NOTES TO CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED)
1. NATURE OF BUSINESS, ORGANIZATION AND GOING CONCERN
Cellectar Biosciences, Inc. (the “Company”) is a clinical
stage biopharmaceutical company focused on the discovery, development and commercialization of drugs for the treatment of cancer.
The Company’s core objective is to leverage its proprietary phospholipid drug conjugate
TM
(PDCs
TM
)
delivery platform to develop PDCs that specifically target cancer cells to deliver improved efficacy and better safety as a result
of fewer off-target effects.
The Company is subject to a number of risks similar to those of
other small pharmaceutical companies. Principal among these risks are the need to obtain additional financing necessary to fund
future operations, dependence on key individuals, competition from substitute products and larger companies and the successful
development and marketing of its products in a highly regulated environment.
The accompanying financial statements have been prepared on
a basis that assumes that the Company will continue as a going concern and that contemplates the continuity of operations, realization
of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has devoted substantially
all its efforts toward research and development and has, during the three months ended March 31, 2018, generated an operating loss
of approximately $3,454,000. The Company expects that it will continue to generate operating losses for the foreseeable future.
The Company believes that its cash balance at March 31, 2018
is adequate to fund operations into early first quarter 2019. The Company’s ability to execute its operating plan beyond
early first quarter 2019 depends on its ability to obtain additional funding via the sale of equity and/or debt securities, a strategic
transaction or otherwise. The Company plans to continue to actively pursue financing alternatives, but there can be no assurance
that it will obtain the necessary funding, raising substantial doubt about the Company’s ability to continue as a going concern
within one year of the date these financial statements are issued. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The accompanying condensed consolidated balance sheet as of
December 31, 2017 has been derived from audited financial statements. The accompanying unaudited condensed consolidated balance
sheet as of March 31, 2018, the condensed consolidated statements of operations for the three months ended March 31, 2018 and 2017,
the condensed consolidated statements of cash flows for the three months ended March 31, 2018 and 2017 and the related interim
information contained within the notes to the condensed consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information
and with the instructions, rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial
information. Accordingly, they do not include all the information and the notes required by U.S. GAAP for complete financial statements.
In the opinion of management, the unaudited interim condensed consolidated financial statements reflect all adjustments which are
of a nature necessary for the fair presentation of the Company’s consolidated financial position at March 31, 2018 and consolidated
results of its operations and cash flows for the three months ended March 31, 2018 and 2017. The results for the three months ended
March 31, 2018 are not necessarily indicative of future results.
These unaudited condensed consolidated financial statements should
be read in conjunction with the audited financial statements and related notes thereto included in the Company’s Form 10-K
for the fiscal year ended December 31, 2017, which was filed with the SEC on March 21, 2018.
Principles of Consolidation
— The consolidated
financial statements include the accounts of the Company and the accounts of its wholly-owned subsidiary. All significant intercompany
accounts and transactions have been eliminated.
Restricted Cash
— The Company accounts for cash
that is restricted for other than current operations as restricted cash. Restricted cash at March 31, 2018 and December 31, 2017
consisted of a certificate of deposit of $55,000 required under the Company’s lease agreement for its Madison, Wisconsin
facility.
Goodwill
— Goodwill is not amortized but
is required to be evaluated for impairment annually or whenever events or changes in circumstances suggest that the carrying value
of an asset may not be recoverable. The Company evaluates goodwill for impairment annually in the fourth fiscal quarter and additionally
on an interim basis if an event occurs or there is a change in circumstances, such as a decline in the Company’s stock price
or a material adverse change in the business climate, which would more likely than not reduce the fair value of the reporting unit
below its carrying amount. No such event or change in circumstances occurred; therefore, no changes in goodwill were made during
the three months ended March 31, 2018 and 2017.
