WARRANTS

12 Months Ended

Dec. 31, 2012

Text Block [Abstract]

WARRANTS

WARRANTS

During 2012, warrant holders exercised 74,669 warrants with 12,500 warrants exercised at $4.00 per share and 7,273 warrants exercised at $5.50 per share. The total cash received from these exercises was approximately $90,000. Under the warrant agreements, warrants may be cashlessly exercised based on the average price of the Company's common stock for 5 days prior to exercise. Under this methodology 89,432 of the total exercised warrants were exchanged for 54,896 shares of the Company's common stock in cashless exercises.

During 2011, warrant holders exercised 78,455 warrants. The exercise price for all of these exercises was paid in cash. Our warrants do contain provisions that allow warrant holders to cashlessly exercise their warrants at their option.

On March 15, 2010, one of the Company’s largest shareholders elected to exercise 1,022,728 warrants for a total exercise price of approximately $4.5 million. The proceeds from this exercise were used to pay down the outstanding balance on the revolver. During the fourth quarter of 2010 warrant holders exercised 146,116 warrants with 87,875 warrants exercised at $4.00 per share and 58,241 warrants being exercised at $5.50 per share. The total cash received from these exercises was approximately $477,000. Under the warrant agreements, warrants may be cashlessly exercised based on the average price of the Company’s common stock for 5 days prior to exercise. Under this methodology, 47,387 of the total exercised warrants were exchanged for 31,334 shares of the Company’s common stock in a cashless exercise.

In conjunction with the Rsignia acquisition, the Company issued 158,116 warrants to purchase KEYW common stock at $12.65 per share. These warrants vested immediately and expire seven years from issuance.

In conjunction with the IIT acquisition, the Company issued 215,000 warrants to purchase KEYW common stock at $9.25 per share. These warrants vested immediately and expire seven years from issuance. The costs associated with these warrants were treated as an original issue discount to the debt. This original issue discount is amortized over the life of the loans which was originally two years. The Company expensed the remaining balance of the original issue discount in September 2010 at the completion of the initial public offering due to the initial public offering triggering prepayment of the notes. The total original issue discount was approximately $585,000 as calculated using the Black-Scholes model.

As of December 31, 2012, outstanding warrants were as follows:

Exercise Price	Warrants Outstanding	Warrants Vested	Weighted Average Remaining Life (Years)
$4.00	2,023,250	2,023,250	2.64
$5.50	2,246,780	2,246,780	3.40
$9.25	210,000	210,000	4.21
$12.65	158,116	158,116	6.90
	4,638,146	4,638,146