Earnings (Loss) Per Common Share
Basic net earnings (loss) per common share is computed by dividing net income (loss) by the weighted-average number of shares of Common Stock outstanding. Diluted earnings (loss) per common share reflects, in periods in which it has a dilutive effect, the impact of common shares issuable upon exercise of stock options and warrants as well as non-vested restricted stock awards. The computation of diluted earnings (loss) per common share excludes those options and warrants with an exercise price in excess of the average market price of the Company’s Common Stock during the periods presented. For the year ended December 31, 2024, there were 2,828 options with an exercise price in excess of the average market price of the Company’s Common Stock during the period. For the year ended December 31, 2024, there were no warrants with an exercise price in excess of the average market price of the Company’s Common Stock during the period.
The computation of diluted earnings (loss) per common share excludes outstanding options, warrants and non-vested restricted stock awards in periods where the exercise of such options and warrants or vesting of such restricted stock awards would be anti-dilutive. For the year ended December 31, 2023, no options, warrants or restricted stock awards were included in the computation of diluted loss per common share as they would have been anti-dilutive for the relevant period and, as a result, the weighted average number of shares of Common Stock used in the calculation of diluted loss per common share has not been adjusted for the effect of such options, warrants and non-vested restricted stock awards.
The reconciliation of the weighted average number of shares of Common Stock used in the calculation of basic and diluted earnings (loss) per common share follows:
| | | | | | | | | | | | | | |
| | Years ended
December 31, | |
| | 2024 | | 2023 | |
| | | | | |
| Weighted average number of shares outstanding | 11,478,899 | | 10,756,487 | |
| | | | | |
| Effect of dilutive securities, common share equivalents: | | | | |
| Stock options | 205,961 | | - | |
| Warrants | 554,516 | | - | |
| Restricted stock awards | 184,393 | | - | |
| | | | | |
| Weighted average number of shares outstanding, | | | | |
| used for computing diluted earnings (loss) per share | 12,423,769 | | 10,756,487 | |
About Earnings Per Share Disclosures
The earnings per share disclosure breaks down the calculation from net income to both basic and diluted EPS, revealing the full impact of a company's capital structure on per-share economics. The reconciliation between basic and diluted share counts exposes how many stock options, RSUs, convertible securities, and warrants are potentially dilutive to existing shareholders.
Key signals: a widening gap between basic and diluted shares indicates growing dilution from equity compensation or convertible instruments. Anti-dilutive securities excluded from the diluted calculation deserve attention — they represent latent dilution that will materialize if the stock price rises. Watch for the effect of share buybacks on per-share metrics: EPS growth driven primarily by repurchases rather than income growth signals weakening fundamentals. Compare year-over-year changes in the diluted share count against equity compensation expense to assess whether management is effectively managing dilution.