In January 2017, the FASB issued ASU No. 2017-04, Simplifying the
Test for Goodwill. The standard streamlines the methodology for calculating whether goodwill is impaired based upon whether the
carrying amount of goodwill exceeds the reporting unit’s fair value. ASU 2017-04 applies to public business entities and
those other entities that have goodwill reported in their financial statements and have not elected the private company alternative
for the subsequent measurement of goodwill and is effective for annual and interim reporting periods beginning after December 15,
2019, with early adoption permitted. The Company does not expect that the adoption of this standard will have a material effect
on its financial statements.
Impairment of Long
-
Lived Assets
— Long-lived assets other than goodwill consist primarily of fixed assets, which we periodically evaluate for potential impairment.
Whenever events or circumstances change, an assessment is made as to whether there has been an impairment in the value of long-lived
assets by determining whether projected undiscounted cash flows generated by the applicable asset exceed its net book value as
of the assessment date. No such event or change in circumstances occurred; therefore, no such impairment occurred during the three
months ended March 31, 2018 and 2017.
Stock-Based Compensation
— The Company uses
the Black-Scholes option-pricing model to calculate the grant-date fair value of stock option awards. The resulting compensation
expense, net of expected forfeitures, for awards that are not performance-based is recognized on a straight-line basis over the
service period of the award, which is generally three years for stock options. For stock options with performance-based vesting
provisions, recognition of compensation expense, net of expected forfeitures, commences if and when the achievement of the performance
criteria is deemed probable. The compensation expense, net of expected forfeitures, for performance-based stock options is recognized
over the relevant performance period. Awards of stock that are not performance-based are valued at the fair market value on the
date of the grant and are amortized over the service period of the award. Non-employee stock-based compensation is accounted for
in accordance with the guidance of Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”)
Topic 505,
Equity.
As such, the Company recognizes expense based on the estimated fair value of options granted to
non-employees over their vesting period, which is generally the period during which services are rendered and deemed completed
by such non-employees.
Fair Value of Financial Instruments
— The
guidance under FASB ASC Topic 825,
Financial Instruments
, requires disclosure of the fair value of certain financial instruments.
Financial instruments in the accompanying financial statements consist of cash equivalents, accounts payable and long-term obligations.
The carrying amount of cash equivalents and accounts payable approximate their fair value because of their short-term nature.
The carrying value of remaining long-term obligations, including the current portion, approximates fair value because the fixed
interest rate approximates current market interest rates available on similar instruments.
Derivative Instruments
— The Company generally
does not use derivative instruments to hedge exposures to cash flow or market risks. However, certain warrants to purchase
common stock that do not meet the requirements for classification as equity, in accordance with the Derivatives and Hedging Topic
of the FASB ASC, are classified as liabilities. In such instances, net-cash settlement is assumed for financial reporting
purposes, even when the terms of the underlying contracts do not provide for a net-cash settlement. These warrants are considered
derivative instruments because the agreements contain a certain type of cash settlement feature, “down-round” provisions
whereby the number of shares for which the warrants are exercisable and/or the exercise price of the warrants is subject to change
in the event of certain issuances of stock at prices below the then-effective exercise price of the warrants. The number of shares
issuable under such warrants was 494,315 and 533,065 at March 31, 2018 and December 31, 2017 respectively. The primary underlying
risk exposure pertaining to the warrants is the change in fair value of the underlying common stock. Such financial instruments
are initially recorded at fair value with subsequent changes in fair value recorded as a component of gain or loss on derivatives
on the consolidated statements of operations in each reporting period. If these instruments subsequently meet the requirements
for equity classification, the Company reclassifies the fair value to equity. At March 31, 2018 and December 31, 2017, these
warrants represented the only outstanding derivative instruments issued or held by the Company.
Leases
— In February 2016, the FASB issued
ASU 2016-02, Leases (Topic 842) which supersedes FASB ASC Topic 840, Leases (Topic 840) and provides principles for the recognition,
measurement, presentation and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual
approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively
a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective
interest method or on a straight-line basis over the term of the lease, respectively. A lessee is also required to record a right-of-use
asset and a lease liability for all leases with a term of greater than twelve months regardless of classification. Leases with
a term of twelve months or less will be accounted for in a similar fashion to existing guidance for operating leases. The standard
is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted upon issuance. The
Company is currently evaluating the method of adoption and the impact of adopting ASU 2016-02 on its results of operations, cash
flows and financial position.
