Note 8 - Stockholders’ Equity

Dividend

On November 17, 2016, the Company’s Board of Directors declared a special one-time cash dividend of $2.91 per share of common stock, payable on February 3, 2017 to holders of record as of January 24, 2017.

Stockholder Rights Plan

On November 25, 2015, the Company’s Board of Directors adopted a stockholder rights plan (“Rights Plan”) in an effort to preserve the value of its net operating loss carryforwards (“NOLs”) under Section 382 of the Internal Revenue Code (the “Code”). The description and terms of the rights are set forth in a Section 382 Rights Agreement, dated as of November 25, 2015 (the “Section 382 Rights Agreement”), by and between the Company and Continental Stock Transfer & Trust Company, as Rights Agent.

In connection with the adoption of the Rights Plan, on November 25, 2015 (the “Rights Dividend Declaration Date”), the Board declared a non-taxable dividend distribution of one share purchase right (“Right”) for each outstanding share of common stock to the Company's stockholders of record as of the close of business on December 9, 2015. The Section 382 Rights Plan is intended to act as a deterrent to any person (an “Acquiring Person”) acquiring (together with all affiliates and associates of such person) beneficial ownership of 4.99% or more of the Company’s outstanding common stock within the meaning of Section 382 of the Code, without the approval of the Board of Directors. Stockholders who beneficially owned 4.99% or more of the Company’s outstanding common stock as of the Rights Dividend Declaration Date are not be deemed to be an Acquiring Person, but such person will be deemed an Acquiring Person if such person (together with all affiliates and associates of such person) becomes the beneficial owner of securities representing a percentage of the Company’s common stock that exceeds by 0.5% or more the lowest percentage of beneficial ownership of the Company’s common stock that such person had at any time since the Rights Dividend Declaration Date. In its discretion, the Board may exempt certain persons whose acquisition of securities is determined by the Board not to jeopardize the availability to the Company's NOLs or other tax benefits and may also exempt certain transactions.

Controlled Equity Offering

On March 25, 2013, we entered into a controlled equity offering sales agreement with a sales agent, and filed with the SEC a prospectus supplement, dated March 25, 2013 to our prospectus dated July 27, 2011, or the 2011 Prospectus, pursuant to which we could offer and sell, from time to time, through the agent shares of our common stock having an aggregate offering price of up to $15.0 million.

On May 23, 2014, we entered into an amendment, or the 2014 Amendment, to the controlled equity offering sales agreement with the sales agent, pursuant to which we may offer and sell, from time to time, through the agent shares of our common stock having an aggregate offering price of up to an additional $15.0 million. On that day, we filed a prospectus supplement to the 2011 Prospectus for use in any sales of these additional shares of common stock through July 26, 2014, the date the underlying registration statement (File No. 333-175394) expired. As a result of this expiration, the 2011 Prospectus, as supplemented on March 25, 2013 and May 23, 2014, may no longer be used for the sale of shares of common stock under the controlled equity offering sales agreement, as amended. On May 23, 2014, we also filed a new universal shelf registration statement (File No. 333-196265) containing, among other things, a prospectus, or the 2014 Prospectus, for use in sales of the common stock under the 2014 Amendment. This registration statement was declared effective on May 30, 2014. Since the expiration of the 2011 Prospectus, all sales under the controlled equity offering sales agreement, as amended, are being effected under the 2014 Prospectus.

Under the controlled equity offering sales agreement, as amended, the agent may sell shares by any method permitted by law and deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on NYSE MKT, or any other existing trading market for our common stock or to or through a market maker. Subject to the terms and conditions of that agreement, the agent will use commercially reasonable efforts, consistent with its normal trading and sales practices and applicable state and federal law, rules and regulations and the rules of NYSE MKT, to sell shares from time to time based upon our instructions. We are not obligated to sell any shares under the arrangement. We are obligated to pay the agent a commission of 3.0% of the aggregate gross proceeds from each sale of shares under the arrangement.

As of December 31, 2016, shares having an aggregate offering price of $3.0 million remained available under the controlled equity offering sales agreement, as amended. During the years ended December 31, 2016 and 2015, we did not sell any shares of our common stock under this arrangement. During the year ended December 31, 2014, we sold 10,520,454 shares of our common stock under this arrangement resulting in net proceeds to us of approximately $17.8 million. During the year ended December 31, 2014, we incurred offering costs of approximately $0.1 million in connection with the controlled equity offering sales agreement, as amended.

Long-Term Incentive Compensation Plan

In 2007, the Company’s stockholders approved the 2007 Long-Term Incentive Compensation Plan (the “2007 Plan”) which provides for the granting of incentive and non-qualified stock options, stock appreciation rights, performance units, restricted stock awards and performance bonuses (collectively “awards”) to Company officers and employees. Additionally, the 2007 Plan authorizes the granting of non-qualified stock options and restricted stock awards to Company directors and to independent consultants.

In 2008, our stockholders approved amendments to the 2007 Plan, increasing from 3.5 million shares to 4.6 million shares the maximum number of shares authorized for issuance under the plan and adding an evergreen provision pursuant to which the number of shares authorized for issuance under the plan would increase automatically in each year, beginning in 2009, in accordance with certain limits set forth in the 2007 Plan. Under the terms of the evergreen provision, the annual increases were to continue through 2015, subject, however, to an aggregate limitation on the number of shares that could be authorized for issuance pursuant to such increases. This aggregate limitation was reached on January 1, 2014, so that the number of shares authorized for issuance under the plan did not automatically increase on January 1, 2015. At December 31, 2016, there are approximately 10.3 million shares approved for issuance under the 2007 Plan, of which approximately 3.4 million shares are available for grant. The Board of Directors in conjunction with management determines who receives awards, the vesting conditions and the exercise price. Options may have a maximum term of ten years.

