NOTE 9 – DIVIDENDS PAYABLE – OPTIONS ADJUSTMENTS (EQUITY RESTRUCTURING EVENT)

On March 8, 2016, the Company’s Board of Directors declared a special cash dividend of $0.50 per common share, which was paid on April 4, 2016, to shareholders of record at the close of business on March 21, 2016. The total amount of this special dividend payment is approximately $1.8 million. Further, the Company’s Board of Directors also announced that it approved the initiation of a dividend policy under which the Company intends to declare a cash dividend to the Company’s shareholders in the amount of $0.20 per share per annum, payable in equal quarterly installments. In conjunction therewith, the Company’s Board of Directors declared a quarterly cash dividend of $0.05 per share to shareholders of record at the close of business on March 31, 2016. This dividend of approximately $180,000 was paid on April 14, 2016.

The Compensation Committee of the Board of Directors of the Company serves as administrator of the 2012 Plan, and the P&F Industries, Inc. 2002 Stock Incentive Plan (“2002 Plan”). The 2012 Plan requires that options granted under the 2012 Plan be equitably adjusted when an equity restructuring transaction or event occurs. Additionally, the 2002 Plan allows the Compensation Committee to equitably adjust any outstanding options granted under the 2002 Plan in the event of an equity restructuring event. The Compensation Committee determined that the special dividend met the applicable criteria under both the 2012 Plan and the 2002 Plan and authorized an equitable adjustment be made to all outstanding options under both plans. The equitable adjustment lowered the exercise price of all outstanding options, and added, in the aggregate, 19,174 options to purchase Common Stock relating to options held by all Company option holders. The reduction in the exercise price ranged from $0.13 to $0.48. The Company determined that, in accordance with ASU 718-20-20, the special dividend described above was an equity restructuring event, and, as such, there was no impact on the Company’s consolidated statement of income as the result of adjustments to the exercise price or the issuance of the additional stock options that resulted from the aforementioned modification.