Recent Accounting Pronouncements -
In July 2017,
the FASB issued Accounting Standards Update (“ASU”) No. 2017-11,
Earnings Per Share (Topic 260), Distinguishing
Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815).
The amendments in Part I of this update change
the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When
determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature
no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The
amendments also clarify existing disclosure requirements for equity-classified instruments. As a result, a freestanding equity-linked
financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as
a result of the existence of a down round feature. The standard is effective for annual and interim periods beginning after December
15, 2018, with early adoption permitted upon issuance. The Company is currently evaluating the method of adoption and the impact
of adopting ASU 2017-11 on its results of operations, cash flows and financial position.
2. FAIR VALUE
In accordance with Fair Value Measurements and Disclosures Topic
of the FASB ASC 820, the Company groups its financial assets and financial liabilities generally measured at fair value in three
levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine
fair value.
|
·
|
Level 1: Input prices quoted in an active market for identical financial assets or liabilities.
|
|
·
|
Level 2: Inputs other than prices quoted in Level 1, such as prices quoted for similar financial assets and liabilities in active markets, prices for identical assets, and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
|
|
·
|
Level 3: Input prices quoted that are significant to the fair value of the financial assets or liabilities which are not observable or supported by an active market.
|
To the extent that the valuation is based on models or inputs that
are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree
of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial
instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair
value measurement.
The Company issued warrants to purchase an aggregate of 82,500 common
shares in a February 2013 public offering (the “February 2013 Public Offering Warrants”). On February 20, 2014, 27,500
of the February 2013 Public Offering Warrants expired. On May 20, 2016, 16,250 warrants were exercised. The remaining 38,750 warrants
expired on February 20, 2018.
In August 2014, as part of an underwritten public offering, the
Company issued 494,315 warrants to purchase common stock (the “August 2014 Warrants”). The August 2014 Warrants are
listed on the NASDAQ Capital Market under the symbol “CLRBW,” however, there are certain periods where trading volume
is low; therefore, they are classified as Level 2 within the hierarchy.
The following tables set forth the Company’s financial instruments
carried at fair value using the lowest level of input applicable to each financial instrument as of March 31, 2018 and December
31, 2017:
|
|
March 31, 2018
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August 2014 Warrants
|
|
$
|
—
|
|
|
$
|
132,000
|
|
|
$
|
—
|
|
|
$
|
132,000
|
|
Total
|
|
$
|
—
|
|
|
$
|
132,000
|
|
|
$
|
—
|
|
|
$
|
132,000
|
|
|
|
December 31, 2017
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Fair Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
February 2013 Public Offering Warrants
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,050
|
|
|
$
|
5,050
|
|
August 2014 Warrants
|
|
|
—
|
|
|
|
100,000
|
|
|
|
—
|
|
|
|
100,000
|
|
Total
|
|
$
|
—
|
|
|
$
|
100,000
|
|
|
$
|
5,050
|
|
|
$
|
105,050
|
|
In order to estimate the value of the February 2013 Public Offering
Warrants considered to be derivative instruments, the Company uses a modified option-pricing model together with assumptions that
consider, among other variables, the fair value of the underlying stock, risk-free interest rates, volatility, the contractual
term of the warrants, future financing requirements and dividend rates. The future financing estimates are based on the Company’s
estimates of anticipated cash requirements over the term of the warrants as well as the frequency of required financings based
on its assessment of its historical financing trends and anticipated future events. These warrants are classified within the Level
3 hierarchy because of the nature of the inputs and the valuation technique utilized.
