|
45,200
|
||||||
Deferred rent benefit
|
24,000
|
72,000
|
96,000
|
|||||||||
|
$
|
28,800
|
$
|
112,400
|
$
|
141,200
|
Component
|
Current Liabilities
|
Long-Term Liabilities
|
Total
|
|||||||||
Deferred rent expense
|
$
|
2,700
|
$
|
43,500
|
$
|
46,200
|
||||||
Deferred rent benefit
|
24,000
|
84,000
|
108,000
|
|||||||||
|
$
|
26,700
|
$
|
127,500
|
$
|
154,200
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
Statement of Operations Classification
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
Costs of revenue
|
$
|
1,700
|
$
|
4,100
|
$
|
3,800
|
$
|
10,400
|
||||||||
Selling and marketing expense
|
38,400
|
25,200
|
78,900
|
51,600
|
||||||||||||
General and administrative expense
|
84,600
|
260,600
|
179,500
|
333,700
|
||||||||||||
Research and development expense
|
80,000
|
86,200
|
128,300
|
169,800
|
||||||||||||
|
$
|
204,700
|
$
|
376,100
|
$
|
390,500
|
$
|
565,500
|
|
Number of Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Terms (Years)
|
Aggregate Intrinsic Value
|
||||||
Outstanding – March 31, 2013
|
13,742,500
|
$
|
0.20
|
|
|
|||||
Granted
|
—
|
—
|
|
|
||||||
Exercised
|
(319,878
|
)
|
0.15
|
|
|
|||||
Forfeited or expired
|
(154,406
|
)
|
0.21
|
|
|
|||||
Cancellation of unearned performance option
|
(133,818
|
)
|
0.19
|
|
|
|||||
Outstanding – June 30, 2013
|
13,134,398
|
$
|
0.20
|
6.67
|
$2,082,500
|
|
Number of Shares
|
Weighted Average Exercise Price
|
Weighted Average Remaining Contractual Terms (Years)
|
Aggregate Intrinsic Value
|
||||||
Outstanding – December 31, 2012
|
14,174,000
|
$
|
0.20
|
|
|
|||||
Granted
|
—
|
—
|
|
|
||||||
Exercised
|
(751,378
|
)
|
0.15
|
|
|
|||||
Forfeited or expired
|
(154,406
|
)
|
0.21 |
|
|
|||||
Cancellation of unearned performance option
|
(133,818
|
)
|
0.23 |
|
|
|||||
Outstanding – June 30, 2013
|
13,134,398
|
$
|
0.19
|
6.67 |
$2,082,500
|
|
Number of Shares
|
Weighted Average Grant Date Fair Value
|
Weighted Average Remaining Recognition Period (Years)
|
Unrecognized Compensation Cost Remaining
|
||||||
Unreleased – March 31, 2013
|
4,066,092
|
$
|
0.21
|
|
|
|||||
Awarded
|
145,000
|
0.40
|
|
|
||||||
Released
|
(414,858
|
)
|
0.21
|
|
|
|||||
Forfeited
|
—
|
—
|
|
|
||||||
Outstanding – June 30, 2013
|
3,796,234
|
$
|
0.22
|
2.17
|
$ 747,200
|
|
Number of Shares
|
Weighted Average Grant Date Fair Value
|
Weighted Average Remaining Recognition Period (Years)
|
Unrecognized Compensation Cost Remaining
|
||||||
Unreleased – December 31, 2012
|
4,043,123
|
$
|
0.18
|
|
|
|||||
Awarded
|
580,000
|
0.43
|
|
|
||||||
Released
|
(776,889
|
)
|
0.20
|
|
|
|||||
Forfeited
|
(50,000
|
)
|
0.36
|
|
|
|||||
Outstanding – June 30, 2013
|
3,796,234
|
$
|
0.22
|
2.17
|
$ 747,200
|
Three Months Ended June 30,
|
2013 Over (Under) 2012
|
|||||||||||||||
Revenue
|
2013
|
2012
|
Dollars
|
Percent
|
||||||||||||
Software Licenses
|
||||||||||||||||
Windows
|
$
|
473,700
|
$
|
637,900
|
$
|
(164,200
|
)
|
-25.7
|
%
|
|||||||
UNIX/Linux
|
183,400
|
226,600
|
(43,200
|
)
|
-19.1
|
%
|
||||||||||
|
657,100
|
864,500
|
(207,400
|
)
|
-24.0
|
%
|
||||||||||
Software Service Fees
|
||||||||||||||||
Windows
|
499,200
|
444,400
|
54,800
|
12.3
|
%
|
|||||||||||
UNIX/Linux
|
232,500
|
234,900
|
(2,400
|
)
|
-1.0
|
%
|
||||||||||
|
731,700
|
679,300
|
52,400
|
7.7
|
%
|
|||||||||||
Other
|
5,000
|
27,100
|
(22,100
|
)
|
-81.5
|
%
|
||||||||||
Total Revenue
|
$
|
1,393,800
|
$
|
1,570,900
|
$
|
(177,100
|
)
|
-11.3
|
%
|
|
||||||||||||||||
|
Six Months Ended June 30,
|
2013 Over (Under) 2012
|
||||||||||||||
Revenue
|
2013
|
2012
|
Dollars
|
Percent
|
||||||||||||
Software Licenses
|
||||||||||||||||
Windows
|
$
|
1,113,800
|
$
|
1,270,500
|
$
|
(156,700
|
)
|
-12.3
|
%
|
|||||||
UNIX/Linux
|
454,200
|
490,100
|
(35,900
|
)
|
-7.3
|
%
|
||||||||||
|
1,568,000
|
1,760,600
|
(192,600
|
)
|
10.9
|
%
|
||||||||||
Software Service Fees
|
||||||||||||||||
Windows
|
960,400
|
869,600
|
90,800
|
10.4
|
%
|
|||||||||||
UNIX/Linux
|
459,800
|
472,300
|
(12,500
|
)
|
-2.6
|
%
|
||||||||||
|
1,420,200
|
1,341,900
|
78,300
|
5.8
|
%
|
|||||||||||
Other
|
22,600
|
79,000
|
(56,400
|
)
|
-71.4
|
%
|
||||||||||
Total Revenue
|
$
|
3,010,800
|
$
|
3,181,500
|
$
|
(170,700
|
)
|
-5.4
|
%
|
|
Three Months Ended June 30,
|
2013 Over (Under) 2012
|
||||||||||||||
|
2013
|
2012
|
Dollars
|
Percent
|
||||||||||||
Software service costs
|
$
|
64,200
|
$
|
62,500
|
$
|
1,700
|
|
2.7
|
%
|
|||||||
Software product costs
|
73,100
|
69,900
|
3,200
|
4.6
|
%
|
|||||||||||
|
$
|
137,300
|
$
|
132,400
|
$
|
4,900
|
3.7
|
%
|
|
Six Months Ended June 30,
|
2013 Over (Under) 2012
|
||||||||||||||
|
2013
|
2012
|
Dollars
|
Percent
|
||||||||||||
Software service costs
