10-Q 1 notv-20220331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from ___________ to _____________.

Commission File Number 000-23357

INOTIV, INC.

(Exact name of the registrant as specified in its charter)

INDIANA
(State or other jurisdiction of incorporation or organization)

    

35-1345024
(I.R.S. Employer Identification No.)

2701 KENT AVENUE
WEST LAFAYETTE, INDIANA
(Address of principal executive offices)

47906
(Zip code)

(765) 463-4527

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange

on which registered

Common Shares

NOTV

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES         NO

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES      NO

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check):

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller Reporting Company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES       NO

As of April 26, 2022, 25,515,239 of the registrant's common shares were outstanding.

TABLE OF CONTENTS

 

 

 

 

 

    

Page

PART I

FINANCIAL INFORMATION

 

 

 

 

Item 1

Condensed Consolidated Financial Statements:

 

Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and September 30, 2021

4

Condensed Consolidated Statements of Operations for the Three and Six Months Ended March 31, 2022 and 2021 (Unaudited)

5

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended March 31, 2022 and 2021 (Unaudited)

6

Condensed Consolidated Statements of Shareholders’ Equity and Noncontrolling Interest for the Three and Six Months Ended March 31, 2022 and 2021 (Unaudited)

7

Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 2022 and 2021 (Unaudited)

9

Notes to Condensed Consolidated Financial Statements

10

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 3

Quantitative and Qualitative Disclosures about Market Risk

45

Item 4

Controls and Procedures

46

 

 

 

PART II

OTHER INFORMATION

47

 

 

 

Item 1

Legal Proceedings

47

Item 1A

Risk Factors

48

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3

Defaults Upon Senior Securities

48

Item 4

Mine Safety Disclosures

48

Item 5

Other Information

49

Item 6

Exhibits

49

 

Signatures

50

3

INOTIV, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

    

March 31, 

    

September 30, 

    

2022

2021

(Unaudited)

Assets

 

  

 

  

 

Current assets:

 

  

 

  

 

Cash and cash equivalents

$

47,042

$

138,924

Restricted cash

 

427

 

18,000

Trade receivables and contract assets, net of allowances for doubtful accounts of $4,698 and $668, respectively

 

86,456

 

28,364

Inventories, net

 

56,775

 

602

Prepaid expenses and other current assets

 

34,883

 

3,129

Total current assets

 

225,583

 

189,019

 

 

  

Property and equipment, net

 

153,179

 

47,978

Operating lease right-of-use assets, net

23,795

8,358

Goodwill

 

456,631

 

51,927

Other intangible assets, net

 

274,387

 

24,233

Other assets

 

5,846

 

341

Total assets

$

1,139,421

$

321,856

 

  

Liabilities, shareholders' equity and noncontrolling interest

 

  

Current liabilities:

 

  

Accounts payable

$

30,805

$

6,163

Accrued expenses and other liabilities

 

20,690

 

8,968

Capex line of credit

1,749

Fees invoiced in advance

70,238

26,614

Current portion on long-term operating lease

 

5,356

 

1,959

Current portion of long-term debt

5,339

9,656

Total current liabilities

 

132,428

 

55,109

Long-term operating leases, net

18,613

6,554

Long-term debt, less current portion, net of debt issuance costs

 

332,274

 

154,209

Other liabilities

1,913

512

Deferred tax liabilities, net

36,783

344

Total liabilities

 

522,011

 

216,728

Contingencies (Note 14)

 

 

  

Shareholders’ equity and noncontrolling interest:

 

 

  

Preferred shares, authorized 1,000,000 shares, no par value:

 

 

  

Common shares, no par value:

 

Authorized 74,000,000 shares; 25,495,701 issued and outstanding at March 31, 2022 and 15,931,485 at September 30, 2021

 

6,336

 

3,945

Additional paid-in capital

 

713,034

 

112,198

Accumulated deficit

 

(101,090)

 

(11,015)

Accumulated other comprehensive loss

(628)

Total equity attributable to common shareholders

617,652

105,128

Noncontrolling interest

(242)

Total shareholders’ equity and noncontrolling interest

 

617,410

 

105,128

Total liabilities and shareholders’ equity and noncontrolling interest

$

1,139,421

$

321,856

The accompanying notes are an integral part of the condensed consolidated financial statements

4

INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended

Six Months Ended

March 31, 

March 31, 

    

2022

    

2021

    

2022

    

2021

    

Service revenue

$

49,584

$

17,902

$

87,760

$

34,934

Product revenue

 

90,729

 

849

 

136,764

 

1,702

Total revenue

$

140,313

 

18,751

$

224,524

$

36,636

Costs and expenses:

 

 

 

 

Cost of services provided

33,305

11,905

57,514

23,502

Cost of products sold

62,282

522

102,959

933

Selling

 

4,647

 

880

 

7,385

 

1,505

General and administrative

21,347

5,610

34,599

10,492

Amortization of intangible assets

6,414

152

9,810

312

Other operating expense

4,450

203

38,030

399

Operating income (loss)

$

7,868

$

(521)

$

(25,773)

$

(507)

Other income (expense):

Interest expense

 

(7,547)

 

(366)

 

(12,375)

 

(713)

Other (expense) income

 

(139)

 

179

 

(57,866)

 

179

Income (loss) before income taxes

$

182

$

(708)

$

(96,014)

$

(1,041)

Income tax (expense) benefit

 

(6,846)

 

(15)

 

5,939

 

(48)

Consolidated net (loss)

$

(6,664)

$

(723)

$

(90,075)

$

(1,089)

Less: Net income (expense) attributable to noncontrolling interests

(577)

(941)

Net (loss) attributable to common shareholders

$

(6,087)

$

(723)

$

(89,134)

$

(1,089)

(Loss) per common share

Net (loss) attributable to common shareholders:

Basic and diluted

$

(0.24)

$

(0.06)

$

(3.84)

$

(0.10)

 

Weighted-average number of common shares outstanding:

 

Basic and diluted

 

25,315

 

11,151

 

23,197

 

11,083

The accompanying notes are an integral part of the condensed consolidated financial statements.

5

INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

(In thousands)

Three Months Ended

Six Months Ended

March 31, 

March 31, 

    

2022

    

2021

    

2022

    

2021

Consolidated net (loss)

$

(6,664)

$

(723)

$

(90,075)

$

(1,089)

Foreign currency translation

 

(1,114)

 

 

(867)

 

Defined benefit plans:

Amortization of periodic benefit costs

340

230

Other comprehensive (loss) income, net of tax

(774)

(637)

Consolidated comprehensive (loss)

(7,438)

(723)

(90,712)

(1,089)

Less: Comprehensive (loss) attributable to non-controlling interests

 

(577)

 

 

(941)

Comprehensive (loss) attributable to common stockholders

$

(6,861)

$

(723)

$

(89,771)

$

(1,089)

6

INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTEREST

(UNAUDITED)

(In thousands, except number of shares)

Three and Six Month Periods Ended March 31, 2022

Accumulated

    

Additional

    

    

    

Other

Non-

Total

Preferred Shares

Common Shares

paid-in

Accumulated

Comprehensive

Controlling

shareholders’

    

Number

    

Amount

    

Number

    

Amount

    

capital

    

deficit

    

Loss

Interests

equity

Balance at September 30, 2021

 

$

 

15,931,485

$

3,945

$

112,198

$

(11,015)

$

$

$

105,128

Consolidated net (loss) income

 

 

 

 

 

 

(83,411)

 

 

364

 

(83,047)

Stock issued in acquisitions

 

 

8,374,138

 

2,094

 

459,289

 

 

 

 

461,383

Non-controlling interest related to Envigo acquisition

 

 

 

(983)

(983)

Issuance of stock under employee stock plans

42,971

11

38

49

Stock based compensation

19,160

19,160

Pension cost amortization

(110)

(110)

Foreign currency translation adjustment

247

247

Reclassification of convertible note embedded derivative to equity (Note 7)

88,576

88,576

Balance at December 31, 2021

$

24,348,594

$

6,050

$

679,261

$

(94,426)

$

137

$

(619)

$

590,403

Consolidated net (loss) income

 

 

 

 

 

(6,664)

577

 

(6,087)

Stock issued in acquisitions

 

 

1,106,457

 

276

 

32,599

 

 

 

 

32,875

Non-controlling interest related to Envigo acquisition

 

 

 

(191)

(191)

Issuance of stock under employee stock plans

40,650

10

36

46

Stock based compensation

1,138

1,138

Pension cost amortization

 

340

340

Foreign currency translation adjustment

(1,105)

(9)

(1,114)

Balance March 31, 2022

$

25,495,701

$

6,336

$

713,034

(101,090)

$

(628)

$

(242)

$

617,410

7

INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND NONCONTROLLING INTEREST

(UNAUDITED)

(In thousands, except number of shares)

Three and Six Month Periods Ended March 31, 2021

Accumulated

    

Additional

    

    

    

Other

Non-

Total

Preferred Shares

Common Shares

paid-in

Accumulated

Comprehensive

Controlling

shareholders’

    

Number

    

Amount

    

Number

    

Amount

    

capital

    

deficit

    

Loss

Interests

equity

Balance at September 30, 2020

 

25

$

25

 

10,977,675

$

2,706

$

26,775

$

(21,910)

$

$

$

7,596

Consolidated net (loss) income

 

 

 

 

 

(366)

 

(366)

Stock option exercises

23,350

6

39

45

Stock based compensation

116,974

29

152

181

Balance at December 31, 2020

25

$

25

11,117,999

$

2,741

$

26,966

$

(22,276)

$

$

$

7,456

Consolidated net (loss) income

 

 

 

 

 

(723)

 

(723)

Stock based compensation

12,502

3

275

278

Stock option exercises

36,040

9

56

65

Preferred stock conversion

(25)

(25)

12,500

3

22

Balance at March 31, 2021

$

11,179,041

$

2,756

$

27,319

$

(22,999)

$

$

$

7,076

The accompanying notes are an integral part of the consolidated financial statements.

8

INOTIV, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

Six Months Ended

March 31, 

    

2022

    

2021

    

Operating activities:

 

  

 

  

 

Consolidated net (loss)

$

(90,075)

$

(1,089)

Adjustments to reconcile net income (loss) to net cash provided by operating activities, net of acquisitions:

 

 

Depreciation and amortization

 

15,866

 

2,154

Undistributed earnings of noncontrolling interest

777

Employee stock compensation expense

 

20,300

 

460

Changes in deferred taxes

(1,907)

Provision for doubtful accounts

381

72

Unrealized foreign currency loss

60

9

Amortization of debt issuance costs and original issue discount

1,203

Noncash interest and accretion expense

2,512

Loss on fair value remeasurement of embedded derivative

56,714

Other non-cash operating activities

69

Loss on debt extinguishment

878

Non-cash amortization of inventory fair value step-up

6,277

Gain on disposal of property and equipment

(235)

(1)

Financing lease interest expense

 

1

 

137

Changes in operating assets and liabilities:

 

 

Trade receivables and contract assets

 

(8,926)

 

(1,927)

Inventories

 

(14,688)

 

(172)

Prepaid expenses and other current assets

(10,149)

178

Operational lease right-of-use assets and liabilities, net

1,457

(31)

Accounts payable

 

5,222

 

770

Accrued expenses and other liabilities

 

(11,510)

 

66

Fees invoiced in advance

 

28,402

 

3,831

Other asset and liabilities, net

1,467

Net cash provided by operating activities

 

4,027

 

4,526

 

  

 

  

Investing activities:

 

  

 

  

Capital expenditures

(15,202)

(2,427)

Proceeds from sale of equipment

283

2

Cash paid in acquisitions

 

(288,702)

 

Net cash used in investing activities

 

(303,621)

 

(2,425)

 

  

 

  

Financing activities:

 

  

 

  

Payments on finance lease liability

(207)

Payments of long-term debt

(37,746)

(1,436)

Payments of debt issuance costs

(9,887)

(41)

Payments on promissory notes

 

(763)

 

Payments on capex lines of credit

(1,749)

(135)

Payments on revolving credit facility

 

(10,000)

 

Payments on senior term notes

(513)

Payments on delayed draw term loan

(88)

Borrowings on revolving credit facility

 

10,000

 

Borrowings on construction loans

1,184

Borrowings on capex lines of credit

387

Borrowings on delayed draw term loan

35,000

Proceeds from issuance of senior term notes

205,000

Proceeds from exercise of stock options

93

111

Net cash provided by (used in) financing activities

 

190,531

 

(1,321)

 

 

  

Effect of exchange rate changes on cash and cash equivalents

(392)

Net (decrease) increase in cash and cash equivalents

 

(109,455)

 

780

Cash, cash equivalents, and restricted cash at beginning of period

 

156,924

 

1,406

Cash, cash equivalents, and restricted cash at end of period

$

47,469

$

2,186

 

 

Noncash financing activity:

Seller financed acquisition

$

6,325

Supplemental disclosure of cash flow information:

 

 

Cash paid for interest

$

5,989

$

520

Income taxes paid, net

$

614

$

The accompanying notes are an integral part of the condensed consolidated financial statements.

