|6 Months Ended|
Jun. 30, 2019
|Derivative Instruments and Hedging Activities Disclosure [Abstract]|
NOTE 14 – DERIVATIVE LIABILITIES
On April 25, 2019, the Company issued 1,714,288 five-year warrants to several third party institutional investors in a registered direct offering (see Note 15). The warrants include the fundamental transaction provisions and the exercise price of the warrants is protected against down-round financing throughout the term of the warrants. Upon evaluation, the warrants meet the definition of derivative liabilities under FASB ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Accordingly, the fair value of the warrants was classified as derivative liabilities of $3,517,241 on the issuance date, April 25, 2019. The estimated fair value of the warrants were computed at issuance using Black-Scholes option-pricing model, with the following assumptions: stock price of $2.82, volatility of 100.87%, risk-free rate of 2.33%, annual dividend yield of 0% and expected life of 5 years.
The estimated fair value of the outstanding warrant as derivative liabilities was $3,055,748 at June 30, 2019. The estimated fair value of the warrants were computed as of June 30, 2019 using Black-Scholes option-pricing model, with the following assumptions: stock price of $2.60, volatility of 97.69%, risk-free rate of 1.76%, annual dividend yield of 0% and expected life of 4.82 years.
Increases or decreases in fair value of the derivative liabilities are included as a component of total other income / expenses in the accompanying consolidated statements of operations for the respective period. The changes to the derivative liabilities for the warrants resulted in a decrease of $461,493 in the derivative liabilities and the corresponding increase in other income as a gain for the three and six months ended June 30, 2019.
The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef