NOTE 4: EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of common stock outstanding during the period. Diluted earnings (loss) per share is computed by dividing net income (loss) applicable to common stock by the weighted average number of shares of common stock adjusted to include the effect of potentially dilutive securities. Potentially dilutive securities include incremental shares issuable upon exercise of outstanding stock options and shares of unvested restricted stock. Diluted earnings (loss) per share exclude all dilutive securities if their effect is anti-dilutive.

The Company's restricted stock awards are considered "participating securities" because they contain non-forfeitable rights to dividends. Under the two-class method, earnings per share ("EPS") is computed by dividing earnings allocated to common shareholders by the weighted-average number of common shares outstanding for the period. In applying the two-class method, earnings are allocated to both shares of common stock and participating securities based on their respective weighted-average shares outstanding for the period.

For the three months ended June 30, 2013, the Company analyzed its EPS using the two-class method and determined that EPS was the same for both the common stock and the participating securities during this period.

For the three months ended June 30, 2012 and for the six months ended June 30, 2013 and 2012, the Company experienced a net loss. As a result, the effect of participating securities was excluded from the computation of basic and diluted EPS. The net losses were not allocated because the restricted stockholders are not required to fund losses.

The weighted average number of shares of common stock used in basic and diluted earnings per share for the three and six months ended June 30, 2013 and 2012 is as follows:


		Three Months Ended June 30,
(amounts in thousands, except for per share)		2013			2012
NUMERATOR:
Net income (loss) before participating securities	$	33		$	(235	)
Less: income applicable to participating securities (1)		(2	)		-
Net income (loss) applicable to common stockholders	$	31		$	(235	)

DENOMINATOR:
Weighted average shares of common stock
used in basic earnings per share		5,775			5,459
Effects of puttable common stock (2)		-			272
Weighted average shares outstanding - Basic and Diluted (3)		5,775			5,731
EPS:
Net income (loss) per share - Basic and Diluted	$	0.01		$	(0.04	)

(1) For the three months ended June 30, 2013, the Company had 0.4 million nonvested restricted stock that are considered participating securities to which income is allocated. For the three months ended June 30, 2012, the Company had 0.1 million nonvested participating securities. As the participating securities do not participate in losses, there was no allocation of loss for the period.

(2) Included in the weighted average shares – basic for 2012 were puttable common shares that arose from the Alteva, LLC acquisition in August 2011. During the second half of 2012, all of the puttable shares were either exercised or the put option was terminated and are no longer outstanding.

(3) For the three months ended June 30, 2013, 0.2 million potentially dilutive shares related to out of the money common stock options were excluded from EPS, as their effect was anti-dilutive. For the three months ended June 30, 2012, 0.2 million potentially dilutive shares related to out of the money stock options were excluded from EPS as their effect was anti-dilutive.


		Six Months Ended June 30,
(amounts in thousands, except for per share)		2013			2012
NUMERATOR:
Net income (loss), before participating securities	$	(806	)	$	(1,475	)
Less: income applicable to participating securities		-			-
Net income (loss) applicable to common stockholders	$	(806	)	$	(1,475	)

DENOMINATOR:
Weighted average shares of common stock
used in basic earnings per share		5,760			5,451
Effects of puttable common stock (2)		-			272
Weighted average shares outstanding - Basic and Diluted (3)		5,760			5,723
EPS:
Net income (loss) per share - Basic and Dilutive	$	(0.14	)	$	(0.26	)

(1) For the six months ended June 30, 2013 and 2012, the Company had 0.4 million and 0.1 million nonvested restricted stock that are considered participating securities to which income is allocated, respectively. As the participating securities do not participate in losses, there was no allocation of loss for the periods.

(3) Basic and diluted weighted average shares were the same for the six months ended June 30, 2013 and 2012 because the effects of the potentially dilutive securities were anti-dilutive and were excluded from the calculation. Such securities included 0.2 million and 0.1 million common stock options at June 30, 2013 and June 30, 2012, respectively.