Basic and Diluted Earnings (Loss) Per Share

9 Months Ended

Sep. 30, 2018

NET LOSS PER SHARE

Basic and Diluted Earnings (Loss) Per Share

Note 12 - Basic and diluted earnings (loss) per share

Basic earnings (loss) per share is computed by dividing earnings (loss) available to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share gives effect to all dilutive potential common shares outstanding during the period and is computed by dividing the earnings attributable to common stockholders by the weighted-average number of common equivalent shares outstanding for the period, including any dilutive effect from outstanding stock options and convertible preferred stock. Diluted net income per share does not assume conversion, exercise or contingent exercise of securities that would have an anti-dilutive effect.

The Company follows the two-class method when computing earnings (loss) per share in periods when issued shares that meet the definition of participating securities are outstanding. The two-class method determines earnings (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The Company’s Series A Preferred Stock participates in any dividends declared by the Company on its common stock and are therefore considered to be participating securities. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. Accordingly, in periods in which the Company reports a net loss attributable to common stockholders when participating securities are outstanding, losses are not allocated to the participating securities because they have no contractual obligation to share in the losses of the Company. For purposes of calculating diluted earnings per share attributable to common shareholders, stock options and convertible preferred stock are considered common stock equivalents.

As described above, the Company computes basic and diluted loss per share using a methodology that gives effect to the impact of outstanding participating securities (the “two-class method”). As the three and nine months ended September 30, 2018 and 2017 resulted in net losses, there is no income allocation required under the two-class method or dilution attributed to weighted-average shares outstanding in the calculation of diluted loss per share.

Of the outstanding stock options, 5,068,335 were vested and exercisable at an average exercise price of $0.26. The following common stock equivalents, presented on an as converted basis, were excluded from the calculation of net loss per share for the periods presented, due to their anti-dilutive effect:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Outstanding stock options		6,148,335		5,540,002		6,148,335		5,540,002
Convertible preferred stock		1,680,000		-		1,680,000		-
Convertible loan payable-AOR		601,463		-		601,463		-
		8,429,798		5,540,002		8,429,798		5,540,002