Note 2 – Net loss per share

Basic net income (loss) per share represents net income (loss) divided by the weighted average number of common shares outstanding during the period. The dilutive effect of potential common shares if any, consisting of outstanding stock options and unvested restricted stock is determined using the treasury stock method. Diluted weighted average shares outstanding for the three and nine months ended April 30, 2014 and 2013 do not include the potential common shares from stock options and unvested restricted stock because to do so would be antidilutive, and as such is the same as basic weighted average shares outstanding.

During the three and nine months ended April 30, 2014, potential shares from unvested restricted stock excluded from the computation of diluted net loss per share were approximately 34,000 and 36,000 shares, respectively. During the three and nine months ended April 30, 2013, potential shares from unvested restricted stock excluded from the computation of diluted net loss per share were approximately 17,000 and zero shares, respectively. For the three and nine months ended April 30, 2014, potential shares for “in the money” stock options excluded from the computation of diluted net loss per share were approximately 273,000 shares. During the three and nine months ended April 30, 2013, there were 0 potential shares from “in the money” stock options.

For the three and nine months ended April 30, 2014 the effect of approximately 170,000 and 744,000 shares respectively, of outstanding “out of the money” options to purchase common shares were excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive. During the three and nine months ended April 30, 2013, approximately 726,000 and 731,000 shares respectively, were excluded from the calculation of diluted net loss per share.