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 six months ended January 31, 2015 and 2014, 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 and six months ended January 31, 2015, potential shares from unvested restricted stock excluded from the computation of diluted net loss per share were approximately zero and 18,000 shares, respectively. During the three and six months ended January 31, 2014, potential shares from unvested restricted stock excluded from the computation of diluted net loss per share were approximately zero and 22,000 shares, respectively.

For the three and six months ended January 31, 2015, potential shares for “in the money” stock options excluded from the computation of diluted net loss per share were approximately 411,000 and 438,000 shares, respectively. For the three and six months ended January 31, 2014, there were 0 potential shares for “in the money” stock options excluded from the computation of diluted net loss per share.

For the three and six months ended January 31, 2015 the effect of approximately 52,000 and 97,000 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. For the three and six months ended January 31, 2014 the effect of approximately 1,341,000 and 1,032,000 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.