The following table summarizes the modified option-pricing assumptions
used:
|
Three Months
Ended
March 31,
2018
|
|
|
Twelve Months
Ended
December 31,
2017
|
|
Volatility
|
|
|
N/A
|
|
|
|
76-118
|
%
|
Risk-free interest rate
|
|
|
N/A
|
|
|
|
1.03-1.39
|
%
|
Expected life (years)
|
|
|
N/A
|
|
|
|
0.14-0.89
|
|
Dividend
|
|
|
N/A
|
|
|
|
0
|
%
|
The following table summarizes the changes in the fair market value
of the Company’s warrants which are classified within the Level 3 fair value hierarchy.
|
|
Three Months
Ended
March 31,
2018
|
|
|
Twelve Months
Ended
December 31,
2017
|
|
Beginning balance – Fair value
|
|
$
|
5,050
|
|
|
$
|
27,125
|
|
(Gain) on derivatives resulting from change in fair value or extinguishment
|
|
|
(5,050
|
)
|
|
|
(22,075
|
)
|
Ending balance – Fair value
|
|
$
|
—
|
|
|
$
|
5,050
|
|
To estimate the fair value of the August 2014 Warrants, the
Company calculated the weighted average closing price for the trailing 10-day period with trades that ended on the balance sheet
date.
3. STOCKHOLDERS’ EQUITY
Authorized Share Increase
At a special meeting held on September 12, 2017, the Company’s
stockholders approved the ratification of the approval of the Certificate of Amendment to our Certificate of Incorporation to increase
the number of authorized shares by 40,000,000 to 80,000,000 which was previously approved by the Company’s stockholders at
our annual meeting of stockholders held on May 31, 2017.
October 2017 Registered Direct Offering
On October 12, 2017, the Company closed on a registered direct offering
(the “October 2017 Registered Direct Offering”), priced at-the-market, of 1,954,388 shares of its common stock and
41.0412949 shares of its Series B Preferred Stock. The Series B Preferred Stock was offered at $100,000 per share and is immediately
convertible into approximately 53,369 shares of common stock for a total of 2,190,330 shares upon conversion at a price of $1.87375
per share. The common stock was offered at $1.87375 per share. Gross offering proceeds to the Company were $7.76 million. In a
concurrent private placement, the Company offered purchasers in the registered direct offering Series D warrants to purchase an
aggregate of 3,108,538 shares of common stock, or 0.75 shares of common stock for each share of common stock purchased directly
or issuable upon conversion of shares of preferred stock. The Series B Preferred Stock is non-voting, has no dividend rights (except
to the extent dividends are also paid on common stock), liquidation preference, or other preferences over common stock. The Series
D warrants are immediately exercisable at an exercise price of $1.78 per share and expire seven years from the closing. The Series
D warrants, which are callable by the Company under certain circumstances, will not trade. Gross proceeds were approximately $7.8
million with net proceeds to the Company of approximately $7.1 million.
In order to account for the October 2017 Registered Direct Offering,
the Company allocated the proceeds to the common stock, the Series B Preferred Stock and the Series D warrants on a relative fair
value basis. Then using the effective conversion price of the Series B Preferred Stock, the Company determined that there was a
beneficial conversion feature of $1,448,945.
On or prior to December 31, 2017, 23 shares of Series B Preferred
Stock issued in the October 2017 Registered Direct Offering were converted into 1,227,485 shares of common stock. During the three
months ended March 31, 2018, 6.5 shares of Series B Preferred Stock were converted into 346,898 shares of common stock. As of March
31, 2018 11.5 shares of Series B Preferred Stock remained outstanding which are convertible into 615,947 shares of common stock.
Common Stock Warrants
The following table summarizes information with regard to outstanding
warrants to purchase common stock as of March 31, 2018.
