EARNINGS PER SHARE

Basic earnings per share includes no dilution and is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the periods presented. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, such as convertible preferred stock, stock options, warrants or convertible securities. Due to their anti-dilutive effect, the calculation of diluted earnings per share for the three months ended June 30, 2018 and 2017 excludes: 1) options to purchase 3,466,714 and 2,583,058 shares, respectively, of common stock, 2) warrants to purchase 7,353,056 and 7,353,061 shares, respectively, of common stock, 3) Series B Preferred Stock which is convertible into 3,499,059 and 3,376,938 shares, respectively, of common stock, and 4) Series B1 Preferred Stock which is convertible into 13,105,989 and 12,862,572 shares, respectively, of common stock. Due to their anti-dilutive effect, the calculation of diluted earnings per share for the six months ended June 30, 2018 and 2017 excludes: 1) options to purchase 3,603,250 and 2,583,058 shares, respectively, of common stock, 2) warrants to purchase 7,353,056 and 7,353,061 shares, respectively, of common stock, 3) Series B Preferred Stock which is convertible into 3,499,059 and 3,376,938 shares, respectively, of common stock, 4) Series B1 Preferred Stock which is convertible into 13,105,989 and 12,862,572 shares, respectively, of common stock, 5) Series A Preferred Stock which is convertible into 419,859 and 456,608 shares, respectively, of common stock, and 6) Series C Preferred Stock, which is convertible into 3,156,800 and 3,156,800 shares of common stock, respectively.

In accordance with ASC 260-10-45, Share-Based Payment Arrangements and Participating Securities and the Two-Class Method, our Series A Preferred Stock, Series C Preferred Stock, and Series B and B1 Preferred Stock are considered participating securities. Basic earnings per common share are calculated by dividing the net income, adjusted for preferred dividends and income allocated to participating securities, by the weighted average number of common shares outstanding during the period. Diluted net income per common share reflects the dilutions that would occur if any potential dilutive instruments were exercised or converted into common shares. The dilutive effect of participating securities is calculated using the more dilutive of the treasure stock method of two-class method. Other potentially dilutive securities include preferred stock, stock options and warrants, and restricted stock. These are included in diluted shares to the extent they are dilutive under the treasure stock method for the applicable periods. During the periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company.

The following is a reconciliation of the numerator and denominator for basic and diluted earnings per share for the six months ended June 30, 2018 and 2017:



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017

Basic Earnings per Share
Numerator:
Net income (loss) available to common shareholders	$	1,439,174		$	(2,696,174	)	$	(2,016,655	)	$	(6,743,420	)
Less allocation of dividends to participating securities	(543,698		)	—			—			—
Total	895,476			(2,696,174		)	(2,016,655		)	(6,743,420		)
Denominator:
Weighted-average shares outstanding	33,300,456			32,350,218			33,182,748			32,650,347
Basic earnings per share	$	0.03		$	(0.08	)	$	(0.06	)	$	(0.21	)

Diluted Earnings per Share
Numerator:
Net income (loss) available to common shareholders	$	1,439,174		$	(2,696,174	)	$	(2,016,655	)	$	(6,743,420	)
Less diluted allocation of dividends to participating securities	(446,158		)	—			—			—
Total	993,016			(2,696,174		)	(2,016,655		)	(6,743,420		)
Denominator:
Weighted-average shares outstanding	33,300,456			32,350,218			33,182,748			32,650,347
Effect of dilutive securities
Stock options and warrants	136,536			—			—			—
Preferred Stock A	419,859			—			—			—
Preferred Stock C	3,156,800			—			—			—
Diluted weighted-average shares outstanding	37,013,651			32,350,218			33,182,748			32,650,347
Diluted earnings (loss) per share	$	0.03		$	(0.08	)	$	(0.06	)	$	(0.21	)