Loss Per Share

3 Months Ended

Mar. 31, 2013

(7) Loss Per Share

The Company calculates net income (loss) per share in accordance with authoritative guidance and has determined that its Series A Preferred Stock is considered a participating security for purposes of computing earnings per share and that it is appropriate to employ the two-class method for computing basic earnings per share. Under the two-class method, basic net income (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted-average number of common shares outstanding for the fiscal period. The Company allocates net income first to preferred stockholders based on dividend rights under the Company’s certificate of incorporation and then to common stockholders based on ownership interests. Net losses are not allocated to preferred stockholders.

The following table presents a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income (loss) per share under the “two class” method (in thousands, except per share data):


	Three months ended March 31,
	2013			2012
Net loss	$	(1,037	)	$	(3,220	)
Amortization of financing costs on redeemable preferred stock		7			—
Accrued dividends on redeemable preferred stock		33			—

Net loss allocable to common stockholders	$	(1,077	)	$	(3,220	)

MSDH had 5 authorized shares of common stock, par value $0.001 per share at the date of incorporation. On November 10, 2011, the Company amended its authorized shares to be 30,500 shares of common stock, par value of $0.01 and 10,000 shares of preferred stock, par value $0.01 per share. On March 19, 2012, MSDH issued 10,752 shares of MSDH stock on a one for one basis to holders of Bitstream stock. On October 9, 2012, the Company established a 6.5% Series A Redeemable Preferred Stock with the authorized number of shares of 1,940. These shares were created from the 10,000 shares of authorized preferred stock.

Basic net loss per share of MSDH for the three months ended March 31, 2013 is determined by dividing the net loss of MSDH by MSDH’s weighted average number of shares of common stock outstanding during the periods. MSDHs outstanding shares from January 1, 2011 to March 19, 2012 were determined to be 10,752 for purposes of calculating Basic net loss per share with no common stock equivalents considered outstanding. Diluted earnings per share do not include the effect of common stock equivalents as MSDH has incurred a net loss for the periods presented, and therefore common stock equivalents are considered anti-dilutive. As a result, there is no difference between MSDH’s basic and diluted loss per share for three months ended March 31, 2013 and 2012.

If MSDH had reported a profit for the periods, the potential common shares would have increased the weighted average shares outstanding by 0 and 92 for the three months ended March 31, 2013 and 2012, respectively, based on the weighted average number of common stock equivalents outstanding. Additionally, there were warrants and options outstanding to purchase 4,463 and 374 shares for the three months ended March 31, 2013 and 2012, respectively, that were not included in the potential common share computations because their exercise prices were greater than the average market price of MSDH’s common stock. These common stock equivalents are anti-dilutive even when a profit is reported in the numerator.

- Definition

The entire disclosure for earnings per share.

+ References+ Details

Marlborough Software Development Holdings Inc. 10-Q