2. Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of common share equivalents outstanding for the period determined using the treasury-stock method. Dilutive common stock equivalents are comprised of options outstanding under our stock option plan and convertible note payable.

As of September 30, 2014, we had a convertible note payable outstanding with a principal balance of $5.4 million that was convertible into shares of our common stock at a conversion price of $4.00 per share, at the option of the note holder.

Applicable accounting standards provide that a contract convertible into common stock that is reported as an asset or liability for accounting purposes may require an adjustment to the numerator of the diluted earnings per share calculation for any changes in income or loss that would result if the contract had been reported as an equity instrument during the period. Securities are assumed to be converted at the beginning of the period, and the resulting shares of common stock are included in the denominator of the diluted earnings per share calculation for the entire period presented, if the effect is dilutive. Adding back the gain from the change in valuation of the convertible note payable for the three months ended September 30, 2014 and 2013 to the numerator and adding the number of shares to be issued upon conversion of the convertible note payable into the denominator of the diluted earnings per share calculation resulted in an increase to the net loss per share for the period. The impact of the conversion to the numerator and denominator for the nine months ended September 30, 2014 and 2013 was anti-dilutive, and therefore was excluded.

The following table summarizes the adjustment to net loss for the diluted net loss per share calculation for the three and nine months ended September 30, 2014 and 2013 (in thousands):


	Three months ended September 30,						Nine months ended September 30,
	2014			2013			2014			2013
Net loss	$	(9,798	)	$	(2,164	)	$	(34,512	)	$	(16,741	)
Less: gain from change in valuation of note payable		1,785			671			—			—

Net loss used to compute diluted net loss per share	$	(11,583	)	$	(2,835	)	$	(34,512	)	$	(16,741	)

The following table summarizes the adjustment to weighted average shares outstanding for the diluted net loss per share calculation for the three and nine months ended September 30, 2014 and 2013:


	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
Weighted average shares outstanding used for basic net loss per share		43,406,251		40,154,812		43,155,601		37,367,368
Add: weighted average shares of convertible note payable		1,449,212		1,400,848		—		—

Weighted average shares outstanding used for diluted net loss per share		44,855,463		41,555,660		43,155,601		37,367,368

Potentially dilutive securities not included in the calculation of diluted net loss per share because to do so would be anti-dilutive are as follows (in common equivalent shares):


	Three months ended September 30,				Nine months ended September 30,
	2014		2013		2014		2013
Common stock options		1,949,096		3,041,033		2,313,182		2,474,614
Convertible note payable		—		—		1,449,212		1,400,848

Total		1,949,096		3,041,033		3,762,394		3,875,462