Shareholders' Equity

12 Months Ended

Feb. 02, 2013

Equity [Abstract]

SHAREHOLDERS’ EQUITY

SHAREHOLDERS’ EQUITY

PREFERRED STOCK

The Company’s Articles of Incorporation authorize the issuance of up to 1,000,000 shares of preferred stock. The preferred stock may be issued from time to time at the discretion of the Board of Directors without shareholders’ approval. The Board of Directors is authorized to issue these shares in different series and, with respect to each series, to determine the dividend rate, and provisions regarding redemption, conversion, liquidation preference and other rights and privileges. As of February 2, 2013, no preferred stock had been issued.

TREASURY STOCK

From time to time, the Company’s Board of Directors has approved the repurchase of the Company’s common stock. As of February 2, 2013, the Company had repurchased 898,249 shares of common stock for approximately $8.6 million, all of which are held as treasury shares. There were no repurchases during fiscal 2012 or fiscal 2011.

WARRANTS

In connection with the Parlux acquisition, the Company issued warrants (the “Merger Warrants”) for an aggregate of 4,805,304 shares of our common stock at $8.00 per share. See further discussion at Note 7 of these consolidated financial statements.

In connection with the Company's merger with a predecessor company on August 11, 2008, the Company issued warrants (the “Warrants”) to purchase an additional 1,500,000 shares of our common stock with an exercise price per share of $23.94. The Warrants became exercisable effective August 11, 2011 and will be exercisable until August 11, 2018. The fair value of these Warrants at the date of issuance was $26.5 million, which was recorded as a reduction of retained earnings (accumulated deficit) and an increase to additional paid-in capital within the consolidated statement of shareholders’ equity in fiscal 2008.

STOCK OPTION PLANS

The 2010 Equity Incentive Plan (the “2010 Plan”) provides for equity-based awards to the Company’s employees, directors and consultants. Under the 2010 Plan, the Company initially reserved 1,000,000 shares of common stock for issuance. This number automatically increases on the first trading day of each fiscal year beginning with fiscal 2011, by an amount equal to 1.5% of the shares of common stock outstanding as of the last trading day of the immediately preceding fiscal year; accordingly, 1,269,050 shares of common stock were reserved for issuance as of February 2, 2013. The Company previously had two stock option plans which expired on October 31, 2010. No further awards will be granted under these plans, although all options previously granted and outstanding will remain outstanding until they are either exercised or forfeited. As of February 2, 2013, 755,000 stock options have been granted pursuant to the 2010 Plan.

The following is a summary of the stock option activity during the fiscal year ended February 2, 2013:

	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value (in thousands)
Outstanding as of January 28, 2012	216,737		$	9.93
Granted (1)	1,273,505		7.79
Exercised	(60,587	)	3.74
Forfeited	(185,981	)	8.38
Outstanding as of February 2, 2013	1,243,674		$	8.27	6.6	$	642
Vested and expected to vest as of February 2, 2013	1,033,670		$	8.09	6.2	$	642
Exercisable as of February 2, 2013	1,033,670		$	8.09	6.2	$	642

(1) Includes 548,505 stock options issued to holders of options to purchase shares of Parlux Inc. common stock under Parlux Inc.'s equity-based compensation plans as of April 18, 2012, which are not counted against the number of shares reserved for issuance under the 2010 Plan. See further discussion at Note 2.

The following is a summary of stock warrants activity during the fiscal year ended February 2, 2013:

	Number of Warrants	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value (in thousands)
Outstanding as of January 28, 2012	1,500,000	$	23.94
Granted (2)	4,805,304	8.00
Exercised	—	—
Forfeited	—	—
Outstanding as of February 2, 2013	6,305,304	$	11.79	5.4	$	16
Vested as of February 2, 2013	6,305,304	$	11.79	5.4	$	16
Exercisable as of February 2, 2013	6,305,304	$	11.79	5.4	$	16

(2) Represents warrants issued in connection with the acquisition of Parlux on April 18, 2012. See further discussion at Note 7.

Share-based compensation expense was $4.5 million and $0.1 million during fiscal 2012 and 2011, respectively.

The fair value for stock options issued during fiscal 2012 was estimated at the date of grant, using the Black-Scholes option pricing model with the following weighted average assumptions:

	Fiscal Year Ended February 2, 2013
Expected life (years)	1-5
Expected stock price volatility	100% - 118%
Risk-free interest rates	0.2% - 1.0%
Expected dividend yield	0%

The expected life of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. The expected stock price volatility is estimated using the historical volatility of the Company’s stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero coupon issues with a term equal to the option’s expected life. The Company has not paid dividends in the past and does not intend to in the foreseeable future.

The weighted average estimated fair values of options granted during fiscal years 2012 and 2011 were $6.32 and $8.12 per share, respectively. As of February 2, 2013, there was $1.3 million of unrecognized compensation expense related to non-vested outstanding stock options. These costs are expected to be recognized over a weighted-average period of 3.5 years. The aggregate intrinsic value of options exercised during fiscal 2012 and 2011 was $186,000 and $32,000, respectively. Cash received from option exercises during fiscal 2012 and 2011 was $228,000 and $16,000, respectively.

See consolidated statements of shareholders’ equity in these financial statements for activity in shareholders’ equity accounts.