Annual report pursuant to section 13 and 15(d)

Common Stock

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Common Stock
 12 Months Ended
Dec. 31, 2013
Common Stock
3. COMMON STOCK INVESTMENT:

On March 8, 2013, the Company, entered into, and closed, an investment agreement with Great American Insurance Company and Great American Life Insurance Company (collectively, the “Investors”), each a wholly owned subsidiary of American Financial Group, Inc. The Company issued to each Investor (i) 2,136,752 shares of the Company’s common stock and (ii) the right to receive an aggregate of up to an additional 1,250,000 shares of common stock (such number of shares is the maximum number issuable to both Investors in the aggregate) for cash of $2.5 million each, for a total investment of $5 million. The proceeds from the investment are to be used for general corporate and working capital purposes.

Under the investment agreement, the Investors are entitled to receive the additional 1,250,000 shares of common stock if the volume-weighted average price of a share of common stock as reported by Bloomberg Financial Markets for the twenty consecutive trading days ending on the last trading day prior to March 8, 2014 is less than $1.40. No shares were issued under this provision. In connection with the investment, the Company agreed to grant the Investors certain tag-along registration rights with respect to the common stock issued to the Investors.

In connection with the investment, the Company paid $100,000 in cash and issued 42,735 shares of common stock as a finder’s fee for the transaction.
Convertible Securities
  
Common Stock
10. COMMON STOCK:

Common stock—At December 31, 2013, the Company has reserved common stock for issuance in relation to the following:

 

Employee stock options and restricted stock

      1,175,020   

Shares subject to warrants

      289,187   

Shares subject to Series B preferred stock

      153   

Shares subject to Series C preferred stock

      14,515,894   

Shares subject to Series C preferred stock accrued dividends

      1,013,889   

Shares subject to Series E preferred stock

      4,273,504   

Shares subject to Series F preferred stock

      1,089,775   

The Company is required to issue additional shares of common stock upon conversion of the Series C preferred stock if a liquidity event occurs (Note 9).

In addition, for so long as shares of the Series B, Series C, Series E and/or Series F (Note 9) preferred stock are outstanding, the Company is prohibited from declaring dividends without the consent of the holders of at least a majority of the then outstanding Series B, Series C, Series E and Series F preferred stock.

Stock warrants—The Company has granted a 10-year warrant (“Kingstone Warrants”) for 289,187 shares of common stock at an exercise price of $4.30 per share to Brett Kingstone. Mr. Kingstone was the chief executive officer of the Company until December 31, 2005 and was the chairman of the board of the Company until March 11, 2009. The warrant was granted on September 9, 2005.