VERTICAL HEALTH SOLUTIONS INC

CIK:0001163332|SEC Filings

Earnings (Loss) Per Share

3 Months Ended

Sep. 30, 2013

6. EARNINGS (LOSS) PER SHARE

The following table provides a reconciliation of the numerators and denominators used in calculating basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2013 and 2012.

	Three Months Ended September 30, 2013				Three Months Ended September 30, 2012			Nine Months Ended September 30, 2013		Nine Months Ended September 30, 2012

Basic earnings (loss) per share calculation:

Net income (loss) to common stockholders	$	(1,074,608	)	$	(2,397,064	)	$	(3,165,835	)	$	(3,649,081	)
Weighted average of common shares outstanding		13,978,146			11,248,343			13,799,552			10,928,783
Basic net earnings (loss) per share	$	(0.08	)	$	(0.21	)	$	(0.23	)	$	(0.33	)

Diluted earnings (loss) per share calculation:

Net income (loss) to common stockholders	$	(1,074,608	)	$	(2,397,064	)	$	(3,165,835	)	$	(3,649,081	)
Weighted average of common shares outstanding		13,978,146			11,248,343			13,799,552			10,928,783
Stock options (1)		—			—			—			—
Stock warrants (2)		—			—			—			—
Convertible debt (3)		—			—			—			—
Diluted weighted average common shares outstanding		13,978,146			11,248,343			13,799,552			10,928,783
Diluted net income (loss) per share	$	(0.07	)	$	(0.21	)	$	(0.23	)	$	(0.33	)

(1)

For the three and nine months ended September 30, 2013 and 2012, there were common stock equivalents attributable to outstanding stock options of 1,385,000 and 1,130,000, respectively. The stock options are anti-dilutive for the three and six months ended September 30, 2013 and 2012 and therefore, have been excluded from diluted earnings (loss) per share.

(2)

For the three and nine months ended September 30, 2013 and 2012, there were common stock equivalents attributable to warrants of 5,292,714 and 3,742,047, respectively. The warrants are anti-dilutive for the three and nine months ended September 30, 2013 and 2012 and therefore, have been excluded from diluted earnings (loss) per share.

(3)

For the three and nine months ended September 30, 2013 and 2012, there were common stock equivalents attributable to conversion shares related to the convertible notes and related accrued interest of 10,543,474 and 4,321,530, respectively. The conversion shares are anti-dilutive for the three and nine months ended September 30, 2013, and 2012, and therefore, have been excluded from diluted earnings (loss) per share.

