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, 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, 2013 and 2012 do not include the potential common shares from stock options and unvested restricted stock because to do so would have been antidilutive, and as such is the same as basic weighted average shares outstanding.

During the three and nine months ended April 30, 2013 and 2012, potential shares from unvested restricted stock excluded from the computation of diluted net loss per share were approximately 17,000 and 0 and 31,000 and 55,000 shares, respectively.

For the three and nine months ended April 30, 2013 the effect of approximately 726,000 and 731,000 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, 2012, approximately 776,000 and 779,000 shares respectively were excluded from the calculation of diluted net loss per share.