|
$
|
127,800
|
$
|
135,500
|
$
|
(7,700
|
)
|
-5.7
|
%
|
|||||||
Software product costs
|
121,300
|
135,400
|
(14,100
|
)
|
-10.4
|
%
|
||||||||||
|
$
|
249,100
|
$
|
270,900
|
$
|
(21,800
|
)
|
-8.0
|
%
|
|
June 30, 2013 | December 31, 2012 | ||||||
Software development costs
|
$
|
1,037,600
|
$
|
573,100
|
||||
Accumulated amortization
|
(433,100
|
)
|
(350,000
|
)
|
||||
|
$
|
604,500
|
$
|
223,100
|
Year
|
Amount
|
|||
Remainder of 2013
|
$
|
70,400
|
||
2014
|
144,200
|
|||
2015
|
148,600
|
|||
2016
|
153,000
|
|||
2017
|
78,400
|
|||
|
$
|
594,600
|
Numerator
|
||||
Net income from continuing operations
|
$
|
3,305,100
|
||
Loss from discontinued operations, net of tax
|
$
|
—
|
||
Denominator
|
||||
Basic earnings per share - weighted-average shares outstanding
|
85,823,258
|
|||
Effect of dilutive stock options
|
8,968,770
|
|||
Effect of dilutive warrants
|
6,531,717
|
|||
Diluted earnings per share - weighted-average shares outstanding
|
101,323,745
|
|||
Earnings (Loss) per share - Continuing Operations
|
||||
Basic earnings per share
|
$
|
0.04
|
||
Diluted earnings per share
|
$
|
0.03
|
||
|
||||
Earnings (Loss) per share - Discontinued Operations
|
||||
Basic earnings per share
|
$
|
—
|
||
Diluted earnings per share
|
$
|
—
|
|
Increase (Decrease)
|
|||||||||||||||
|
2013
|
2012
|
Dollars
|
Percentage
|
||||||||||||
GO-Global
|
$
|
1,393,800
|
$
|
1,570,900
|
$
|
(177,100
|
)
|
-11.3
|
%
|
|||||||
hopTo
|
—
|
—
|
—
|
n/
|
a
|
|||||||||||
Consolidated Total
|
$
|
1,393,800
|
$
|
1,570,900
|
$
|
(177,100
|
)
|
-11.3
|
%
|
|
Increase (Decrease)
|
|||||||||||||||
|
2013
|
2012
|
Dollars
|
Percentage
|
||||||||||||
GO-Global
|
$
|
3,010,800
|
$
|
3,181,500
|
$
|
(170,700
|
)
|
-5.4
|
%
|
|||||||
hopTo
|
—
|
—
|
—
|
n/
|
a
|
|||||||||||
Consolidated Total
|
$
|
3,010,800
|
$
|
3,181,500
|
$
|
(170,700
|
)
|
-5.4
|
%
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
GO-Global
|
$
|
(243,300
|
)
|
$
|
(1,189,500 |
)
|
$
|
(205,300
|
)
|
$
|
(1,989,400
|
)
|
||||
hopTo
|
(1,217,700
|
)
|
(382,400
|
)
|
(1,708,700
|
)
|
(782,000
|
)
|
||||||||
Total
|
$
|
(1,461,000
|
)
|
$
|
(1,571,900 |
)
|
$
|
(1,914,000
|
)
|
$
|
(2,771,400
|
)
|
|
Accumulated
|
|||||||||||
|
Depreciation
|
|||||||||||
|
Cost Basis
|
/Amortization
|
Net
|
|||||||||
GO-Global
|
$
|
1,866,800
|
$
|
(1,742,800
|
)
|
$
|
124,000
|
|||||
hopTo
|
918,400
|
(83,400
|
)
|
835,000
|
||||||||
Total from continuing operations
|
2,785,200
|
(1,826,200
|
)
|
959,000
|
||||||||
Discontinued operations
|
2,839,000
|
(2,839,000
|
)
|
—
|
||||||||
Unallocated
|
32,400
|
—
|
32,400
|
|||||||||
Total
|
$
|
5,656,600
|
$
|
(4,665,200
|
)
|
$
|
991,400
|
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
||||||||||||||
Revenue by Country
|
2013
|
2012
|
2013
|
2012
|
||||||||||||
United States
|
$
|
564,800
|
$
|
556,100
|
$
|
1,208,400
|
$
|
1,313,100
|
||||||||
Germany
|
81,200
|
210,400
|
269,600
|
443,600
|
||||||||||||
Other Countries
|
747,800
|
804,400
|
1,532,800
|
1,424,800
|
||||||||||||
Total
|
$
|
1,393,800
|
$
|
1,570,900
|
$
|
3,010,800
|
$
|
3,181,500
|
· | GO-Global for Windows: Allows access to Windows-based applications from remote locations and a variety of connections, including the Internet and dial-up connections. The Windows applications run on a central computer server along with GO-Global Windows Host software. This allows the applications to be accessed remotely via GO-Global Client software, or a Web browser, over many types of data connections, regardless of the bandwidth or operating system. Web-enabling is achieved without modifying the underlying application’s code or requiring costly add-ons. |
· | GO-Global for UNIX: Allows access to UNIX and Linux-based applications from remote locations and a variety of connections, including the Internet and dial-up connections. The UNIX/Linux applications run on a central computer server along with the GO-Global for UNIX Host software. This allows the applications to be accessed and run remotely via GO-Global Client software or a Web browser without having to modify the application’s code or requiring costly add-ons. |
· | GO-Global Client: We offer a range of GO-Global Client software that allows remote application access from a wide variety of local, remote and mobile platforms, including Windows, Linux, UNIX, Apple OS X and iOS, and Google Android. We plan to continue to develop GO-Global Client software for new portable and mobile devices. We released GO-Global Client products for the iPad and Android tablets in June 2011 and February 2012, respectively. |
|
Three Months Ended June 30,
|
2013 Over (Under) 2012
|
||||||||||||||
Revenue
|
2013
|
