Net Earnings (Loss) Per Share and Stockholders’ Equity

6 Months Ended

Jun. 30, 2017

Earnings Per Share [Abstract]

Net Earnings (Loss) Per Share and Stockholders’ Equity

Basic net earnings (loss) per share is computed using the weighted average number of common shares outstanding during the period, excluding any unvested restricted stock. Diluted net earnings (loss) per share is computed using the weighted average number of common shares, and if dilutive, potential common shares outstanding, as determined under the treasury stock and if-converted methods, during the period. Potential common shares consist of common shares issuable upon the exercise of stock options, common shares issuable upon the exercise of warrants, common shares issuable upon conversion of convertible notes and unvested restricted stock.  The following are the share amounts utilized to compute the basic and diluted net earnings (loss) per share for the three and six months ended June 30, 2017 and 2016:

	Three Months Ended June 30,						Six Months Ended  June 30,
	2017			2016			2017			2016
Basic Shares:
Weighted average common shares outstanding		11,259,472			10,711,404			11,143,313			10,672,656
Weighted average unvested restricted stock		(110,440	)		(118,773	)		(113,536	)		(121,887	)
Basic Shares		11,149,032			10,592,631			11,029,777			10,550,769
Diluted Shares:
Basic shares		11,149,032			10,592,631			11,029,777			10,550,769
Weighted average dilutive securities		662,876			1,022,654			690,373			—
Incremental shares from convertible preferred stock		1,532,371			1,680,070			1,605,813			—
Diluted Shares		13,344,279			13,295,355			13,325,963			10,550,769

For the three and six months ended June 30, 2017, weighted average dilutive securities included dilutive options, restricted stock awards and incremental shares issued in connection with the AutoWeb acquisition that converted in the six months ended June 30, 2017. For the three months ended June 30, 2016, weighted average dilutive securities included dilutive options, restricted stock awards, the warrant issued in connection with the acquisition of AutoUSA, LLC (“AutoUSA”) and shares of Series B Preferred Stock issued in connection with the AutoWeb, Inc. (“AutoWeb”) acquisition prior to conversion.

For both the three and six months ended June 30, 2017, 2.8 million of potentially anti-dilutive securities related to common stock have been excluded from the calculation of diluted net earnings per share. For the three and six months ended June 30, 2016, 1.8 million and 4.5 million of potentially anti-dilutive securities related to common stock have been excluded from the calculation of diluted net earnings per share, respectively.    

On June 7, 2012, the Company announced that its board of directors had authorized the Company to repurchase up to $2.0 million of the Company’s Common Stock, and on September 17, 2014 the Company announced that the board of directors had approved the repurchase of up to an additional $1.0 million of the Company’s Common Stock.  The authorization may be increased or otherwise modified, renewed, suspended or terminated by the Company at any time, without prior notice.  The Company may repurchase Common Stock from time to time on the open market or in private transactions. Shares repurchased under this program have been retired and returned to the status of authorized and unissued shares.  The Company funded repurchases and anticipates that the Company would fund future repurchases through the use of available cash. The repurchase authorization does not obligate the Company to repurchase any particular number of shares.  The timing and actual number of repurchases of additional shares, if any, under the Company’s stock repurchase program will depend upon a variety of factors, including price, market conditions, release of quarterly and annual earnings and other legal, regulatory and corporate considerations at the Company’s sole discretion.  The impact of repurchases on the Company’s Tax Benefit Preservation Plan, as amended, and on the Company’s use of its net operating loss carryovers and other tax attributes if the Company were to experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code, is also a factor that the Company considers in connection with share repurchases.  As of June 30, 2017, $1.2 million remains available for repurchase under the program. No shares were repurchased in the three and six months ended June 30, 2017 and June 30, 2016, respectively.

On June 22, 2017, the Company obtained stockholder approval for the issuance of shares of Common Stock upon (i) the conversion of the Company’s outstanding Series B Junior Participating Convertible Preferred Stock, par value $0.001 per share, (“Series B Preferred Stock”); and (ii) the conversion of shares of Series B Preferred Stock issued upon exercise of AutoWeb Warrant (described below). Upon obtaining stockholder approval for the conversion, each share of Series B Preferred Stock outstanding was automatically converted into 10 shares of Common Stock, which resulted in the outstanding shares of Series B Preferred Stock being converted into 1,680,070 shares of Common Stock, and the AutoWeb Warrant converted into warrants to acquire up to 1,482,400 shares of Common Stock.

Warrants.  The warrant to purchase 69,930 shares of Company common stock issued in connection with the acquisition of AutoUSA on January 13, 2014 (“AutoUSA Acquisition Date”) was valued at $7.35 per share for a total value of $0.5 million (“AutoUSA Warrant”).  The Company used an option pricing model to determine the value of the AutoUSA Warrant.  Key assumptions used in valuing the AutoUSA Warrant are as follows: risk-free rate of 1.6%, stock price volatility of 65.0% and a term of 5.0 years.  The AutoUSA Warrant was valued based on long-term stock price volatilities of the Company.  The exercise price of the AutoUSA Warrant is $14.30 per share (as may be adjusted for stock splits, stock dividends, combinations and other similar events).  The AutoUSA Warrant became exercisable on January 13, 2017 and expires on January 13, 2019.  The right to exercise the AutoUSA Warrant is accelerated in the event of a change in control of the Company.

The warrant to purchase up to 148,240 shares of Series B Preferred Stock issued in connection with the acquisition of AutoWeb, Inc. (“AutoWeb Warrant”) was valued at $1.72 per share for a total value of $2.5 million.  The Company used an option pricing model to determine the value of the AutoWeb Warrant.  Key assumptions used in valuing the AutoWeb Warrant are as follows: risk-free rate of 1.9%, stock price volatility of 74.0% and a term of 7.0 years.  The AutoWeb Warrant was valued based on long-term stock price volatilities of the Company’s Common Stock.  On June 22, 2017, the Company received stockholder approval which resulted in the automatic conversion of the AutoWeb Warrant into warrants to acquire up to 1,482,400 shares of Common Stock at an exercise price of $18.45 per share of Common Stock. The AutoWeb Warrant becomes exercisable on October 1, 2018, subject to the following vesting conditions: (i) with respect to the first one-third (1/3) of the warrant shares, if at any time after the issuance date of the AutoWeb Warrant and prior to the expiration date of the AutoWeb Warrant the weighted average closing price of the Common Stock for the preceding 30 trading days (adjusted for any stock splits, stock dividends, reverse stock splits or combinations of the Common Stock occurring after the issuance date) (“Weighted Average Closing Price”) is at or above $30.00; (ii) with respect to the second one-third (1/3) of the warrant shares, if at any time after the issuance date of the AutoWeb Warrant and prior to the expiration date the Weighted Average Closing Price is at or above $37.50; and (iii) with respect to the last one-third (1/3) of the warrant shares, if at any time after the issuance date of the AutoWeb Warrant and prior to the expiration date the Weighted Average Closing Price is at or above $45.00.  The AutoWeb Warrant expires on October 1, 2022.