EARNINGS PER SHARE

9 Months Ended

Sep. 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 nine month periods ending September 30, 2016 and 2015:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands, except per share data)	2016			2015			2016			2015
Numerator:
Net income (loss) available to common shareholders	$	(964	)	$	(1,587	)	$	(3,428	)	$	9,771
Effect of dilutive securities
Derivative liability - warrants	$	-		$	-		$	-		$	(1,800	)
Accretion on convertible preferred stock		-			-			-			222
Numerator for diluted income (loss) per common share	$	(964	)	$	(1,587	)	$	(3,428	)	$	8,193
Denominator:
Weighted average shares used to compute basic income (loss) per common share		27,075			27,051			27,059			23,414
Effect of dilutive securities:
Derivative liability - warrants		-			-			-			54
Convertible preferred stock		-			-			-			2,862
Stock options		-			-			-			16
Denominator for diluted income (loss) per common share		27,075			27,051			27,059			26,346
Basic income (loss) per common share	$	(0.04	)	$	(0.06	)	$	(0.13	)	$	0.42
Diluted income (loss) per common share	$	(0.04	)	$	(0.06	)	$	(0.13	)	$	0.31

For the three and nine months ended September 30, 2016 and 2015, 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 and nine months ended September 30, 2016 and for the three months ended September 30, 2015, the change in 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 three and nine months ended September 30, 2016 and for the three months ended September 30, 2015, the exercise of warrants and options were excluded from the computation of fully diluted earnings per share because their effect was antidilutive. At September 30, 2016, 254,375 warrants and 2,780,876 options, exercisable into 1,062,592 common shares, were excluded from the computation of diluted earnings per share as the effect is anti-dilutive.