2012
|
Dollars
|
Percent
|
||||||||||||
Software Licenses
|
||||||||||||||||
Windows
|
$
|
473,700
|
$
|
637,900
|
$
|
(164,200
|
)
|
-25.7
|
%
|
|||||||
UNIX/Linux
|
183,400
|
226,600
|
(43,200
|
)
|
-19.1
|
%
|
||||||||||
|
657,100
|
864,500
|
(207,400
|
)
|
-24.0
|
%
|
||||||||||
Software Service Fees
|
||||||||||||||||
Windows
|
499,200
|
444,400
|
54,800
|
12.3
|
%
|
|||||||||||
UNIX/Linux
|
232,500
|
234,900
|
(2,400
|
)
|
-1.0
|
%
|
||||||||||
|
731,700
|
679,300
|
52,400
|
7.7
|
%
|
|||||||||||
Other
|
5,000
|
27,100
|
(22,100
|
)
|
-81.5
|
%
|
||||||||||
Total Revenue
|
$
|
1,393,800
|
$
|
1,570,900
|
$
|
(177,100 |
)
|
-11.3
|
%
|
|
Six Months Ended June 30,
|
2013 Over (Under) 2012
|
||||||||||||||
Revenue
|
2013
|
2012
|
Dollars
|
Percent
|
||||||||||||
Software Licenses
|
||||||||||||||||
Windows
|
$
|
1,113,800
|
$
|
1,270,500
|
$
|
(156,700
|
)
|
-12.3
|
%
|
|||||||
UNIX/Linux
|
454,200
|
490,100
|
(35,900
|
)
|
-7.3
|
%
|
||||||||||
|
1,568,000
|
1,760,600
|
(192,600
|
)
|
10.9
|
%
|
||||||||||
Software Service Fees
|
||||||||||||||||
Windows
|
960,400
|
869,600
|
90,800
|
10.4
|
%
|
|||||||||||
UNIX/Linux
|
459,800
|
472,300
|
(12,500
|
)
|
-2.6
|
%
|
||||||||||
|
1,420,200
|
1,341,900
|
78,300
|
5.8
|
%
|
|||||||||||
Other
|
22,600
|
79,000
|
(56,400
|
)
|
-71.4
|
%
|
||||||||||
Total Revenue
|
$
|
3,010,800
|
$
|
3,181,500
|
$
|
(170,700
|
)
|
-5.4
|
%
|
|
2013 Over (Under) 2012
|
|||||||||||||||
|
2013
|
2012
|
Dollars
|
Percent
|
||||||||||||
Software service costs
|
$
|
64,200
|
$
|
62,500
|
$
|
1,700
|
2.7
|
%
|
||||||||
Software product costs
|
73,100
|
69,900
|
3,200
|
4.6
|
%
|
|||||||||||
|
$
|
137,300
|
$
|
132,400
|
$
|
4,900
|
3.7
|
%
|
|
2013 Over (Under) 2012
|
|||||||||||||||
|
2013
|
2012
|
Dollars
|
Percent
|
||||||||||||
Software service costs
|
$
|
127,800
|
$
|
135,500
|
$
|
(7,700
|
)
|
-5.7
|
%
|
|||||||
Software product costs
|
121,300
|
135,400
|
(14,100
|
)
|
-10.4
|
%
|
||||||||||
|
$
|
249,100
|
$
|
270,900
|
$
|
(21,800
|
)
|
-8.0
|
%
|
Exhibit Number
|
Exhibit Description
|
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Certification of Interim Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|
|
Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished, not filed)
|
|
Certification of Interim Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished, not filed)
|
|
101*
|
The following financial information from GraphOn Corporation’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, formatted in eXtensible Business Reporting Language (XBRL): (i) Condensed Consolidated Balance Sheets as of June 30, 2013 (unaudited) and December 31, 2012, (ii) Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2013 and 2012, (iii) Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months ended June 30, 2013 and 2012, (iv) Notes to Unaudited Condensed Consolidated Financial Statements.
|
|
|
GRAPHON CORPORATION
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
Date:
|
August 13, 2013
|
|
Date:
|
August 13, 2013
|
|
|
|
|
|
By:
|
/s/ Eldad Eilam
|
|
By:
|
/s/ Robert L. Dixon
|
|
Eldad Eilam
|
|
|
Robert L. Dixon
|
|
Chief Executive Officer
|
|
|
Interim Chief Financial Officer
|
|
(Principal Executive Officer)
|
|
|
(Principal Financial Officer and
|
|
|
|
|
Principal Accounting Officer)
|
1. | I have reviewed this quarterly report on Form 10-Q of GraphOn Corporation (“registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
/s/ Eldad Eilam
|
|
|
Eldad Eilam
|
|
|
Chief Executive Officer
|
1. | I have reviewed this quarterly report on Form 10-Q of GraphOn Corporation (“registrant”); |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
5. | The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
|
/s/ Robert L. Dixon
|
|
|
Robert L. Dixon
|
|
|
Interim Chief Financial Officer
|
|
/s/ Eldad Eilam
|
|
|
Eldad Eilam
|
|
|
Chief Executive Officer
|
|
|
August 13, 2013
|
|
/s/ Robert Dixon
|
|
|
Robert Dixon
|
|
|
Interim Chief Financial Officer
|
|
|
August 13, 2013
|
Stockholders' Equity
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Stockholders' Equity [Abstract] | |
Stockholders' Equity | 11. Stockholders’ Equity Stock Repurchase Program During each of the three-and six month periods ended June 30, 2013 and 2012, we did not repurchase any of our common stock under the terms of our Board-approved $1,000,000 stock repurchase program (“stock repurchase program”). As of June 30, 2013, approximately $782,600 remained available for future purchases under this program. We are not obligated to repurchase any specific number of shares and the stock repurchase program may be suspended or terminated at our discretion. |
