Quarterly report pursuant to Section 13 or 15(d)

Equity

v3.19.2
Equity
6 Months Ended
Jun. 30, 2019
Equity [Abstract]  
EQUITY

NOTE 15 – EQUITY

 

Shares Authorized

 

The Company is authorized to issue 10,000,000 shares of preferred stock and 490,000,000 shares of common shares with a par value of $0.0001 per share.

 

There are no shares of its preferred stock issued and outstanding as of June 30, 2019 and December 31, 2018.

 

There are 76,175,639 and 73,830,751 shares of its common stock issued as of June 30, 2019 and December 31, 2018, respectively.

 

There are 75,655,639 and 73,310,751 shares of its common stock outstanding as of June 30, 2019 and December 31, 2018, respectively.

 

Common Shares Issued for Warrant Exercise

 

On January 9, 2019, the Company issued 350,856 shares of its common stock upon cashless exercise of warrants to purchase 578,891 shares of common stock.

 

Common Shares Issued for Option Exercise

 

On February 27, 2019, the Company issued 158,932 shares of its common stock upon cashless exercise of options to purchase 200,000 shares of common stock.

 

Common Shares Issued for Service Fee

 

On April 1, 2019, the Company issued a total of 120,812 shares of its common stock in payment of service fee from certain consultants.

 

Units Sold for Cash

 

On April 25, 2019, the Company entered into a purchase agreement with several third party institutional investors for the purchase of 1,714,288 units in a registered direct offering, for gross proceeds of $6,000,008 before placement agent fees and other offering expenses payable by the Company. Each unit was sold at a public offering price of $3.50 and consists of one share of common stock and a warrant to purchase one share of common stock. The Company received net cash proceeds of $5,103,704, net of cash paid for placement agent fees and other offering expenses.

 

The warrants are exercisable immediately as of the date of issuance (the "Initial Exercise Date"), at an exercise price of $3.50 per share, subject to adjustment as provided in the warrants, and expire on the fifth (5th) anniversary of the Initial Exercise Date. The warrants include anti-dilution rights, which provide that if at any time the warrants are outstanding, the Company issues or is deemed to have issued any common stock or common stock equivalents for consideration less than the then current exercise price of the warrants, the exercise price of such warrants is automatically reduced to the lowest price per share of consideration provided or deemed to have been provided for such securities (subject to adjustment for reverse and forward stock splits, recapitalizations and similar transactions). 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 a derivative under FASB ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances (see Note 14).

 

Options

 

The following table summarizes the shares of the Company's common stock issuable upon exercise of options outstanding at June 30, 2019:

 

  Options Outstanding       Options Exercisable  
  Range of Exercise Price      

Number Outstanding at
June 30,

2019

      Range of Weighted Average Remaining Contractual Life (Years)       Weighted Average Exercise Price       Number Exercisable at June 30, 2019      

Weighted Average Exercise

Price

 
$ 0.50       2,000,000       7.62     $ 0.50       1,611,111     $ 0.50  
  1.49       60,000       2.83       1.49       60,000       1.49  
  1.00       50,000       3.34       1.00       50,000       1.00  
  1.00       80,000       1.34       1.00       80,000       1.00  
  2.50       110,000       3.51       2.50       110,000       2.50  
  1.00       80,000       1.84       1.00       80,000       1.00  
  2.30       20,000       3.93       2.30       20,000       2.30  
  2.30       20,000       4.01       2.30       20,000       2.30  
  2.80       20,000       4.08       2.80       20,000       2.80  
  2.80       20,000       4.12       2.80       20,000       2.80  
  1.00       180,000       2.34       1.00       180,000       1.00  
  2.75       240,000       4.51       2.75       120,000       2.75  
  2.00       1,950,000       4.51       2.00       975,000       2.00  
  4.76       60,000       4.77       4.76       20,000       4.76  
  2.52       180,000       2.84       2.52       60,000       2.52  
$ 0.50–4.76       5,070,000       5.45     $ 1.43       3,426,111     $ 1.25  

 

Stock options granted to employee and director

 

Employee and director stock option activities for the six months ended June 30, 2019 were as follows:

 

    Number of Options     Weighted Average Exercise Price  
Outstanding at December 31, 2018     2,280,000     $ 0.69  
Granted     2,250,000       2.15  
Terminated / Exercised     -       -  
Outstanding at June 30, 2019     4,530,000     $ 1.41  
Options exercisable at June 30, 2019     3,006,111     $ 1.25  
Options expected to vest     1,523,889     $ 1.75  

