EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2016

Notes to Financial Statements

NOTE 6. EARNINGS PER SHARE

We compute basic earnings per share ("basic EPS") by dividing the net income or loss by the weighted average number of common shares outstanding for the reporting period. Diluted earnings per share ("diluted EPS") gives effect to all dilutive potential shares outstanding. The following table provides the computation of basic and diluted earnings per share for the three and six month periods ending June 30, 2016 and 2015:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands, except per share data)	2016			2015			2016			2015
Numerator:
Net income (loss) available to common shareholders	$	(519	)	$	(1,497	)	$	(2,463	)	$	11,359
Effect of dilutive securities
Derivative liability - warrants	$	(41	)	$	-		$	(128	)	$	(1,534	)
Accretion on convertible preferred stock		-			-			-			222
Numerator for diluted income (loss) per common share	$	(560	)	$	(1,497	)	$	(2,591	)	$	10,047
Denominator:
Weighted average shares used to compute basic income (loss) per common share		27,051			24,435			27,051			21,555
Effect of dilutive securities:
Derivative liability - warrants		-			-			-			82
Convertible preferred stock		-			-			-			2,305
Stock options		-			-			-			309
Denominator for diluted income (loss) per common share		27,051			24,435			27,051			24,251
Basic income (loss) per common share	$	(0.02	)	$	(0.06	)	$	(0.09	)	$	0.53
Diluted income (loss) per common share	$	(0.02	)	$	(0.06	)	$	(0.09	)	$	0.41

For the three months ended June 30, 2016, the potential conversion of Series B Preferred Stock into 3,951,278 shares of common stock was excluded from the computation of diluted earnings per share as the effect is anti-dilutive.

For the three months ended June 30, 2016, approximately $41,000 of the gain on the fair market valuation of the derivative liability was excluded in the computation of diluted earnings per share as the effect is anti-dilutive.

For the six months ended June 30, 2016, the exercise of warrants, preferred stock, and options were excluded from the computation of fully diluted earnings per share because their effect was antidilutive.

For the three months ended June 30, 2015, options and warrants to purchase approximately 277,000 shares of common stock and approximately $90,000 of the gain on the fair market valuation of the derivative liabilities were excluded in the computation of diluted earnings per share because their effects were anti-dilutive, while the potential conversion of Series B Preferred Stock into 3,951,278 shares of common stock was excluded from the computation of diluted earnings per share as the effect is anti-dilutive.

For the six months ended June 30, 2015, warrants to purchase approximately 82,000 shares of common stock and approximately $1,534,000 of the gain on the fair market valuation of the derivative liabilities were included in the computation of dilutive earnings per share and options to purchase approximately 309,000 shares of common stock were included in the computation of dilutive earnings per share because their effect was dilutive. The conversion of Series B Preferred Stock into 2,305,000 shares of common stock was included in the computation of diluted earnings per share as the effect is dilutive.