The following table summarizes the activity of the 2007 Plan for options:

					Weighted-Average
			Weighted-Average		Remaining
	Shares		Exercise Price		Contractual Term

Options
Outstanding, December 31, 2013		5,974,039	$	2.52		6.5
Granted		2,547,585		1.81
Exercised		(352,718)		1.29
Forfeited		(635,424)		2.61
Expired		(143,588)		3.04
Outstanding, December 31, 2014		7,389,894	$	2.31		6.9
Granted		369,814		1.66
Exercised		(778,783)		1.25
Forfeited		(2,712,613)		2.43
Expired		(77,308)		3.26
Outstanding, December 31, 2015		4,191,004	$	2.36		6.0
Granted		200,000		2.20
Exercised		(2,492,639)		1.70
Forfeited		(166,000)		1.69
Expired		(12,336)		3.80
Outstanding, December 31, 2016		1,720,029	$	3.36		4.2

Exercisable, December 31, 2016		1,348,842	$	3.80		3.2
Vested and expected to vest, December 31, 2016		1,675,487	$	3.40		4.1

The aggregate intrinsic value is calculated as the difference between (i) the closing price of the common stock at December 31, 2016 and (ii) the exercise price of the underlying awards, multiplied by the number of options that had an exercise price less than the closing price on the last trading day. Our outstanding and exercisable options had an aggregate intrinsic value of approximately $0.3 million and $0.7 million as of December 31, 2016 and 2015, respectively.

At December 31, 2016, total compensation costs for unvested stock option awards outstanding approximated $0.4 million, net of estimated forfeitures, which we expect to recognize as stock compensation expense over a weighted-average period of 1.7 years.

Valuation assumptions used to determine fair value of share-based compensation

The weighted-average grant date fair value for options granted in 2016, 2015 and 2014 was $1.28, $1.13 and $1.30, respectively. The aggregate intrinsic value of options exercised during the years ended December 31, 2016, 2015 and 2014 was approximately $2.8 million, $0.3 million and $0.2 million, respectively. The total fair value of awards vested during 2016, 2015 and 2014 was approximately $0.9 million, $0.8 million and $1.4 million, respectively.

The fair value for the 2016, 2015 and 2014 awards were estimated at the date of grant using the Black-Scholes option-pricing model using the following assumptions:

	December 31,
	2016			2015			2014

Weighted-average volatility		65	%		70	%		84	%
Risk-free rate		1.45% - 1.59	%		1.50% - 2.25	%		1.51% - 2.25	%
Expected annual dividend yield		-			-			-
Expected weighted-average life, in years		5.8			5.7			6.1

The following table summarizes the activity of the 2007 Plan for restricted shares:

			Weighted-
			Average
			Grant Date		Aggregate
	Shares		Fair Value		Intrinsic Value

Restricted shares
Outstanding, December 31, 2013		6,667	$	1.59	$	12,401
Granted		-		-
Vested		(6,667)		1.59
Forfeited or expired		-		-
Outstanding, December 31, 2014		-	$	-	$	-
Granted		877,244		1.77
Vested		-		-
Forfeited or expired		(25,000)		1.71
Outstanding, December 31, 2015		852,244	$	1.78	$	1,619,264
Vested		(852,244)		1.76
Outstanding, December 31, 2016		-	$	-	$	-

During the year ended December 31, 2016, 852,244 shares of restricted stock vested. The shares vested upon the earliest to occur of (i) certain performance conditions or (ii) service conditions. The service conditions either vest in full two years from the grant date or 50% vest annually starting one year from the grant date. At December 31, 2016 all shares of restricted stock awards were vested based on the achievement of the performance conditions and we had no unrecognized share-based compensation related to these shares.

Warrants

At December 31, 2016 there were warrants outstanding to purchase 1,051,358 shares of our common stock. At December 31, 2015 and 2014, there were warrants outstanding to purchase 1,422,781 and 4,495,556 shares of our common stock, respectively. The warrants outstanding as of December 31, 2016 were as follows:

Number of Common Shares
Underlying Warrants			Issue Date/Exercisable Date	Exercise Price		Expiration Date

	100,778	⁽¹⁾	March 2007/March 2007	$	3.97	March 2017
	903,996	⁽²⁾	July 2010/January 2011	$	1.63	January 2017
	46,584	⁽¹⁾	March 2012/March 2012	$	1.61	March 2022
	1,051,358

⁽¹⁾

These warrants to purchase common stock are classified as equity.

⁽²⁾

Because of the presence of net settlement provisions, these warrants to purchase common stock are classified as derivative liabilities. The fair value of these liabilities (see Note 3 – Fair Value Measurements) is remeasured at the end of every reporting period and the change in fair value is reported in the accompanying consolidated statements of operations as other income (expense).

Warrants to purchase 371,423 shares of common stock expired during the year ended December 31, 2016 without being exercised, all of which were classified as derivative liabilities.