7. Net loss per share

In connection with the IPO, the Company’s capital structure was reorganized such that AQXP Canada became a wholly-owned subsidiary of the Company, and the holders of the preferred shares of AQXP Canada, common shares of AQXP Canada and preferred shares of the Company exchanged their shares for shares of common stock of the Company (see Note 3). In connection with the IPO, the Company effected a 1-for-19.2 reverse stock split. The common stock, options and warrants outstanding as of the completion of the reorganization were 5,845,260 shares, 628,754 options and 11,363 warrants, respectively. Basic and diluted earnings per share has been retroactively restated for all periods prior to the reorganization.

Basic and diluted net loss per common share are presented using the two-class method required for participating securities. If a dividend is paid on common stock, the holders of preferred stock are entitled to a proportionate share of any such dividend as if they were holders of common stock (on an if-converted basis). The Company considers its preferred stock to be participating securities and, in accordance with the two-class method, earnings allocated to participating securities and the related number of outstanding shares of participating securities have been excluded from the computation of basic and diluted net loss per common share.

The Company considers the Aquinox USA Common Stock to be their participating stock that is subordinate to all other stock or shares of the Company. These shares are used by the Company when computing its loss per share. Under the two-class method, net loss attributable to common stockholders is determined by allocating undistributed loss between common stock and participating securities. Undistributed loss is calculated as net loss less distributed loss, accretion of liquidation preference on preferred stock, accretion of share issuance costs on preferred stock, and tax expense on preferred stock. As holders of preferred stock, holders of stock options and holders of common stock warrants do not have contractual obligations to share in the losses of the Company, the net loss attributable to common stockholders for each period is not allocated between common stock and participating securities. Accordingly, outstanding stock options, common stock warrants and preferred stock are excluded from the calculation of basic and diluted net loss per share as the effect would have been anti-dilutive.

The detail of the computation of basic and diluted earnings per share is as follows:


	THREE MONTHS ENDED MARCH 31, 2014			THREE MONTHS ENDED MARCH 31, 2013			DECEMBER 26, 2003 (INCEPTION) TO MARCH 31, 2014
*Numerator*
Net loss and comprehensive loss incurred in the development stage	$	(4,227,678	)	$	(1,010,267	)	$	(51,502,587	)
Accretion for liquidation preference on preferred stock		(1,132,893	)		(1,157,865	)		(18,566,008	)
Accretion for share issuance costs on preferred stock		(19,550	)		(44,307	)		(1,014,667	)
Tax expense on preferred stock		(100,291	)		(346,091	)		(1,897,702	)
Reversal of tax payable on preferred stock due to conversion of preferred stock		1,897,702			—			1,897,702
Extinguishment of remaining share issuance costs due to conversion of preferred stock		(439,227	)		—			(439,227	)

Total loss attributable to common stockholders	$	(4,021,937	)	$	(2,558,530	)	$	(71,522,489	)

*Denominator*
Weighted average shares used to compute basic net loss per common share		3,148,481			301,745			398,573
Effect of potentially dilutive securities:
Stock options		—			—			—
Common stock warrants		—			—			—

Weighted average shares used to compute diluted net loss per common share		3,148,481			301,745			398,573

Net loss per share attributable to common stockholders—basic	$	(1.28	)	$	(8.48	)	$	(179.45	)

Net loss per share attributable to common stockholders—diluted	$	(1.28	)	$	(8.48	)	$	(179.45	)

The following have been excluded from the computation of basic and diluted net loss per share as their effect would have been antidilutive:


	THREE MONTHS ENDED MARCH 31, 2014		THREE MONTHS ENDED MARCH 31, 2013
Convertible preferred stock		—		5,525,844
Outstanding stock options		630,159		435,141
Common stock warrants		11,363		—

Total		641,522		5,960,985