Earnings Per Share

9 Months Ended

Sep. 30, 2021

NOTE 11. EARNINGS PER SHARE

Basic net loss per common share was determined by dividing net loss applicable to common stockholders by the weighted average common shares outstanding during the period. Basic and diluted net loss per share are the same because all outstanding common stock equivalents have been excluded, as they are anti-dilutive due to the Company’s losses.

The following potentially issuable common shares were not included in the computation of diluted net loss per share because they would have an anti-dilutive effect for each of the three and nine months ended September 30, 2021 and 2020 (in thousands):


	Three Months Ended September 30,		Nine Months Ended September 30,
	2021	2020	2021	2020
Shares issuable upon the release of restricted stock units	2,320	722	2,320	722
Shares issuable upon exercise of stock options	7,634	8,952	7,634	8,952
	9,954	9,674	9,954	9,674

Potentially dilutive common shares would include common shares that would be outstanding if Notes convertible at the balance sheet date were converted. As discussed in Note 10, Convertible Notes, after giving effect to the Exchange Transactions, the total principal amount of the Notes outstanding as of September 30, 2021 was $125.5 million. Upon conversion of the Notes, the Company will pay or deliver, as the case may be, cash, shares of the Company’s common stock, or a combination of cash and shares of common stock, at the Company’s election. The initial conversion rate of the Notes is 32.3428 shares of common stock per $1,000 principal amount of the Notes. As of September 30, 2021, no Notes were convertible pursuant to the original terms. The number of shares of common stock issuable upon conversion of the Notes based on the initial conversion rate was approximately 4.1 million shares as of September 30, 2021.

In connection with the Notes, the Company entered into a prepaid forward stock repurchase transaction. The aggregate number of shares of the Company’s common stock underlying the Prepaid Forward was approximately 1,858,500. The shares purchased under the Prepaid Forward are treated as treasury stock and not outstanding for purposes of the calculation of basic and diluted earnings per share, but will remain outstanding for corporate law purposes, including for purposes of any future stockholders’ votes, until the Forward Counterparty delivers the shares underlying the Prepaid Forward to the Company.

Potentially dilutive common shares would also include common shares that would be outstanding if Series A Preferred Stock were converted into common stock. Each share of Series A Preferred Stock is convertible, at the option of the holder, at any time into one share of the Company’s common stock. Additionally, each share of Series A Preferred Stock will automatically be converted into one share of the Company’s common stock immediately upon

a sale of all outstanding stock of the Company or a merger of the Company into another corporation where the pre-merger Company’s stockholders cease to be the controlling stockholders of the post-merger corporation.