Discontinued Operations (Details) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Discontinued Operations [Abstract] | ||||
Cost related to intellectual property litigation | $ 0 | $ 90,900 | $ 0 | $ 121,300 |
Revenue derived from intellectual property litigation | $ 0 | $ 0 | $ 0 | $ 0 |
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
|
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Jun. 30, 2012
|
|
Condensed Consolidated Statements of Operations (Unaudited) [Abstract] | ||||
Revenue | $ 1,393,800 | $ 1,570,900 | $ 3,010,800 | $ 3,181,500 |
Costs of revenue | 137,300 | 132,400 | 249,100 | 270,900 |
Gross profit | 1,256,500 | 1,438,500 | 2,761,700 | 2,910,600 |
Operating expenses: | ||||
Selling and marketing | 561,200 | 604,800 | 1,060,200 | 1,179,300 |
General and administrative | 780,700 | 1,440,800 | 1,526,700 | 2,484,800 |
Research and development | 1,375,600 | 964,800 | 2,088,800 | 2,017,900 |
Total operating expenses | 2,717,500 | 3,010,400 | 4,675,700 | 5,682,000 |
Loss from operations | (1,461,000) | (1,571,900) | (1,914,000) | (2,771,400) |
Other income - change in fair value of warrants liability | 4,767,900 | 666,500 | 1,319,200 | 607,900 |
Other income (expense), net | (200) | 1,100 | (300) | 3,500 |
Income (loss) from continuing operations before provision for income tax | 3,306,700 | (904,300) | (595,100) | (2,160,000) |
Provision for income taxes | 1,600 | 1,000 | 2,700 | 2,000 |
Income (loss) from continuing operations | 3,305,100 | (905,300) | (597,800) | (2,162,000) |
Loss from discontinued operations | 0 | (90,900) | 0 | (121,300) |
Net income (loss) | $ 3,305,100 | $ (996,200) | $ (597,800) | $ (2,283,300) |
Earnings (loss) per share: | ||||
Continuing operations - basic (in dollars per share) | $ 0.04 | $ (0.01) | $ 0.01 | $ (0.03) |
Continuing operations - diluted (in dollars per share) | $ 0.03 | $ (0.01) | $ 0.01 | $ (0.03) |
Discontinued operations - basic and diluted (in dollars per share) | $ 0 | $ 0 | $ 0 | $ 0 |
Loss per share - basic and diluted (in dollars per share) | $ 0.03 | $ (0.01) | $ (0.01) | $ (0.03) |
Average weighted common shares outstanding - basic (in shares) | 85,823,258 | 81,961,071 | 84,488,583 | 81,937,732 |
Average weighted common share outstanding - diluted (in shares) | 101,323,745 | 81,961,071 | 84,488,583 | 81,937,732 |
Liability Attributable to Warrants
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability Attributable to Warrants [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Liability Attributable to Warrants | 4. Liability Attributable to Warrants On June 17, 2013, we entered into, and subsequently consummated, an Exercise Agreement (the “Exercise Agreement”) with five of the largest investors in our September 1, 2011 private placement of common stock and warrants (the “2011 Transaction”), providing for the exercise for cash by such investors of warrants to purchase an aggregate 9 million shares of our common stock, out of the approximately 17 million shares of common stock subject to warrants issued to the investors in the 2011 Transaction that remained outstanding as of such date. The approximately 5 million shares of common stock subject to warrants issued to the placement agent in the 2011 Transaction that remained outstanding as of such date were not part of the Exercise Agreement. The Company agreed under the Exercise Agreement to subsequently commence a tender offer (the “Offer to Exercise”) to provide these holders of other warrants that remained outstanding from the 2011 Transaction with the same opportunity to exercise as provided under the Exercise Agreement (See Note 18). The warrants exercised had a remaining term of approximately 38 months, and had an exercise price of $0.26 per warrant, which was the original exercise price. We received cash proceeds of $2.34 million as a result of the warrants exercised. In consideration for the early exercise of these warrants, we issued to the five investors an aggregate of 4.5 million warrants to purchase common stock at an exercise price of $1.00 per warrant, with a term of five years from issuance (the “New Warrants”). The New Warrants were issued on June 18, 2013, are substantially similar to the investor warrants that were exercised, and, after giving effect to the amendments to such warrants described below. Such warrants have been recorded as a component of equity (additional paid-in capital “APIC”) at Level 3 fair value. Using a binomial pricing model, we calculated the fair value of the New Warrants to be $514,800. We used the following assumptions in the binomial pricing model: estimated volatility - 185%; annualized forfeiture rate - 0%; expected term – 5 