Note 10 - Stockholders' Equity

12 Months Ended

Dec. 31, 2012

Stockholders' Equity Note Disclosure [Text Block]

(10)           STOCKHOLDERS’ EQUITY

Common Stock - We have authorized 2 million shares of $.01 par value common stock. At December 31, 2012 and 2011, we had 435,328 and 462,015 shares, respectively, issued and outstanding. Dividends may not be paid to holders of our common stock prior to the satisfaction of all dividend obligations related to our Series G1 and Series G2 preferred stock.

In April 2011, the previously announced rights offering was fully subscribed for, and upon its closing we issued 187 thousand shares of our common stock at the subscription price of $80.00 per share. The net proceeds to the Company from the sale of the shares were approximately $14.7 million.

Effective October 30, 2012, we completed a one-for-forty reverse stock split of our issued and outstanding common stock which was approved by shareholders on October 29, 2012.  The reverse stock split was initiated to reduce the amount of small shareholders that typically do not vote their shares. Accordingly, all share and per share amounts have been retroactively restated to reflect the reverse stock split. In conjunction with the reverse stock split, our shareholders also approved a reduction of our common stock shares authorized from 24 million shares to 2 million shares.  Our shares authorized have been adjusted to reflect this change.

Treasury Stock - Adjusted for the one-for-forty reverse stock split, at December 31, 2012 and 2011, we held no shares of treasury stock. During April 2012, our Board of Directors authorized an amendment to the existing repurchase plan allowing us to repurchase an additional 25 thousand shares of our common stock. During the year ended December 31, 2012, we purchased approximately 25 thousand shares and retired approximately 25 thousand shares of our common stock. Of this, approximately 21 thousand shares were repurchased from shareholders in privately negotiated transactions for approximately $2.5 million. As of December 31, 2012, approximately 3 thousand shares remained available for repurchase under the amended repurchase program.  In January 2013, we announced that our Board of Directors authorized the cancelation of our  amended September 2005 stock repurchase plan and authorized a new stock repurchase program which allows us to buy back up to 45 thousand shares of our common stock.

Series G1 Convertible Preferred Stock - Our Series G1 convertible preferred stock (“Series G1 preferred”), which was issued in 2000, has a liquidation value of $100 per share, is non-voting, and is convertible at the holder’s option into our common stock at a conversion price of $11,200 per share.  At December 31, 2012 and 2011, there were 1,000 shares of Series G1 preferred issued and outstanding.

The Series G1 preferred holders shall be entitled to receive dividends at an annual rate equal to $8 per share when, as and if declared by our Board of Directors. All dividends on the Series G1 preferred are cumulative and payable semi-annually in arrears on June 30 and December 30. At our option, dividends may also be payable in our common stock valued at $11,200 per share. The Series G1 preferred dividend and liquidation rights shall rank junior to all claims of creditors, but senior to our common stockholders and to any subsequent series of our preferred stock, unless otherwise provided, except for the Series G2 preferred, which shall rank equal to the Series G1 preferred.

Series G2 Convertible Preferred Stock - Our Series G2 convertible preferred stock (“Series G2 preferred”), which was issued in 2000, has a liquidation value of $100 per share, is non-voting, and is convertible at the holder’s option into our common stock at a conversion price of $2,688 per share.  The Series G2 preferred is also convertible by us into shares of our common stock if for any period of twenty consecutive calendar days the average of the closing prices of our common stock during such period shall have equaled or exceeded $3,360 per share.   At December 31, 2012 and 2011, there were 1,000 shares of Series G2 preferred issued and outstanding.

The Series G2 preferred holders shall be entitled to receive dividends at an annual rate equal to $8 per share when, as and if declared by our Board of Directors. All dividends on the Series G2 preferred are cumulative and payable semi-annually in arrears on June 30 and December 30. At our option, dividends may also be payable in our common stock valued at $2,688 per share. The Series G2 preferred dividend and liquidation rights shall rank junior to all claims of creditors but senior to our common stockholders and to any subsequent series of our preferred stock, unless otherwise provided. The Series G2 preferred shall rank equal to the Series G1 preferred.

Changes in our common, preferred and treasury shares during 2012 and 2011 are as follows:

	Number of Shares
Description	Preferred G1		Preferred G2		Common			Treasury
Balance as of December 31, 2010		1,000		1,000		250,651			-
Shares issued for preferred stock dividends		-		-		4			-
Shares issued for purchase of additional BWI ownership interest		-		-		32,156			-
Shares issued related to the Rights Offering		-		-		187,500			-
Treasury stock repurchase		-		-		-			8,296
Treasury stock retirements		-		-		(8,296	)		(8,296	)
Balance as of December 31, 2011		1,000		1,000		462,015			-
Shares issued for preferred stock dividends		-		-		4			-
Reverse stock split - buy back of partial shares		-		-		(1,485	)		-
Treasury stock repurchase		-		-		-			25,206
Treasury stock retirements		-		-		(25,206	)		(25,206	)
Balance as of December 31, 2012		1,000		1,000		435,328			-

Noncontrolling Interest – During 2011, HKN purchased an additional 47.91% of the outstanding units of BWI in exchange for the issuance of 32,156 restricted shares of our common stock. Therefore, at December 31, 2011, we owned 100% of BWI and thus eliminated our noncontrolling interests. Please see Note 2 –“Investment in BriteWater International, Inc.” for additional information regarding our investment in BWI.

Convertible Preferred Stock - At December 31, 2012, if our remaining convertible preferred stock were converted we would be required to issue the following amounts of our common stock:

Instrument	Conversion Price (1)		Shares of Common Stock Issuable at December 31, 2012
Series G1 Preferred	$	11,200		8
Series G2 Preferred	$	2,688		37
Common Stock Potentially Issued Upon Conversion				45

(1)   Certain conversion prices are subject to adjustment under certain circumstances.

Stockholder Rights Plan – We had previously adopted a Rights Agreement whereby a dividend of one preferred share purchase right (“Right”) was paid for each outstanding share of our common stock.  During April 2012, we amended the existing Rights Agreement to accelerate the final expiration date of the Rights issued thereunder. The effect of this amendment is that our outstanding Rights expired on May 30, 2012 and the shareholder’s rights plan pursuant to which Rights had been issued is of no further force or effect.