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 months ended October 31, 2014 and 2013, as a result of the net loss for each period, 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 months ended October 31, 2014 and 2013, potential shares from unvested restricted stock excluded from the computation of diluted net loss per share were approximately 18,000 and 51,000 shares, respectively.

For the three months ended October 31, 2014 and 2013, potential shares for “in the money” stock options excluded from the computation of diluted net loss per share were approximately 465,000 and zero shares, respectively.

For the three months ended October 31, 2014 and 2013 the effect of approximately 142,000 and 723,000 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.