9

INOTIV, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Amounts in thousands except share amounts, unless otherwise indicated)

(Unaudited)

1.           DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

Inotiv, Inc. and its subsidiaries and a variable interest entity (“VIE”) (“we,” “our,” “us,” the “Company,” and “Inotiv”) comprise a leading contract research organization specializing in nonclinical and analytical drug discovery and development services. The Company also manufactures scientific instruments for life sciences research, which it sells with related software for use by pharmaceutical companies, universities, government research centers and medical research institutions.

On November 5, 2021, the Company completed the acquisition of Envigo RMS Holding Corp. (“Envigo”) by merger of a wholly owned subsidiary of the Company with and into Envigo.

As a result of the Envigo transaction, the Company’s business now includes breeding, importing and selling research-quality animal models for use in laboratory tests, manufacturing and distributing standard and custom diets, distributing bedding and enrichment products, and providing other services associated with these products. With over 130 different species and strains, the Company is a global leader in the production and sale of some of the most widely used rodent research model strains, among other species. The Company maintains production and distribution facilities in the United States (“U.S.”), United Kingdom (“U.K.”), mainland Europe, and Israel.

Basis of Presentation

The Company has prepared the accompanying unaudited interim condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles (“GAAP”), and therefore should be read in conjunction with the Company’s audited consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2021. In the opinion of management, the condensed consolidated financial statements for the three and six months ended March 31, 2022 and 2021 include all adjustments which are necessary for a fair presentation of the results of the interim periods and of the Company’s financial position at March 31, 2022. The results of operations for the three and six months ended March 31, 2022 may not be indicative of the results for the fiscal year ending September 30, 2022.

The acquisition of Envigo was transformational to the Company’s underlying business. As a result, certain reclassifications have been made to prior periods in the unaudited condensed consolidated financial statements and accompanying notes to conform with current presentation, which more closely reflects management’s perspective of the business as it currently exists.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgements that may affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosures of contingent assets and liabilities. These include, but are not limited to, management estimates in the calculation and timing of revenue recognition, pension liabilities, deferred tax assets and liabilities and the related valuation allowance. Although estimates are based upon management’s best estimate using historical experience, current events, and actions, actual results could differ from those estimates. Changes in estimates are reflected in reported results in the period in which they become known.

Consolidation

The accompanying condensed consolidated financial statements are unaudited and have been prepared by the Company, including all subsidiaries and a VIE it consolidates in accordance with GAAP. The Company consolidates a VIE as a result of the Envigo acquisition. The VIE does not materially impact our net assets or net income.  

The Company accounts for noncontrolling interests in accordance with Accounting Standard Codification (“ASC”) 810, “Consolidation” (“ASC 810”). ASC 810 requires companies with noncontrolling interests to disclose such interests as a portion of equity but separate from the parent’s equity. The noncontrolling interests’ portion of net income (loss) is presented on the condensed consolidated statement of operations.

10

Summary of Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in the Company’s Annual Report on Form 10-K for fiscal year 2021. As a result of the Envigo acquisition, the following policies have been added or adjusted to reflect our combined business.

Pension Costs

As a result of the Envigo acquisition, the Company has a defined benefit pension plan for one of its U.K. subsidiaries.

The projected benefit obligation and funded position of the defined benefit plan is estimated by actuaries and the Company recognizes the funded status of its defined benefit plan on its condensed consolidated balance sheets and recognizes gains, losses and prior service costs or credits that arise during the period that are not recognized as components of net periodic benefit cost as a component of accumulated other comprehensive income (loss), net of tax. The Company measures plan assets and obligations as of the date of the Company’s year-end consolidated balance sheet, using assumptions to anticipate future events. The valuation of assets acquired and liabilities assumed in the Envigo acquisition had not yet been finalized as of March 31, 2022. The purchase price allocation is preliminary and subject to change, including the valuation of the unfunded defined benefit plan obligation, among other items.

Additional information about certain effects on net periodic benefit cost for the next fiscal year that arise from delayed recognition of the gains or losses, prior service costs or credits, and transition assets or obligations are disclosed in the notes to the condensed consolidated financial statements (see Note 13 – Defined Benefit Plan).

Comprehensive Income (Loss)

Comprehensive income (loss) for the periods presented is comprised of consolidated net income (loss) plus the change in the cumulative translation adjustment equity account and the adjustments, net of tax, for the current period actuarial gains (losses) in connection with the Company’s defined benefit plan.

Foreign Currencies

Transactions in currencies other than the functional currency of each entity are recorded at the rates of exchange on the date of the transaction. Monetary assets and liabilities in currencies other than the functional currency are translated at the rates of exchange on the balance sheet date and the related transaction gains and losses are reported in the condensed consolidated statements of operations, in Operating income. The Company records gains and losses from re-measuring intercompany loans within Other (expense) income in the condensed consolidated statements of operations.