Offering
|
|
Number of Shares
Issuable Upon
Exercise of
Outstanding
Warrants
|
|
|
Exercise
Price
|
|
|
Expiration Date
|
|
|
|
|
|
|
|
|
|
October 2017 Series D Warrants
|
|
|
3,108,538
|
|
|
$
|
1.78
|
|
|
October 14, 2024
|
November 2016 Public Offering Series C
|
|
|
4,157,850
|
|
|
$
|
1.50
|
|
|
November 29, 2021
|
April 2016 Underwritten Registered Series A
|
|
|
3,626,942
|
|
|
$
|
3.04
|
|
|
April 20,2021
|
October 2015 Incremental Series A
|
|
|
300,006
|
|
|
$
|
2.13
|
|
|
October 20,2021
|
October 2015 Private Placement Series A
|
|
|
86,365
|
|
|
$
|
2.13
|
|
|
April 1, 2021
|
October 2015 Offering – Placement Agent
|
|
|
3,750
|
|
|
$
|
28.30
|
|
|
October 1, 2020
|
August 2014 Public Offering
(1)
|
|
|
504,019
|
|
|
$
|
46.80
|
|
|
August 20, 2019
|
Total
|
|
|
11,787,470
|
|
|
|
|
|
|
|
|
(1)
|
These warrants have a certain type of cash settlement feature and they have been accounted for as derivative instruments as described in Note 1, with the exception of 9,704 warrants issued in August 2014.
|
4. STOCK-BASED COMPENSATION
Accounting for Stock-Based Compensation
During the three months ended March 31, 2018 there were no option
grants issued. The following table summarizes amounts charged to expense for stock-based compensation related to employee and director
stock option grants and recorded in connection with stock options granted to non-employee consultants:
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Employee and director stock option grants:
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
34,127
|
|
|
$
|
16,648
|
|
General and administrative
|
|
|
139,311
|
|
|
|
149,026
|
|
Total stock-based compensation
|
|
$
|
173,438
|
|
|
$
|
165,674
|
|
Assumptions Used in Determining Fair Value
Valuation and amortization method
. The fair value of each
stock award is estimated on the grant date using the Black-Scholes option-pricing model. The estimated fair value of employee
stock options is amortized to expense using the straight-line method over the vesting period. The estimated fair value of the non-employee
options is amortized to expense over the period during which a non-employee is required to provide services for the award (usually
the vesting period).
Volatility.
The Company estimates volatility based on an
average of (1) the Company’s historical volatility since its common stock has been publicly traded and (2) review of volatility
estimates of publicly held drug development companies with similar market capitalizations.
Risk-free interest rate
. The risk-free interest rate is based
on the U.S. Treasury yield curve in effect at the time of grant commensurate with the expected term assumption.
Expected term
. The expected term of stock options granted
is based on an estimate of when options will be exercised in the future. The Company applied the simplified method of estimating
the expected term of the options, as described in the SEC’s Staff Accounting Bulletins 107 and 110, as the historical experience
is not indicative of the expected behavior in the future. The expected term, calculated under the simplified method, is applied
to groups of stock options that have similar contractual terms. Using this method, the expected term is determined using the average
of the vesting period and the contractual life of the stock options granted. The Company applied the simplified method to non-employees
who have a truncation of term based on termination of service and utilizes the contractual life of the stock options granted for
those non-employee grants which do not have a truncation of service.
Forfeitures.
The Company records stock-based compensation
expense only for those awards that are expected to vest. A forfeiture rate is estimated at the time of grant and revised, if necessary,
in subsequent periods if actual forfeitures differ from initial estimates. An annual forfeiture rate of 2% was applied to all unvested
options for employees and directors, respectively, for the three months ended March 31, 2018 and for the year ended December 31,
2017. Ultimately, the actual expense recognized over the vesting period will be for only those shares that vest.
There were no stock option grants during the three months ended
March 31, 2018.
Stock Option Activity
A summary of stock option activity is as follows:
|
|
Number of
Shares Issuable
Upon Exercise
of Outstanding
Options
|
|
|
Weighted
Average
Exercise Price
|
|
|
Weighted
Average
Remaining
Contracted
Term in
Years
|
|
|
Aggregate
Intrinsic
Value
|
|
Outstanding at December 31, 2017
|
|
|
531,729
|
|
|
$
|
6.55
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
Expired
|
|
|
(4,350
|
)
|
|
$
|
48.57
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(17,987
|
)
|
|
$
|
1.89
|
|
|
|
|
|
|
|
|
|
Outstanding at March 31, 2018
|
|
|
509,392
|
|
|
$
|
6.36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, March 31, 2018
|
|
|
278,499
|
|
|
$
|
8.40
|
|
|
|
7.75
|
|
|
$
|
—
|
|
Unvested, March 31, 2018
|
|
|
230,893
|
|
|
$
|
3.89
|
|
|
|
8.48
|
|
|
$
|
—
|
|
The aggregate intrinsic value of options outstanding is calculated
based on the positive difference between the estimated per-share fair value of common stock at the end of the respective period
and the exercise price of the underlying options. There have been no option exercises to date. Shares of common stock issued
upon the exercise of options are from authorized but unissued shares.
