Note 12. Net Income (Loss) Per Share

Basic net income (loss) per common share is determined by dividing the net income (loss) by the weighted-average common shares outstanding during the period. Diluted net income (loss) includes the effect, if any, from potential exercises of conversion of securities, such as stock options and warrants, which could result in the issuance of incremental shares of common stock. However, potential common shares are excluded if their effect is anti-dilutive. All warrants are participating in securities, as they participate on a one-for-one basis with common stock in earnings of the Company, if and when declared by the Board of Directors. For the purposes of computing earnings per share, the warrants are considered to participate with common stock in earnings of the Company. Therefore, the Company computes earnings per share using the two-class method, an earnings allocation method that determines net income (loss) per share (when there are earnings) for common stock and participating securities. Diluted earnings per share for the Company’s common stock is computed using the more dilutive of the two-class method or the treasury stock method.