NET INCOME PER SHARE

12 Months Ended

Dec. 31, 2022

3.	NET INCOME PER SHARE

The Company presents basic and diluted income per common share using the two-class method which requires all outstanding Series A Preferred Stock (“Series A Preferred Stock”) and unvested Restricted Stock that contain rights to non-forfeitable dividends and therefore participate in undistributed income with common shareholders to be included in computing income per common share. Under the two-class method, net income is reduced by the amount of dividends declared in the period for each class of Common Stock and participating security. The remaining undistributed income is then allocated to Common Stock and participating securities, based on their respective rights to receive dividends. Series A Preferred Stock and unvested Restricted Stock contain non-forfeitable rights to dividends on an if-converted basis and on the same basis as common shares, respectively, and are considered participating securities. The Series A Preferred Stock and unvested Restricted Stock are not included in the computation of basic income per common share in periods in which we have a net loss, as the Series A Preferred Stock and unvested Restricted Stock are not contractually obligated to share in our net losses. However, the cumulative dividends on Series A Preferred Stock for the period decreases the income or increases the net loss allocated to common shareholders unless the dividend is paid in the period. Basic income per common share has been computed by dividing net income allocated to common shareholders by the weighted-average number of common shares outstanding. The basic and diluted net income amounts are the same for the years ended December 31, 2022 and 2021 as a result of the anti-dilutive impact of the potentially dilutive securities.

The Company uses the more dilutive method of calculating the diluted income per share by applying the more dilutive of either (a) the treasury stock method, if-converted method, or (b) the two-class method in its diluted income per common share calculation. Potentially dilutive shares are determined by applying the treasury stock method to the assumed exercise of outstanding stock options and the assumed vesting of restricted stock. Potentially dilutive shares issuable upon conversion of the Series A Preferred Stock are calculated using the if-converted method.

On November 30, 2022, the Company exercised in full its right of mandatory conversion of the Company’s Series A Preferred Stock. In connection with the conversion, each share of Series A Preferred Stock has been cancelled and converted into 423,729 shares of the Company’s Common Stock, no par value per share. Shares of Series A Preferred Stock are no longer outstanding and all rights of the holders to receive future dividends have been terminated. As a result of the conversion, the aggregate 12,700 shares of Series A Preferred Stock outstanding were converted into 5,381,356 shares of Common Stock.

The following is a reconciliation of the numerator and denominator of the diluted net income per share computations for the periods presented below:

	Year Ended December 31,
(in thousands, except share data)	2022			2021
Numerator:
Net income	$	12,634		$	34,718
Less: preferred stock dividend		(1,111	)		(1,219	)
Less: allocation to preferred stockholders		(1,753	)		(5,601	)
Less: allocation to restricted stockholders		(559	)		(1,796	)
Net income allocated to common stockholders	$	9,211		$	26,102

Basic net income per share:
Denominator:
Weighted average common shares outstanding		25,879,483			25,080,789
Basic net income per share	$	0.36		$	1.04

Diluted net income per share:
Denominator:
Weighted average number of:
Common shares outstanding		25,879,483			25,080,789
Dilutive potential common shares outstanding:
Series A preferred stock		-			-
Unvested restricted stock		-			-
Stock options		-			-
Dilutive shares outstanding		25,879,483			25,080,789
Diluted net income per share	$	0.36		$	1.04

The following table summarizes the potential weighted average shares of Common Stock that were excluded from the determination of our diluted shares outstanding as they were anti-dilutive:

	Year Ended December 31,
	2022		2021
Series A preferred stock		-		5,381,356
Unvested restricted stock		516,233		825,569
		516,233		6,206,925