   

The fair values of options granted to employee and director during the six months ended June 30, 2019 and 2018, respectively, were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

  

    Six Months
Ended
June 30,
2019
   

Six Months
Ended
June 30,
2018

 
Dividend rate     0       0  
Terms (in years)     5.0       5.0  
Volatility     149.74% -150.61 %      175.94% - 185.28%  
Risk-free interest rate     2.31% - 2.49%       2.25% - 2.78%  

  

The aggregate fair value of the options granted to employee and director during the six months ended June 30, 2019 was $5,956,574, of which, $1,510,545 and $2,935,484 for the three and six months ended June 30, 2019, respectively, has been reflected as compensation and related benefits on the accompanying unaudited condensed consolidated statements of operations because the options were fully earned and non-cancellable.

 

The aggregate fair value of the options granted to employee and director during the six months ended June 30, 2018 was $337,523, of which, $79,193 and $151,480 for the three and six months ended June 30, 2018, respectively, has been reflected as compensation and related benefits on the accompanying unaudited condensed consolidated statements of operations because the options were fully earned and non-cancellable.

 

As of June 30, 2019, the aggregate value of nonvested employee and director options was $3,507,201, which will be amortized as stock-based compensation expense as the options are vesting, over the remaining 0.58 years.

 

The aggregate intrinsic values of the employee and director stock options outstanding and the employee and director stock options exercisable at June 30, 2019 was $5,539,600 and $4,137,933, respectively.

 

A summary of the status of the Company's nonvested employee and director stock options granted as of June 30, 2019 and changes during the six months ended June 30, 2019 is presented below:

  

    Number of
Options
  Weighted
Average
Exercise
Price
  Grant Date Fair
Value
Nonvested at December 31, 2018     722,222     $ 0.50     $ 902,779  
Granted     2,250,000       2.15       5,956,574  
Vested     (1,448,333 )     (1.76 )     (3,352,152 )
Nonvested at June 30, 2019     1,523,889     $ 1.75     $ 3,507,201  

   

Stock Options Granted to Non-employee

 

Non-employee stock option activities for the six months ended June 30, 2019 were as follows:

  

    Number of
Options
    Weighted
Average
Exercise
Price
 
Outstanding at December 31, 2018     560,000     $ 1.06  
Granted     180,000       2.52  
Exercised     (200,000 )     1.00  
Outstanding at June 30, 2019     540,000       1.57  
Options exercisable at June 30, 2019     420,000     $ 1.30  
Options expected to vest     -     $ -  

   

The fair values of these non-employee options vested in six months ended June 30, 2019 and 2018, and nonvested non-employee options as of June 30, 2019 and 2018, respectively, were estimated using the Black-Scholes option-pricing model with the following assumptions:

  

    Six Months Ended
June 30,
2019
  Six Months Ended
June 30,
2018
Dividend rate     0       0  
Terms (in years)     3.00 – 5.00       2.51 - 3.0  
Volatility     150.35% – 151.70%       172.87% - 188.29%  
Risk-free interest rate     2.28% - 2.51%       2.29% - 2.66%  

   

Stock-based compensation expense associated with stock options granted to non-employee is recognized as the stock options vest. The stock-based compensation expense related to non-employee will fluctuate as the fair value of the Company's common stock fluctuates. Stock-based compensation expense associated with stock options granted to non-employee amounted to $444,732 and $383,042 for the six months ended June 30, 2019 and 2018, respectively.

 

As of June 30, 2019, the aggregate value of vested and nonvested non-employee options was $905,696, which will be amortized as stock-based compensation expense over the remaining 0.33 years. 

 

The aggregate intrinsic values of the non-employee stock options outstanding and the non-employee stock options exercisable at June 30, 2019 was $557,900 and $548,800, respectively.

 

A summary of the status of the Company's nonvested non-employee stock options granted as of June 30, 2019 and changes during the six months ended June 30, 2019 is presented below:

  

    Number of
Options
  Weighted
Average
Exercise
Price
  Fair Value at
June 30,
2019
Nonvested at December 31, 2018     193,333     $ 1.12          
Granted     180,000       2.52          
Vested     (193,333 )     (1.12 )        
Forfeited     -         -            
Nonvested at June 30, 2019     180,000     $ 2.52     $ -    

   

In the three months ended June 30, 2019, the overall value of common stock granted at unit price below $3.50 and stock options granted at exercise price below $3.50 to non-employee is $490,098.