4. Net income per share

The Company computes net income per share in accordance with ASC 260, Earnings per Share (“ASC topic 260”). Under ASC topic 260, securities that contain rights to receive non-forfeitable dividends (whether paid or unpaid) are participating securities and should be included in the two-class method of computing earnings per share. The Company’s preferred stockholders are entitled to participate in dividends and earnings when, and if, dividends are declared on the common stock. As such, the Company calculates net income per share using the two-class method. The two-class method is an earnings formula that treats a participating security as having rights to dividends that otherwise would have been available to common and preferred stockholders based on their respective rights to receive dividends. Losses are not allocated to the preferred stockholders for computing net loss per share under the two-class method because the preferred stockholders do not have contractual obligations to share in the losses of the Company.

Basic earnings per share is calculated by dividing net income, adjusted for amounts allocated to participating securities under the two-class method, if applicable, by the weighted average number of common stock outstanding during the period.

Diluted earnings per share is calculated by dividing net income by the weighted average number of shares of the Company’s common stock outstanding, assuming dilution, during the period. The diluted earnings per share calculation assumes (i) all stock options and warrants which are in the money are exercised at the beginning of the period and (ii) each issue or series of issues of potential common stock are considered in sequence from the most dilutive to the least dilutive. That is, dilutive potential common stock with the lowest “earnings add-back per incremental share” shall be included in dilutive earnings per share before those shares with higher earnings add back per incremental share.

The following table sets forth the computation of basic and diluted net income per share:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
Numerator:
Net income	$	3,695,099	$	2,225,413	$	7,082,168	$	5,268,441
Amounts allocated to participating preferred stockholders under the two-class method		(319,921)		(196,868)		(613,173)		(466,065)
Net income applicable to common stockholders (basic and dilutive)	$	3,375,178	$	2,028,545	$	6,468,995	$	4,802,376
Denominator:
Weighted-average common stock outstanding (basic)		49,391,614		49,179,596		49,184,276		49,848,634
Common equivalent shares from options to purchase common stock		1,870,155		2,074,627		2,112,743		2,153,615
Weighted-average common stock outstanding (diluted)(1)		51,261,769		51,254,223		51,297,019		52,002,249
Basic net income per share applicable to common stockholders	$	0.07	$	0.04	$	0.13	$	0.10
Diluted net income per share applicable to common stockholders(1)	$	0.07	$	0.04	$	0.13	$	0.09


(1)	In accordance with ASC 260-10-45-48, for the three and nine months ended September 30, 2017 and 2016, the Company excluded 396,500, of contingently-issued restricted shares from diluted weighted average common stock outstanding as the contingencies were neither (a) satisfied at the reporting date nor (b) would have been satisfied if the reporting date was at the end of the contingency period.

The following table sets forth the weighted average securities outstanding that have been excluded from the diluted net income per share calculation because the effect would have been anti-dilutive:


	Three Months Ended		Nine Months Ended
	September 30,		September 30,
	2017	2016	2017	2016
Stock options	41,500	—	28,921	581,665
Restricted stock awards	—	—	30,238	23,574
Convertible preferred stock(1)	4,688,237	4,688,237	4,688,237	5,493,407
Total anti-dilutive securities	4,729,737	4,688,237	4,747,396	6,098,646

(1)

Diluted net income per share increases when convertible preferred stock is included in the required sequence in the diluted earnings per share computation. As such, convertible preferred stock is excluded from the computation of diluted earnings per share for the three and nine months ended September 30, 2017 and 2016.