Stockholders' Equity

9 Months Ended

Sep. 30, 2012

Stockholders Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 10 – Stockholders’ Equity

Net Income (Loss) Per Common Share

Basic net income (loss) per common share is computed by dividing net income (loss) attributable to common shareholders, less dividends on restricted stock expected to vest plus gains on redemptions on common stock, by the weighted average number of common shares outstanding for the period. Diluted net loss per common share is computed by dividing net income (loss) attributable to common shareholders by the sum of the weighted average number of common shares outstanding and any potential dilutive shares for the period. Under the two-class method of computing earnings per share, net income (loss) attributable to common shareholders is computed by adjusting net loss for the non-forfeitable dividends paid on non-vested restricted stock.

The following table reconciles the components of basic and diluted net income (loss) per common share:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2012			2011			2012			2011
Net income (loss) attributable to common shareholders	$	(719,870	)	$	(662,354	)	$	3,737,066		$	(3,777,765	)
Dividends on restricted stock expected to vest		(3,127	)		(3,003	)		(8,575	)		(7,899	)
Gain on redemption of common stock(2)		250			6,750			4,018			6,750
Basic net income (loss) attributable to common shareholders	$	(722,747	)	$	(658,607	)	$	3,732,509		$	(3,778,914	)
Weighted average common shares outstanding		1,855,791			828,387			1,537,554			754,151
Potential dilutive shares (1)		-			-			16,319			-
Weighted average common shares outstanding and potential dilutive shares		1,855,791			828,387			1,553,873			754,151
Basic income (loss) per share	$	(0.39	)	$	(0.80	)	$	2.43		$	(5.01	)
Diluted income (loss) per share	$	(0.39	)	$	(0.80	)	$	2.40		$	(5.01	)

⁽¹⁾ Excludes 17,022 and 17,723 shares related to non-vested restricted stock for the three months ended September 30, 2011 and 2012, respectfully, and 15,088 shares for the nine months ended September 30, 2011, as the effect would be anti-dilutive. Also excludes any dilution related to the 1,000 shares of convertible stock as currently there would be no conversion into common shares.

⁽²⁾ Represents the difference between the fair value and carrying amount of the common stock upon redemption.

Share Repurchase Plan and Redeemable Common Stock

The Company has adopted a share repurchase plan that may enable stockholders to sell their shares to the Company in limited circumstances.

There are several limitations on the Company’s ability to repurchase shares under the share repurchase plan:

· The Company may not repurchase shares until the stockholder has held the shares for one year.

· During any calendar year, the share repurchase plan limits the number of shares the Company may repurchase to those that the Company could purchase with the net proceeds from the sale of shares under the distribution reinvestment plan during the previous fiscal year.

· During any calendar year, the Company may not repurchase in excess of 5% of the number of shares of common stock outstanding as of the same date in the prior calendar year.

Pursuant to the share repurchase plan, the Company will initially repurchase shares at prices determined as follows:

· The lower of $9.25 or the price paid to acquire the shares from the Company for stockholders who have held their shares for at least one year;

· The lower of $9.50 or the price paid to acquire the shares from the Company for stockholders who have held their shares for at least two years;

· The lower of $9.75 or the price paid to acquire the shares from the Company for stockholders who have held their shares for at least three years; and

· The lower of $10.00 or the price paid to acquire the shares from the Company for stockholders who have held their shares for at least four years

The Company’s Board of Directors may amend or modify any provision of the plan at any time in its discretion without prior notice to participants. In the event that the Company’s Board of Directors amends, suspends or terminates the share repurchase plan, however, the Company will send stockholders notice of the change(s) following the date of such amendment, suspension or modification, and will disclose the change(s) in a report filed with the SEC on either Form 8-K, Form 10-Q or Form 10-K, as appropriate. 

The Company records amounts that are redeemable under the share repurchase plan as redeemable common stock in the accompanying consolidated balance sheets because the shares are redeemable at the option of the holder and, therefore, their redemption is outside the Company’s control. The maximum amount redeemable under the Company’s share repurchase plan is limited to the number of shares the Company could repurchase with the amount of the net proceeds from the sale of shares under the distribution reinvestment plan during the prior fiscal year. However, because the amounts that can be repurchased in future periods are determinable and only contingent on an event that is likely to occur (e.g., the passage of time), the Company presents the net proceeds from the current dividend reinvestment plan, net of current year redemptions, as redeemable common stock in the accompanying consolidated balance sheets.