years; estimated exercise factor – 1.5, risk free interest rate – 1.07%; and dividends – 0. The New Warrants were accounted for as a cost of the exercise of the warrants issued pursuant to the Exercise Agreement, as a result, a $514,800 reduction of APIC was also recorded. Accordingly there was no net effect on equity because of the issuance of the new warrants. Immediately prior to the exercise for cash, the five investors, who held a majority of the outstanding warrants issued in the 2011 Transaction to investors (Investor Warrants), agreed to amend the entire series of such warrants to delete the following provisions: (1) the price-based anti-dilution clause; (2) our right to lower the exercise price in our discretion; and (3) a clause that mandated that we buy the warrants for cash at their Black-Scholes value in the event of certain extraordinary transactions. By virtue of a majority-rule clause in the warrants, the elimination of these provisions from the investor warrants issued in the 2011 Transaction eliminated the warrant derivative liability classification related to all of the investor warrants issued in the 2011 Transaction including those held by investors who did not exercise their warrants at the date of the amendment. The table below shows the calculation of the reduction of the warrants derivative liability The warrants issued to the placement agent and to an intellectual property consulting firm (ipCapital Group, Inc.) were not included in the Exercise Agreement or affected by the amendment described above. The exercise price of such warrants could, in certain circumstances, be reset to below-market value. Accordingly, unlike the amended investor warrants, we have concluded that the warrants issued to the placement agent and ipCapital Group, Inc. are not indexed to our common stock; therefore, the fair value of these warrants were, and continue to be, recorded as a liability. Under ASC 820, “Fair Value Measurement,” we re-measure the fair value of the warrants classified as a liability at every balance sheet date. As an integral part of the re-measurement process, we reevaluate each of the assumptions used, and when circumstances change or we become aware of new information affecting any of our assumptions, we adjust those assumptions accordingly. During the three months ended March 31, 2013 two investors in the 2011 private placement exercised an aggregate 462,500 warrants. While closing our books for the three months ended March 31, 2013, we reevaluated our internal assumptions based on historic and recent exercise patterns and analysis of our stock performance. Based on the work performed, we concluded that a lowering of our estimated exercise factor for the warrants issued in conjunction with the 2011 transaction from 10 to 4 was appropriate (see the assumptions used, as set forth in the tables, below). Changes in fair value of the warrants liability are recognized in other expense, except for changes in the fair value of the warrants issued to ipCapital which are recognized as a component of general and administrative expense in the condensed consolidated statement of operations. We used the exercise price of the warrants, as well as the fair market value of our common stock, to determine the fair value of our warrants. The exercise price for warrants issued in conjunction with the 2011 Transaction, including those issued to the placement agent ranged between $0.20 and $0.26, per share, and was $0.26 per share for the warrants issued to ipCapital. The fair market value of our common stock was $0.36 and $0.15 per share as of June 30, 2013 and 2012, respectively. We used a binomial pricing model to determine the fair value of our warrants liability as of June 30, 2013 and December 31, 2012, the balance sheet dates, using the following assumptions:
The following table is a reconciliation of the warrants liability measured at fair value using significant unobservable inputs (Level 3) for the six months ended June 30, 2013:
The following table reconciles the number of warrants outstanding for the periods ended June 30, 2013 and 2012, respectively.
|
Subsequent Events
|
6 Months Ended |
---|---|
Jun. 30, 2013
|
|
Subsequent Events [Abstract] | |
