ZeroStack Corp. Earnings Per Share Disclosure
22. LOSS PER SHARE
The Company calculates basic loss per share based upon the weighted average number of common shares outstanding during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares outstanding during the period. The calculation of diluted earnings per share excludes all potential common shares, with the exception of Pre-Funded Warrants, if their inclusion would have an anti-dilutive effect. Restricted stock award recipients under the 2022 Plan have a non-forfeitable right to receive dividends declared by the Company and are therefore included in computing earnings per share. A total of 8,897,410 Pre-funded Warrants are included in the computing earnings per share because the exercise price of the Pre-funded Warrants is nominal and there are no conditions that must be satisfied prior to their exercise.
The following securities were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive as the Company has a net loss for each period presented:
| December 31, 2025 | December 31, 2024 | |||||
| Stock options | 1,178,459 | 546 | ||||
| Warrants | 168,396 | 61,144 | ||||
| Restricted stock awards | 266 | 335 | ||||
| Stock appreciation rights | 18,142 | 21,569 | ||||
| Zero Gravity Convertible Note shares | 1,469,706 | |||||
| JustCBD potential additional shares to settle contingent consideration | - | 16,218 | ||||
| Total anti-dilutive | 2,834,969 | 99,812 |
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.