Note 10 – Stockholders’ Deficit and Loss Per Share

The following table presents the calculation of loss per share for the three and nine months ended September 30, 2020 and 2019:

	Three months ended September 30				Nine months ended September 30
In thousands, except per share data	2020		2019		2020		2019
Numerator:
Net loss, as reported	$	(758)	$	(277)	$	(3,154)	$	(1,165)
Change in dividends accumulated on preferred shares		-		(2)		-		(40)
Net loss attributable to common shares	$	(758)	$	(279)	$	(3,154)	$	(1,205)
Denominator:
Weighted average shares outstanding		13,696		13,650		13,696		10,648
Basic and diluted loss per share	$	(0.06)	$	(0.02)	$	(0.23)	$	(0.11)

Basic loss per common share is computed by dividing net loss attributable to common shares by the weighted average number of common shares outstanding for the period. Diluted loss per common share is computed by dividing net loss attributable to common shares, by the weighted average number of common shares outstanding, adjusted for shares that would be assumed outstanding after warrants and stock options vested under the treasury stock method.

At September 30, 2020 and 2019, the Company had no accumulated unpaid dividends related to the Series B Convertible Preferred Stock (“SBCPS”).

As of September 30, 2020 and 2019, the Company had no shares of SBCPS outstanding. For each holder of the 15,864 shares of SBCPS that converted their shares into Common Stock in March 2019, the Company declared a dividend of $4.60 per share of SBCPS on March 29, 2019, aggregating $73,000, which was distributed to these former holders of the SBCPS on April 2, 2019. For a holder of 151 shares of SBCPS that converted its shares into Common Stock in August 2019, the Company declared a dividend of $9.50 per share of SBCPS on August 8, 2019, aggregating $1,000, which was distributed to this former holder of the SBCPS on August 8, 2019. On August 9, 2019, the Company notified the holders of the remaining 497 shares of SBCPS that it was exercising its mandatory conversion right on the SBCPS. As a result, each remaining outstanding share of SBCPS was converted into 100 shares of Common Stock on September 12, 2019. The Company declared a dividend of $11.00 per share of SBCPS on September 9, 2019, aggregating $6,000, which was distributed to these former holders of the SBCPS on September 12, 2019.

As of September 30, 2020 and 2019, the Company had warrants to purchase 250,000 shares of Common Stock outstanding which were included in the calculation of diluted loss per share because their exercise price was less than the average stock price for the period so their inclusion was dilutive. As of September 30, 2020 and 2019, the Company had other warrants to purchase 500,000 shares and 10,000 shares, respectively, of Common Stock outstanding, which were excluded from the calculation of diluted loss per share because their exercise price was greater than the average stock price for the period and their inclusion would have been anti-dilutive. The remaining warrants to purchase 500,000 shares could be dilutive in the future if the average share price increases and is greater than the exercise price of these warrants.

On June 4, 2020, the Company entered into a Contract Manufacturing Agreement (the “CMA”) with Craftsmen Industries Inc. (“Craftsmen”). The CMA commenced June 15, 2020 and the initial term terminates December 31, 2020. The CMA allows for renewal terms of 180 days each. Under the CMA, Craftsmen shall manufacture and supply goods and provide all necessary labor, materials, management expertise, and oversight necessary to manufacture the goods at the Company’s manufacturing facility located in Hazelwood, Missouri. The Company shall provide Craftsmen assistance to the manufacturing process, the technical details as well as the amount of goods to be produced. The CMA provides that all payments owed by the Company to Craftsmen under the CMA are secured by a second lien on company assets and have been guaranteed by Unilumin USA LLC (“Unilumin USA”). Unilumin USA is wholly owned by Unilumin North America, who owns 52% of the Company’s outstanding Common Stock. In connection with the Unilumin Guarantee in the CMA, the Company issued warrants (the “Warrants”) to purchase 500,000 shares of the Company’s Common Stock to Unilumin USA at an exercise price of $1.00 per share. The Warrants are exercisable until June 4, 2024. The Company calculated the fair value of the Warrants as $94,000 utilizing the Black-Scholes method, using a volatility of 151% and a risk free rate of 0.28%. The Company recorded an expense of $94,000 in general and administrative expenses in June 2020.