STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2013

Stockholders' Equity

Note 8. STOCKHOLDERS' EQUITY

Common Stock Issuances

During June and July of 2012, the Company issued 1,185,851 shares of its Common Stock in a Private Placement to Accredited Investors. The Company received $6,528,000 net of commissions and expenses. The placement agent, Taglich Brothers, received commissions in the amount of approximately $569,000, along with 12,000 shares of common stock, and Warrants to purchase approximately 119,000 shares of Common Stock at $6.30. The Company also paid approximately $18,000 of legal fees on behalf of Taglich Brothers.

There were no shares issued during the three and nine months ended September 30, 2013.

On October 28, 2013, the Company sold 133,000 shares of its common stock for $7.50 a share for gross proceeds of $997,500.  The Company reserves the right to pay Taglich Brothers a placement agent fee in connection with the sale in an amount not to exceed $20,000.

Dividends

On March 11, 2013, the Board of Directors approved and the Company announced a quarterly dividend of $0.0625 per common share paid on April 1, 2013 to all shareholders of record as of the close of business on March 15, 2013.  The approximate amount of the dividend was $358,000.

On June 20, 2013, the Board of Directors approved and the Company announced a quarterly dividend of $0.0625 per common share paid on July 5, 2013 to all shareholders of record as of the close of business on July 1, 2013.  The approximate amount of the dividend was $358,000.

On September 17, 2013, the Board of Directors approved and the Company announced a quarterly dividend of $0.125 per common share paid on October 15, 2013 to all shareholders of record as of the close of business on September 30, 2013.  The approximate amount of the dividend was $716,000.

Dividends for the three and nine months ended September 30, 2013 amounted to $716,000 and $1,432,000, respectively. There were no dividends for the three and nine months ended September 30, 2012.

Stock Options

On June 3, 2013, the Board of Directors adopted the Company’s 2013 Equity Incentive Plan (“2013 Plan”).  The 2013 plan is virtually identical to and is intended to replace, the Company’s 2010 Equity Incentive Plan. The proposal to approve the 2013 Plan was approved by the affirmative vote of the Company’s stockholders on July 29, 2013.

Derivative Liability

In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative liability instruments under the provisions of FASB ASC 815, “Derivatives and Hedging.”

            In connection with the private placement to raise money for the NTW Acquisition, the Company issued warrants to Taglich Brothers.  Such warrants contain “cashless exercise” provisions.  As a result, the value of the warrants has to be recognized as a liability.  In addition, the Company would be required to revalue the derivative liability at the end of each reporting period with the change in value reported on the statement of operations.  The Company did not account for the derivative liability in its financial statements as it was determined to not be material.