The Company classifies financial instruments that represent a mandatory obligation to the Company to repurchase shares as liabilities. When the Company determines it has a mandatory obligation to repurchase shares under the share repurchase plan, the Company will reclassify such obligations from temporary equity to a liability based upon their respective settlement values. In addition, upon reclassification of such obligation to a liability, the difference between the fair value of the instrument and the carrying amount should be added to (or subtracted from) net earnings available to common shareholders in the calculation of earnings per share.

The Company limits the dollar value of shares that may be repurchased under the program as described above. During the nine months ended September 30, 2012, the Company redeemed $212,767 of common stock based on the maximum amount available for repurchases, which was equal to the amount of net proceeds raised from the sale of shares under the dividend reinvestment plan during 2011, totaling $212,767. As of September 30, 2012, we received a total of four redemption requests during the nine month period ended September 30, 2012. Of these four redemption requests, we honored a total of 5,926 shares aggregating $59,005, and deferred redemption requests with respect to 2,500 shares. In September 2012, the board of directors approved the redemption of $59,005 of common stock, in excess of the amount available for repurchases due to certain extraordinary circumstances, bringing total redemptions to $271,772 for the nine months ended September 30, 2012. The average redemption price for the fulfilled redemptions during the nine months ended September 30, 2012 was $9.96 per share. Funds for the payment of redemption requests were derived from the proceeds of our distribution reinvestment plan. We do not expect to be able to fulfill redemption requests during the remainder of 2012, except in exceptional circumstances as determined by our board of directors. As the Company receives additional share redemption requests, such shares will be queued for repurchase in 2013 in accordance with the terms of the share repurchase plan and subject to the funds available from the sale of shares under our dividend reinvestment plan during 2012. Based on the amount of net proceeds raised from the sale of shares under the dividend reinvestment plan during the nine months ended September 30, 2012, totaling $312,407, less the $59,005 redeemed during the three months ended September 30, 2012, additional redemption requests in 2012 may be redeemed up to $253,402 in 2013. As the Company has received additional redemption requests totaling $23,125 that it will have capacity to fill in 2013 based on net proceeds from the sale of the shares under the dividend reinvestment plan for the nine months ended September 30, 2012, it has reclassified this amount from redeemable common stock to other accrued liabilities as of September 30, 2012.

Stock-based Compensation for Independent Directors

The Company’s independent directors received an automatic grant of 5,000 shares of restricted stock on the effective date of the Initial Public Offering and will receive an automatic grant of 2,500 shares of restricted stock when such directors are reelected at each annual meeting of the Company’s stockholders thereafter. Each person who thereafter is elected or appointed as an independent director will receive an automatic grant of 5,000 shares of restricted stock on the date such person is first elected as an independent director and an automatic grant of 2,500 shares of restricted stock when such director is reelected at each annual meeting of our stockholders thereafter. To the extent allowed by applicable law, the independent directors will not be required to pay any purchase price for these grants of restricted stock. The restricted stock will vest 20% at the time of the grant and 20% on each anniversary thereafter over four years from the date of the grant. All restricted stock may receive distributions, whether vested or unvested. The value of the restricted stock to be granted is not determinable until the date of grant. During the nine months ended September 30, 2012, 2,500 shares of restricted stock have been granted to each of the three independent directors.

A summary of the status of the Company’s non-vested shares as of September 30, 2012, and changes during the nine months ended September 30, 2012, is as follows:

Non Vested shares	Shares			Weighted average grant-date fair value
Balance at January 1, 2012		16,500		$	165,000
Granted		7,500			75,000
Vested		(4,500	)		(45,000	)
Forfeited		-			-
Balance at September 30, 2012		19,500		$	195,000

At September 30, 2012, there was $168,750 of total unrecognized compensation cost related to unvested stock options granted under the Plan. The original cost is expected to be recognized over a period of four years. The total fair value of shares vested during the nine months ended September 30, 2012 was $45,000.

The Company currently uses authorized and unissued shares to satisfy share award grants.

Distributions

Distributions, including distributions paid by issuing shares under the distribution reinvestment plan, for the nine months ended September 30, 2012 were as follows:

	Distributions
2012	Declared		Paid
First Quarter	$	213,217	$	197,708
Second Quarter		272,107		255,192
Third Quarter		332,188		313,424

Distributions are calculated based on stockholders of record each day during the period at a rate of $0.00191781 per share per day and equal a daily amount that, if paid each day for a 365-day period, would equal a 7.0% annualized rate based on a purchase price of $10.00 per share.