Subsequent Events | 18. Subsequent Events On June 17, 2013, we entered into, and subsequently consummated, an Exercise Agreement (the “Exercise Agreement”) with five of the largest investors in our September 1, 2011 private placement of common stock and warrants (the “2011 Transaction”), providing for the exercise for cash by such investors of warrants to purchase an aggregate 9 million shares of our common stock, out of the approximately 17 million shares of common stock subject to warrants issued to the investors in the 2011 Transaction that remained outstanding as of such date. We received cash proceeds of $2.34 million as a result of the warrants exercised. In consideration for the early exercise of these warrants, we issued to the five investors an aggregate of 4.5 million warrants to purchase common stock at an exercise price of $1.00 per warrant, with a term of five years from issuance (the “New Warrants”). Each of the warrant holders represented to us that there were “accredited investors.” The issuance of such common stock upon exercise and the issuance of the New Warrants was not registered under the Securities Act of 1933 because such securities were offered and sold in transactions not involving a public offering, exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) and in compliance with Rule 506 thereunder. On August 9, 2013, we consummated an offer to exercise warrants made to holders of warrants in the 2011 Transaction who were not parties to the Exercise Agreement. We were obligated to conduct the Offer to Exercise under the terms of the Exercise Agreement entered into in connection with the June 17, 2013 transaction. In connection with the Offer to Exercise, warrants to purchase an aggregate of 305,000 shares of our common stock were exercised for which we received cash proceeds of $64,000. In consideration for the early exercise of these warrants, we issued an aggregate of 152,500 New Warrants at an exercise price of $1.00 per warrant, with a term of five years from issuance. Each of the warrant holders represented to us that there were “accredited investors.” The issuance of such common stock upon exercise and the issuance of the New Warrants was not registered under the Securities Act of 1933 because such securities were offered and sold in transactions not involving a public offering, exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) and in compliance with Rule 506 thereunder. |
Commitments and Contingencies
|
6 Months Ended | |||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 30, 2013
|
||||||||||||||||||||||||||||||||||||
Commitments and Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | 12. Commitments and Contingencies Our corporate headquarters currently occupies 4,413 square feet of office space in Campbell, California, under a five-year lease that expires June 30, 2017. The following table sets forth the minimum lease payments we will be required to make throughout the remainder of this lease:
We have begun to look for larger office space for our corporate headquarters as our current staffing levels put us near maximum capacity for our current space. We have entered into preliminary discussions with our landlord regarding available space in the office complex where we are currently located. We cannot yet reasonably determine if we would lease larger space or what the costs of a larger space might be, or whether or when we actually acquire such space; however, we expect that they would not be lower than those set forth in the preceding table. |
Commitments and Contingencies (Details) (Campbell Facility [Member], USD $)
|
6 Months Ended |
---|---|
Jun. 30, 2013
sqft
|
|
Campbell Facility [Member]
|
|
Operating Leased Assets [Line Items] | |
Area of office space (in square feet) | 4,413 |
Lease expiration term | 5 years |
Lease expiration date | Jun. 30, 2017 |
Minimum lease payments [Abstract] | |
Remainder of 2013 | $ 70,400 |
2014 | 144,200 |
2015 | 148,600 |
2016 | 153,000 |
2017 | 78,400 |
Total | $ 594,600 |
Property and Equipment (Tables)
|
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Property and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property and equipment | Property and equipment was:
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Significant Accounting Policies (Tables)
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6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
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Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Allowance for doubtful accounts | The following table sets forth the details of the Allowance for Doubtful Accounts for the three and six-month periods ended June 30, 2013 and 2012:
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Schedule of most significant customers | The table sets forth the percentage of sales attributable to each customer for the three and six-month periods ended June 30, 2013 and 2012, and the respective customer’s ending accounts receivable balance as a percentage of reported accounts receivable, net, as of June 30, 2013 and 2012.