Statements of Cash Flows (Unaudited) (USD $)	6 Months Ended	9 Months Ended	56 Months Ended
Statements of Cash Flows (Unaudited) (USD $)	Jun. 30, 2012	Sep. 30, 2013	Sep. 30, 2013
Statement of Cash Flows [Abstract]
Net loss	$ (3,649,081)	$ (3,165,835)	$ (12,033,089)
Cash flows used in operating activities:
Depreciation and amortization of assets	128,135	450,695	1,092,003
Amortization of debt discount	364,572	1,023,774	1,570,487
Stock-based compensation	1,039,165	272,932	2,222,206
Non-cash merger related costs			42,828
Interest expense for warrant liability derivative recorded in excess of discounted debt	133,966		133,966
Beneficial conversion expense	809,533		809,533
Loss on debt extinguishment			171,548
Gain on fair value adjustment of warrant derivative liability	(203)		(203)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable	(13,891)	1,188	(8,220)
(Increase) decrease in prepaid expenses and other current assets	31,582	16,486	(8,047)
Increase (decrease) in accounts payable	(71,373)	147,691	254,712
Increase in accrued interest	56,681	83,360	231,298
Increase (decrease) in accrued payroll and benefits	2,293	(49,215)	15,920
Increase in accrued royalties-related party	75,000	75,000	225,000
Increase (decrease) in deferred revenue	26,813	5,324	34,644
Increase in accrued other expenses
Increase (decrease) in accounts payable-related parties			966,294
Net cash used in operating activities	(1,066,808)	(1,138,600)	(4,279,120)
Cash flows provided by (used in) investing activities:
Decrease (increase) in restricted cash	25,299
Capitalized software development costs			(367,956)
Purchase of property and equipment		(6,829)	(19,279)
Cash received from VHS merger			1,145
Net cash provided by (used in) investing activities	25,299	(6,829)	(386,090)
Cash flows provided by financing activities:
Proceeds from issuance of short-term convertible debt	0	100,000	100,000
Proceeds from issuance of long-term convertible debt	1,296,000	570,000	3,716,500
Debt financing costs	(126,243)	(70,850)	(459,544)
Proceeds from issuance of promissory notes			265,000
Proceeds from exercise of stock warrants	750		6,714
Proceeds from sale of common stock and warrants, net of issuance costs	163,662		1,040,664
Net cash provided by financing activities	1,334,169	599,150	4,669,334
Increase (decrease) in cash	292,660	(546,279)	4,124
Cash:
Beginning of period	168,780	550,403
End of period	461,440	4,124	4,124
Supplemental disclosure of cash flow information:
Cash paid for interest		8,099	32,021
Non-cash investing and financing activities:
Accounts payable - related parties incurred for the purchase of intangible assets			100,000
Accounts payable - related party reduced by forgiveness of debt and issuance of common stock			1,066,294
Increase in deferred debt financing costs by issuing stock warrants	360,214	276,378	923,957
Accrued interest converted to common stock	78,605	1,212	132,351
Debt converted to common stock	480,000	125,000	1,787,500
Increase in accounts payable, accrued expenses and short-term convertible debt for liabilities assumed in reverse merger			43,973
Increase in debt discounts on long-term promissory notes by issuing stock warrants			157,128
Increase in debt discounts on long-term converrtible notes by issuing stock warrants	524,463	743,283	1,552,725
Increase in debt discounts on long-term convertible notes by issuing warrant liability derivatives	406,000		406,000
Increase in accounts payable for deferred financing costs	36,166	2,925	32,185
Warrant derivative liability reclassified to equity	539,763		539,763
Increase in debt discounts in connection with beneficial conversion feature on long-term convertible notes	$ 395,537	$ 332,717	$ 1,252,275

Balance Sheets (Unaudited) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash	$ 4,124	$ 550,403
Accounts receivable	8,220	9,408
Prepaid expenses and other current assets	8,047	24,533
Total current assets	20,391	584,344
Property and equipment, net	4,958	2,826
Software development costs, net	220,774	275,967
Deferred financing costs, net	585,186	625,838
Total assets	831,309	1,488,975
Current liabilities:
Accounts payable	307,325	156,709
Short-term convertible notes payable	73,892	16,948
Accrued interest payable	11,710	16,799
Accrued payroll and benefits	22,517	71,732
Accrued royalties-related party	225,000	150,000
Deferred revenue	34,644	29,320
Current maturities of long-term convertible debt, net of discounts ($406,000 face value at September 30, 2013 and December 31, 2012)	88,261	73,581
Total current liabilities	763,349	515,089
Long-term accrued interest payable	87,237
Long-term convertible debt, net of current maturities and discounts	513,362	92,212
Total long-term liabilities	600,599	92,212
Total liabilities	1,363,948	607,301
Common stock, $0.001 par value, 250,000,000 shares authorized; 13,978,146 and 13,473,299 issued and outstanding at September 30, 2013 and December 31, 2012, respectively	13,978	13,473
Additional paid in capital	11,486,472	9,735,455
Deficit accumulated during the development stage	(12,033,089)	(8,867,254)
Total stockholders' equity (deficit)	(532,639)	881,674
Total liabilities and stockholders' equity (deficit)	$ 831,309	$ 1,488,975