The results of operations of subsidiaries whose functional currency is other than the U.S. dollar are translated into U.S. dollars at the average exchange rate, assets and liabilities are translated at period-end exchange rates, capital accounts are translated at historical exchange rates, and retained earnings are translated at the weighted average of historical rates. Translation adjustments are excluded from the determination of net income (loss) and are recorded as a separate component of equity within accumulated other comprehensive income (loss) in the condensed consolidated financial statements.

Concentration of Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade receivables from customers in the biopharmaceutical, contract research, academic, and governmental sectors. The Company believes its exposure to credit risk is minimal, as the majority of the customers are predominantly well established and viable. Additionally, the Company maintains allowances for potential credit losses. The Company’s exposure to credit loss in the event that payment is not received for revenue recognized equals the outstanding trade receivables and contract assets less fees invoiced in advance.

During the three and six months ended March 31, 2022, one customer accounted for 31.4% and 27.4% of sales, respectively. During the three and six months ended March 31, 2021, no customer accounted for more than 10% of sales. During the the three and six months ended March 31, 2022 and 2021, no supplier accounted for more than 10% of purchases of goods and services.

11

2.           EQUITY

Common Stock Offering

On April 23, 2021, we closed an underwritten public offering of 3,044,117 of our common shares, including 397,058 common shares sold pursuant to the full exercise by the underwriter of its option to purchase additional shares to cover over-allotments.  All of the shares were sold at a price to the public of $17.00 per share. Net proceeds from the offering were approximately $49,000, after deducting the underwriting discount and estimated offering expenses.

Increase in Authorized Shares and Equity Plan Reserve

On November 4, 2021, the Company’s shareholders approved an amendment to the Company’s Second Amended and Restated Articles of Incorporation to increase the number of authorized shares from 20,000,000 shares, consisting of 19,000,000 common shares and 1,000,000 preferred shares, to 75,000,000 shares, consisting of 74,000,000 common shares and 1,000,000 preferred shares. Approval of this matter by the Inotiv shareholders was a condition to the closing of the Envigo acquisition. The amendment was effective on November 4, 2021. On November 4, 2021, the Company’s shareholders approved an amendment to the Company’s 2018 Equity Incentive Plan (the “Equity Plan”) to increase the number of shares available for awards thereunder by 1,500,000 shares and to make certain corresponding changes to certain limitations in the Equity Plan. At March 31, 2022, 1,250,819 shares remained available for grants under the Equity Plan.

Stock Issued in Connection with Acquisitions

During the three and six months ended March 31, 2022, 1,106,457 and 9,480,595 common shares, respectively, were issued in relation to acquisitions. See Note 10 for further discussion of consideration for each acquisition.

Stock Based Compensation

The Company expenses the estimated fair value of stock options, restricted stock and restricted stock units over the vesting periods of the grants. The Company recognizes expense for awards subject to graded vesting using the straight-line attribution method. The Company adopted a change in accounting policy effective October 1, 2020 for forfeitures. Stock based compensation expense for the three and six months ended March 31, 2022 and 2021, was $1,138 and $25,070 and $279 and $460, respectively. Of the $25,070 stock compensation expense in the six-months ended March 31, 2022, $23,014 relates to post-combination expense recognized in connection with the Envigo transaction (see Note 10 – Business Combinations), which is inclusive of $4,772 of stock based compensation settled in cash.

3.          NET LOSS PER SHARE

The Company computes basic income (loss) per share using the weighted average number of common shares outstanding. The Company computes diluted earnings per share using the if-converted method for preferred shares and convertible debt, if any, and the treasury stock method for stock options and restricted stock units. Shares issuable upon exercise of 1,695,070 options and shares issuable upon vesting of 682,357 restricted stock units were not considered in computing diluted income (loss) per share for the three and six months ended March 31, 2022 because they were anti-dilutive. Additionally, there are 3,040,268 shares of common stock issuable upon conversion in connection with the convertible debt entered into on September 27, 2021. The Company computes diluted earnings per share using the if-converted method for the shares issuable in connection with the convertible debt. These shares were not considered in computing diluted (loss) per share for the three and six months ended March 31, 2022 because they were anti-dilutive. Shares issuable upon the exercise of 671 options and seven common shares issuable upon conversion of preferred shares were not considered in computing diluted income (loss) per share for the three and six months ended March 31, 2021 because they were anti-dilutive.

12

The following table reconciles the computation of basic net loss per share to diluted net loss per share: