Quarterly report pursuant to Section 13 or 15(d)

Equity

v3.20.2
Equity
6 Months Ended
Jun. 30, 2020
Equity [Abstract]  
EQUITY

NOTE 8 – EQUITY

 

Common Shares Sold for Cash

 

On April 1, 2020, the Company entered into a Subscription Agreement with WLM, an entity owned by Wenzhao Lu, Chairman of the Board of Directors of the Company, pursuant to which WLM purchased 645,161 shares of the Company's common stock at a price per share of $1.55 for an aggregate purchase price of $1,000,000. The closing occurred on April 1, 2020.

 

On December 13, 2019, the Company entered into an Open Market Sale AgreementSM (the "Sales Agreement") with Jefferies LLC, as sales agent ("Jefferies"), pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of its common stock, par value $0.0001 per share, having an aggregate offering price of up to $20.0 million. On April 6, 2020, the date on which the Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, the Company's registration statement became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3. During the six months ended June 30, 2020, Jefferies sold an aggregate of 2,130,347 shares of common stock at an average price of $1.74 per share to investors. The Company recorded net proceeds of $3,499,118, net of commission and other offering costs of $204,772.

 

Common Shares Issued for Services

 

During the six months ended June 30, 2020, the Company issued a total of 602,577 shares of its common stock for services rendered and to be rendered. The shares of common stock were issued under the 2019 Incentive Stock Plan. These shares were valued at $612,030, the fair market values on the grant dates using the reported closing share prices on the dates of grant and the Company recorded stock-based compensation expense of $594,530 for the six months ended June 30, 2020 and recorded prepaid expense of $17,500 as of June 30, 2020 which will be amortized over the rest of corresponding service periods.

 

Options

 

The following table summarizes the shares of the Company's common stock issuable upon exercise of options outstanding at June 30, 2020:

 

Options Outstanding     Options Exercisable  
Range of
Exercise
Price
    Number
Outstanding at
June 30,
2020
    Weighted
Average
Remaining
Contractual Life
(Years)
    Weighted
Average
Exercise
Price
    Number
Exercisable at
June 30,
2020
    Weighted
Average
Exercise
Price
 
$ 0.50       2,000,000       6.61     $ 0.50       2,000,000     $ 0.50  
  1.00 – 1.93       2,210,000       6.28       1.46       1,253,333       1.37  
  2.00 – 2.80       2,740,000       3.27       2.17       2,740,000       2.17  
  4.76       30,000       3.76       4.76       30,000       4.76  
$ 0.50 – 4.76       6,980,000       5.18     $ 1.48       6,023,333     $ 1.46  

 

Stock option activities for the six months ended June 30, 2020 were as follows:

 

    Number of
Options
    Weighted
Average
Exercise
Price
 
Outstanding at January 1, 2020     5,260,000     $ 1.45  
Granted     1,720,000       1.56  
Terminated / Exercised     -       -  
Outstanding at June 30, 2020     6,980,000     $ 1.48  
Options exercisable at June 30, 2020     6,023,333     $ 1.46  
Options expected to vest     956,667     $ 1.59  

 

The aggregate intrinsic values of stock options outstanding and stock options exercisable at June 30, 2020 was $3,766,000 and $3,467,267, respectively.

 

The stock options granted during the six months ended June 30, 2020 were granted under the 2019 Stock Incentive Plan. The fair values of options granted during the six months ended June 30, 2020 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: volatility of 137.42% - 139.58%, risk-free rate of 0.25% - 1.67%, annual dividend yield of 0% and expected life of 3.00 – 10.00 years. The aggregate fair value of the options granted during the six months ended June 30, 2020 was $2,644,161.

 

Stock-based compensation expense associated with stock options granted amounted to $726,600 and $1,524,139 for the three months ended June 30, 2020 and 2019, respectively.

 

Stock-based compensation expense associated with stock options granted amounted to $1,511,950 and $3,796,886 for the six months ended June 30, 2020 and 2019, respectively.

 

A summary of the status of the Company's nonvested stock options granted as of June 30, 2020 and changes during the six months ended June 30, 2020 is presented below:

 

    Number of
Options
    Weighted
Average
Exercise
Price
 
Nonvested at January 1, 2020     264,723     $ 2.00  
Granted     1,720,000       1.56  
Vested     (1,028,056 )     (1.65 )
Nonvested at June 30, 2020     956,667     $ 1.59