|
Capitalized Software Development Costs (Details) (USD $)
|
3 Months Ended | 6 Months Ended | 6 Months Ended | |||
---|---|---|---|---|---|---|
Jun. 30, 2013
|
Jun. 30, 2012
|
Jun. 30, 2013
|
Dec. 31, 2012
|
Jun. 30, 2013
HopTo [Member]
|
Jun. 30, 2012
HopTo [Member]
|
|
Capitalized software [Abstract] | ||||||
Software development costs | $ 1,037,600 | $ 1,037,600 | $ 573,100 | |||
Accumulated amortization | (433,100) | (433,100) | (350,000) | |||
Capitalized software, net | 604,500 | 604,500 | 223,100 | |||
Finite-Lived Intangible Assets [Line Items] | ||||||
Amortization of capitalized software development cost | 41,500 | 83,100 | ||||
Capitalized software development cost | $ 0 | $ 0 | $ 464,500 | $ 0 |
Capitalized Software Development Costs (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Capitalized Software Development Costs [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of capitalized software | Capitalized software development costs consisted of the following:
|
Liability Attributable to Warrants (Details) (USD $)
|
0 Months Ended | 6 Months Ended | 0 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | 6 Months Ended | 0 Months Ended | 3 Months Ended | 6 Months Ended | 12 Months Ended | 6 Months Ended | 12 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Jun. 18, 2013
Investor
|
Jun. 30, 2013
Factor
|
Jun. 30, 2012
|
Jun. 18, 2013
2011 Private Placement [Member]
|
Jun. 30, 2013
2011 Private Placement [Member]
|
Jun. 30, 2012
2011 Private Placement [Member]
|
Jun. 30, 2013
2011 Private Placement [Member]
|
Jun. 30, 2012
2011 Private Placement [Member]
|
Jun. 30, 2013
ipCapital [Member]
|
Jun. 30, 2012
ipCapital [Member]
|
Jun. 30, 2013
ipCapital [Member]
|
Jun. 30, 2012
ipCapital [Member]
|
Jun. 30, 2013
Warrants [Member]
|
Jun. 30, 2012
Warrants [Member]
|
Jun. 30, 2013
Warrants [Member]
|
Jun. 30, 2012
Warrants [Member]
|
Jun. 30, 2013
Exercise Agreement [Member]
|
Jun. 30, 2013
Exercise Agreement [Member]
|
Jun. 18, 2013
2011 Private Placement [Member]
Investor
|
Jun. 30, 2013
2011 Private Placement [Member]
Investor
|
Jun. 30, 2013
2011 Private Placement [Member]
Factor
|
Jun. 30, 2012
2011 Private Placement [Member]
|
Dec. 31, 2012
2011 Private Placement [Member]
Factor
|
Jun. 30, 2013
2011 Private Placement [Member]
Minimum [Member]
|
Jun. 30, 2013
2011 Private Placement [Member]
Maximum [Member]
|
Jun. 30, 2013
ipCapital [Member]
Factor
|
Jun. 30, 2012
ipCapital [Member]
|
Dec. 31, 2012
ipCapital [Member]
Factor
|
||||
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items] | |||||||||||||||||||||||||||||||
Number of investors | 5 | 5 | 2 | ||||||||||||||||||||||||||||
Exercise price of warrants (in dollars per share) | $ 1.00 | $ 1.00 | $ 0.26 | $ 0.26 | $ 0.20 | $ 0.26 | $ 0.26 | ||||||||||||||||||||||||
Share price (in dollars per share) | $ 0.36 | $ 0.15 | |||||||||||||||||||||||||||||
Cash Proceeds | $ 2,340,000 | $ 2,551,300 | $ 0 | $ 2,340,000 | |||||||||||||||||||||||||||
Stock issued on exercise of warrants (in shares) | 9,000,000 | 9,000,000 | |||||||||||||||||||||||||||||
Common stock subject to warrants (in shares) | 17,000,000 | 17,000,000 | 17,000,000 | ||||||||||||||||||||||||||||
Common stock subject to warrants excluded from exercise agreement (in shares) | 5,000,000 | 5,000,000 | |||||||||||||||||||||||||||||
Warrants exercised (in shares) | 4,500,000 | 917,500 | |||||||||||||||||||||||||||||
Contractual term | 5 years | 38 months | 5 years | ||||||||||||||||||||||||||||
Aggregate reduction in warrant liability | 4,739,300 | ||||||||||||||||||||||||||||||
Assumption used to determine the fair value of warrants [Abstract] | |||||||||||||||||||||||||||||||
Estimated fair value of New warrants | 514,800 | ||||||||||||||||||||||||||||||
Estimated volatility (in hundredths) | 185.00% | 136.00% | 159.00% | 135.00% | 163.00% | ||||||||||||||||||||||||||