As of March 31, 2018, there was approximately $1,023,289 of total
unrecognized compensation cost related to unvested stock-based compensation arrangements. Of this total amount, the Company
expects to recognize approximately $489,116, $462,703, and $71,470 during 2018, 2019, and 2020, respectively. The Company’s
expense estimates are based upon the expectation that all unvested options will vest in the future, less the forfeiture rate discussed
above. The weighted-average grant-date fair value of vested and unvested options outstanding at March 31, 2018 was $6.67 and $3.18,
respectively.
Restricted Stock Grant
s. During 2017, the Company granted
480,000 shares of restricted common stock with a weighted average grant date fair value of $2.10. The shares vest annually over
a three year period. As of December 31, 2017 380,000 shares of restricted common stock were outstanding. There were no restricted
stock grants issued during the three months ended March 31, 2018. A summary of restricted stock activity is as follows:
Outstanding at December 31, 2017
|
|
|
380,000
|
|
Granted
|
|
|
—
|
|
Vested
|
|
|
(93,332
|
)
|
Outstanding at March 31, 2018
|
|
|
286,668
|
|
5. NOTES PAYABLE
During the quarter ended March 31, 2017, the two loans with initial
principal amounts totaling $450,000 from the Wisconsin Economic Development Corporation, dated September 15, 2010, were paid in
full.
6. INCOME TAXES
The Company accounts for income taxes in accordance with the liability
method of accounting. Deferred tax assets or liabilities are computed based on the difference between the financial statement and
income tax basis of assets and liabilities, and net operating loss carryforwards, (NOLs) using the enacted tax rates. Deferred
income tax expense or benefit is based on changes in the asset or liability from period to period. The Company did not record a
provision or benefit for federal, state or foreign income taxes for the three months ended March 31, 2018 or 2017 because the Company
has experienced losses on a tax basis since inception. Because of the limited operating history, continuing losses and uncertainty
associated with the utilization of the NOLs in the future, management has provided a full allowance against the value of its gross
deferred tax assets.
The Company also accounts for the uncertainty in income taxes related
to the recognition and measurement of a tax position taken or expected to be taken in an income tax return. The Company follows
the applicable accounting guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure
and transition related to the uncertainty in income tax positions. No uncertain tax positions have been identified.
7. NET LOSS PER SHARE
Basic net income (loss) per share is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share for
the three months ended March 31, 2018 is computed by dividing net income by the sum of the weighted average number of shares of
common stock and the dilutive potential common stock equivalents then outstanding. Potential common stock equivalents consist
of stock options, non-vested restricted stock and warrants. Since there is a net loss attributable to common stockholders for the
three months ended March 31, 2018, the inclusion of common stock equivalents in the computation for that period would be antidilutive.
The following potentially dilutive securities have been excluded
from the computation of diluted net income (loss) per share since their inclusion would be antidilutive:
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
Warrants
|
|
|
11,787,470
|
|
|
|
8,760,446
|
|
Preferred shares as converted into common stock
|
|
|
615,947
|
|
|
|
—
|
|
Stock options
|
|
|
509,392
|
|
|
|
508,733
|
|
Non-vested restricted stock
|
|
|
286,668
|
|
|
|
—
|
|
Total potentially dilutive shares
|
|
|
13,199,477
|
|
|
|
9,269,179
|
|
8. COMMITMENTS AND CONTINGENCIES
The Company is involved in legal matters and disputes in the ordinary
course of business. We do not anticipate that the outcome of such matters and disputes will materially affect the Company’s
financial statements.