13. Equity

12 Months Ended

Dec. 31, 2012

Stockholders' Equity Note Disclosure [Text Block]

13. EQUITY

Preferred and Common Shares—In December 2011, all of the Company’s then outstanding preferred stock converted into common stock at the close of the IPO. Prior to the IPO, in May 2011, the Company’s stockholders approved a proposal to amend Lucid’s Certificate of Incorporation to: (a) provide for the automatic conversion of Series A Preferred Stock and Series B Preferred Stock immediately prior to the closing of an underwritten public offering; (b) provide that registration rights related to the shares of Common Stock issuable upon conversion of the Series A and Series B Preferred Stock will terminate when such shares can be sold without restriction under the securities laws; and (c) provide for an equitable adjustment to the conversion ratio of Series A Preferred Stock and Series B Preferred Stock in connection with specified recapitalizations of the Company.

As discussed above, the amendment to the Certificate of Incorporation modified the rights and features of the Company’s then outstanding preferred stock. The Company evaluated the facts surrounding the modification and concluded that the modifications constituted a significant change to the rights and features of the preferred stock and followed redemption accounting. Therefore, the transaction was accounted for as if the Company had issued new preferred shares in exchange for the original preferred shares outstanding at the time of the amendment. The Company removed the carrying value (i.e., liquidation value) of the original preferred shares at fair value of approximately $13.2 million. This resulted in a loss on the deemed redemption of approximately $6.9 million recorded as a non-cash charge to equity with no net effects on the Company’s balance sheet, stockholder’s deficit, or cash flows.

In December 2011, the Company issued 379,406 shares of common stock in consideration for the conversion of principal and accrued interest related to convertible notes that were issued pursuant to its 2009 Convertible Debt Offering. In February 2012, the Company recorded a loss on extinguishment of debt of approximately $0.3 million relating to the issuance of an additional 82,647 shares of the Company’s common stock in final consideration for this conversion. In the aggregate, these shares were issued at a conversion price of approximately $1.93.

As part of a restructuring of the board of directors of the Company, five members resigned in February 2012. As a result, the individuals forfeited 18,500 shares of unvested restricted stock, in aggregate.

On September 30, 2012, certain employees and directors of the Company voluntarily forfeited an aggregate of 625,000 stock options with a weighted average exercise price of $7.48. In October 2012, the Company issued approximately 55,000 shares of common stock (at a value of $2.00 per share) in an equal exchange for approximately 234,000 common stock warrants. The value of the exchanged warrants was determined using the Black-Scholes pricing model, with an assumed common stock value of $2.00 per share.

In December 2012, the Company’s Chairman and his spouse purchased 214,286 shares of common stock in a private transaction with the Company at a price of $1.40 per share.

Stock-Based Awards—In July 2012, the Board of Directors adopted, subject to stockholder approval at the next stockholder meeting, the 2012 Stock Option and Incentive Plan (“the 2012 Plan”). If approved by the stockholders, 1,775,000 shares of common stock will be available for issuance upon the grant or exercise of awards under the 2012 Plan. The 2012 Plan has a ten-year term and provides flexibility to the Executive Compensation Committee to use various equity-based incentive awards, including stock options (both incentive and non-qualified options), stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, performance shares, dividend equivalent rights and cash-based awards, as compensation tools to motivate the Company’s workforce. The maximum number of shares of common stock to be issued under the 2012 Plan is 1,775,000, plus on January 1, 2013 and each January 1 thereafter, a number of shares of common stock equal to 3 percent of the number of shares of common stock outstanding on the prior December 31. The shares of common stock underlying any awards that are forfeited, canceled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without any issuance of stock, expire or are otherwise terminated (other than by exercise) under the 2012 Plan are added back to the shares of common stock available for issuance under the 2012 Incentive Plan. As of December 31, 2012, there were options for the purchase of up to 20,000 shares outstanding under the 2012 Plan.

In June of 2010, the Company’s stockholders approved a Stock Option Plan (the 2010 Plan), pursuant to which options including incentive and nonqualified options for its common stock and shares of restricted stock may be granted to employees, directors and consultants of the Company. The 2010 Plan also allows for stock awards to be granted a right to receive shares of stock in the future. The Company reserved 2,000,000 common shares for the 2010 Plan and at December 31, 2012, there were 1,661,500 shares reserved for future grants and 320,000 stock options outstanding. Under the terms of the awards, stock-based awards generally have 10-year contractual terms, equity grants for employees generally vest based on three years of continuous service and equity grants for directors and consultants vest over their respective remaining term as of the date of grant. The Company does not capitalize any expense related to the stock option awards.

The Company also has options and restricted stock outstanding under a Stock Option Plan approved by stockholders during 2007 (the 2007 Plan) and options to purchase common shares outstanding under a Stock Option Plan approved by stockholders during 2000 (the 2000 Plan). Under the terms of the awards under these two plans, equity grants for employees generally vest based on three years of continuous service and equity grants for directors and consultants vest over their respective remaining term as of the date of grant. As of December 31, 2012, options to purchase common shares of 102,500 and 182,500 were outstanding under the 2007 Plan and the 2000 Plan, respectively, with an additional 137,500 shares of restricted stock outstanding under the 2007 Plan. As of December 31, 2012, no shares were reserved for future grants under the 2007 Plan or the 2000 Plan.

The Company recognizes the expense related to stock option awards on a straight-line basis over the service period. Stock-based compensation expense recognized in the statement of operations is as follows:

	Year Ended December 31,
	2012		2011
Cost of revenue	$	13,698	$	12,186
General and administrative		979,547		1,479,356
Sales and marketing		88,282		368,904
Engineering, research and development		714,267		294,100
	$	1,795,794	$	2,154,546

A summary of option activity under the Plans and changes during the periods ended are presented below:

	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at January 1, 2011		2,045,524		$	5.52
Granted		185,000			8.72
Exercised		(4,250	)		4.04
Forfeited or expired		(24,500	)		5.93
Outstanding at December 31, 2011		2,201,774		$	5.78
Granted		317,500			2.00
Exercised		(161,400	)		0.13
Forfeited or expired		(1,732,874	)		6.51
Outstanding at December 31, 2012		625,000			3.32		5.1 years	$	—
Vested or expected to vest at December 31, 2012		612,500			3.32		5.1 years	$	—
Exercisable at December 31, 2012		464,167			3.43		4.6 years	$	—

The total intrinsic value of stock options exercised during the year ended December 31, 2012 and 2011 was approximately $0.2 million and $18,000, respectively. The 2011 stock option exercises were “net exercises,” pursuant to which the optionee received shares of common stock equal to the intrinsic value of the options (fair market value of common stock on date of exercise less exercise price) reduced by any applicable withholding taxes.

The following table summarizes information about stock options outstanding and exercisable at December 31, 2012:

	Options Outstanding							Options Exercisable
Exercise Price		Number of Options		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price			Number of Options		Weighted- Average Remaining Contractual Life		Weighted- Average Exercise Price
2.00 - 2.50			330,000		5.4 years		2.02			197,500		4.9 years		2.03
4.00 - 4.30			232,500		3.9 years		4.08			232,500		3.9 years		4.08
6.58			40,000		7.5 years		6.58			26,667		7.5 years		6.58
8.60 - 8.88			22,500		8.5 years		8.65			7,500		8.5 years		8.65
			625,000							464,167

The weighted-average grant date fair value of options granted during the year ended December 31, 2012 and 2011 was $2.00 and $5.67, respectively. The following assumptions were used to estimate the grant date fair value of options granted using the Black-Scholes option pricing model.

	2012			2011
Risk free interest rate		0.31% - 0.94%			1.23% - 2.82%
Expected dividend yield		0	%		0	%
Expected term (in years)		2.5 – 6.5			6.0 – 6.5
Expected volatility		70	%		70	%
Pre-vesting forfeiture rate		2	%		2	%

As of December 31, 2012 there was $0.6 million of total unrecognized compensation cost related to stock option arrangements granted under the Company’s plans. As of December 31, 2012, the unrecognized cost is expected to be recognized over a weighted average period of 7.6 years.

The Company determines fair value of its restricted stock based on the common stock value on the date of grant. The following table summarizes the Company’s restricted stock activity:

	Number of Shares			Weighted-Average Fair Value
Nonvested at January 1, 2011		191,666		$	8.02
Granted		12,000		$	8.60
Vested
Forfeited		(12,500	)	$	6.42
Nonvested at December 31, 2011		191,166		$	8.16
Granted		—
Vested		(50,000	)	$	7.62
Forfeited		(18,500	)	$	8.41
Nonvested at December 31, 2012		122,666		$	8.34

The total intrinsic value of nonvested restricted stock as of December 31, 2012 and 2011 was $0 and approximately $0.6 million, respectively. At December 31, 2012 there was approximately $0.1 million of total unrecognized compensation cost related to restricted stock granted under the Plan. As of December 31, 2012, the unrecognized cost is expected to be recognized over a weighted average period of 0.9 years.

Stock Warrants—Under the terms of various agreements, the Company has issued warrants for the purchase of common shares. Warrants are exercisable at the grant date and generally expire 5 to 10 years from the date of the grant.

Changes in the status of outstanding warrants are summarized as follows:

	Common Shares			Common Shares Weighted-Average Exercise Price		Preferred Shares			Preferred Shares Weighted-Average Exercise Price
Outstanding at January 1, 2011		370,064		$	7.16		100,000		$	2.00
Issued		1,825,762		$	5.66
Exercised		—
Expired		(4,524	)	$	6.30
Reclassification of preferred warrant		50,000		$	4.00		(100,000	)	$	2.00
Other		(21,756	)	$	8.26
Outstanding at December 31, 2011		2,219,546		$	5.84
Outstanding at January 1, 2012		2,219,546		$	5.84
Issued		5,300		$	5.04
Exercised		—
Expired		(9,166	)	$	6.30
Conversion to Common Stock		(234,019	)	$	6.77
Outstanding at December 31, 2012		1,981,661		$	5.75

At the measurement date, the Company estimated the fair value of each warrant using the Black-Scholes option pricing model. The following assumptions were used:

	2012		2011
Risk free interest rate		0.25% - 0.36%		0.01% - 0.60%
Expected dividend yield		0%		0%
Expected term (in years)		2.0 – 3.0		0.0 - 4.0
Expected volatility		70%		70%