Annualized forfeiture rate (in hundredths) | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | ||||||||||||||||||||||||||
Expected option term | 5 years | 3 years 2 months 1 day | 3 years 8 months 1 day | 3 years 3 months 14 days | 3 years 9 months 14 days | ||||||||||||||||||||||||||
Estimated exercise factor | 1.5 | 4 | 10 | 4 | 10 | ||||||||||||||||||||||||||
Risk-free interest rate (in hundredths) | 1.07% | ||||||||||||||||||||||||||||||
Dividends (in hundredths) | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | ||||||||||||||||||||||||||
New warrants recorded as cost of exercise agreement | (514,800) | ||||||||||||||||||||||||||||||
Reconciliation of warrants liability measured at fair value using significant unobservable inputs [Abstract] | |||||||||||||||||||||||||||||||
Warrants liability - December 31, 2012 fair value | 7,390,100 | ||||||||||||||||||||||||||||||
Change in fair value of warrant liability recorded in other expense | (1,319,200) | ||||||||||||||||||||||||||||||
Diminution of warrant liability recorded in general and administrative expense | (14,100) | ||||||||||||||||||||||||||||||
Reclassification of warrants liability to equity from the exercise of warrants | (348,300) | [1] | |||||||||||||||||||||||||||||
Reclassification of warrants liability to equity from amendment of warrants | (4,391,000) | [1] | |||||||||||||||||||||||||||||
Warrants liability - March 31, 2013 fair value | $ 1,317,500 | ||||||||||||||||||||||||||||||
Class of Warrant or Right [Line Items] | |||||||||||||||||||||||||||||||
Warrants, Beginning Outstanding (in shares) | 22,612,500 | 23,075,000 | 23,075,000 | 23,075,000 | 400,000 | 400,000 | 400,000 | 400,000 | 23,012,500 | 23,475,000 | 23,475,000 | 23,475,000 | 0 | 0 | |||||||||||||||||
Warrants issued (in shares) | 4,500,000 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 4,500,000 | 0 | 4,500,000 | 0 | 4,500,000 | 4,500,000 | ||||||||||||||||
Warrants Exercised (in shares) | 9,455,000 | 0 | 9,917,500 | 0 | 0 | 0 | 0 | 0 | 9,455,000 | 0 | 9,917,500 | 0 | 0 | 0 | |||||||||||||||||
Warrants, Ending Outstanding (in shares) | 13,157,500 | 23,075,000 | 13,157,500 | 23,075,000 | 400,000 | 400,000 | 400,000 | 400,000 | 18,057,500 | 23,475,000 | 18,057,500 | 23,475,000 | 4,500,000 | 4,500,000 | |||||||||||||||||
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Stock-Based Compensation (Tables)
|
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2013
|
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Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of stock-based compensation expense | The following table summarizes the stock-based compensation expense, net of amounts capitalized, we recorded in our Unaudited Condensed Consolidated Statements of Operations for the three and six-month periods ended June 30, 2013 and 2012, respectively, by classification:
|
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Summary of status and activity of stock option awards | The following table presents summaries of the status and activity of our stock option awards for the three-month period ended June 30, 2013.
The following table presents summaries of the status and activity of our stock option awards for the six-month period ended June 30, 2013.
|
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Summary of status and activity of restricted stock awards | The following table presents summaries of the status and activity of our restricted stock awards for the three-month period ended June 30, 2013. We did not issue any restricted stock awards during the three-month period ended June 30, 2012.
The following table presents summaries of the status and activity of our restricted stock awards for the six-month period ended June 30, 2013.
|
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