Note 10. Net Income Per Share

Basic net income per share is computed using the weighted-average number of common shares outstanding during the periods less shares of common stock subject to repurchase and non-vested stock awards. Diluted net income per share is computed using the weighted-average number of common shares outstanding and potentially dilutive common shares outstanding during the periods. The dilutive effect of outstanding stock options and restricted stock awards is reflected in diluted earnings per share by application of the treasury stock method. Potentially dilutive common shares consist of common shares issuable upon the exercise of stock options and vesting of restricted stock awards. Potentially dilutive common shares are excluded from the computation of weighted-average number of common shares outstanding in net loss years, as their effect would be anti-dilutive to the computation.

A reconciliation of the numerators and denominators of the basic and diluted net income per share calculations is as follows (in thousands, except per share data):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2018		2017		2018		2017
Numerator:
Net income attributable to AXT, Inc.	$	3,901	$	1,930	$	6,776	$	2,595
Less: Preferred stock dividends		(44)		(44)		(88)		(88)
Net income available to common stockholders	$	3,857	$	1,886	$	6,688	$	2,507
Denominator:
Denominator for basic net income per share - weighted-average common shares		39,001		38,306		38,970		36,238
Effect of dilutive securities:
Common stock options		1,094		1,212		1,191		1,216
Restricted stock awards		121		188		128		191
Denominator for dilutive net income per common shares		40,216		39,706		40,289		37,645
Net income attributable to AXT, Inc. per common share:
Basic	$	0.10	$	0.05	$	0.17	$	0.07
Diluted	$	0.10	$	0.05	$	0.17	$	0.07

Options excluded from diluted net income per share as the impact is anti-dilutive		228		622		186		617
Restricted stock excluded from diluted net income per share as the impact is anti-dilutive		249		—		240		5

The 883,000 shares of $0.001 par value Series A preferred stock issued and outstanding as of June 30, 2018 and December 31, 2017, valued at $3,532,000, are non-voting and non-convertible preferred stock with a 5.0% cumulative annual dividend rate payable when declared by the board of directors and a $4 per share liquidation preference over common stock, which must be paid before any distribution is made to common stockholders. These preferred shares were issued to Lyte Optronics, Inc. stockholders in connection with the completion of our acquisition of Lyte Optronics, Inc. on May 28, 1999.