Quarterly report pursuant to Section 13 or 15(d)

Equity

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Equity
9 Months Ended
Sep. 30, 2020
Stockholders' Equity Note [Abstract]  
EQUITY

NOTE 8 – EQUITY


2020 Incentive Stock Plan


The Company held its annual meeting on August 4, 2020. During its annual meeting, the Company approved 2020 Incentive Stock Plan and reserved 5,000,000 shares of common stock for issuance thereunder.


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 nine months ended September 30, 2020, Jefferies sold an aggregate of 3,468,315 shares of common stock at an average price of $1.80 per share to investors. The Company recorded net proceeds of $5,875,755, net of commission and other offering costs of $357,923.


Common Shares Issued for Services


During the nine months ended September 30, 2020, the Company issued a total of 1,032,577 shares of its common stock for services rendered and to be rendered. These shares were valued at $1,309,480, 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 $1,248,159 for the nine months ended September 30, 2020 and reduced accrued liabilities of $35,325 and recorded prepaid expense of $25,996 as of September 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 September 30, 2020:


Options Outstanding     Options Exercisable  
Range of Exercise Price     Number Outstanding at September 30, 2020     Weighted Average Remaining Contractual Life (Years)     Weighted Average Exercise Price     Number Exercisable at September 30,
2020
    Weighted Average Exercise
Price
 
$ 0.50       2,000,000       6.36     $ 0.50       2,000,000     $ 0.50  
  1.00 – 1.93       2,250,000       6.01       1.47       1,748,334       1.43  
  2.00 – 2.80       2,740,000       3.02       2.17       2,740,000       2.17  
  4.76       30,000       3.51       4.76       30,000       4.76  
$ 0.50 – 4.76       7,020,000       4.93     $ 1.48       6,518,334     $ 1.47  

Stock option activities for the nine months ended September 30, 2020 were as follows:


    Number of Options     Weighted Average Exercise Price  
Outstanding at January 1, 2020     5,260,000     $ 1.45  
Granted     1,760,000       1.57  
Terminated / Exercised     -       -  
Outstanding at September 30, 2020     7,020,000     $ 1.48  
Options exercisable at September 30, 2020     6,518,334     $ 1.47  
Options expected to vest     501,666     $ 1.59  

The aggregate intrinsic values of both stock options outstanding and stock options exercisable at September 30, 2020 was $1,597,500.


The fair values of options granted during the nine months ended September 30, 2020 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: volatility of 134.32% - 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 nine months ended September 30, 2020 was $2,702,401.


Stock-based compensation expense associated with stock options granted amounted to $739,362 and $1,916,193, of which, $605,555 and $1,803,829 was recorded as compensation and related benefits, $110,970 and $112,364 was recorded as professional fees, $22,837 and $0 was recorded as research and development expenses, for the three months ended September 30, 2020 and 2019, respectively.


Stock-based compensation expense associated with stock options granted amounted to $2,251,312 and $5,713,079, of which, $1,975,245 and $5,155,983 was recorded as compensation and related benefits, $240,162 and $557,096 was recorded as professional fees, $35,905 and $0 was recorded as research and development expenses, for the nine months ended September 30, 2020 and 2019, respectively.


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


    Number of Options     Weighted Average Exercise Price  
Nonvested at January 1, 2020     264,723     $ 2.00  
Granted     1,760,000       1.57  
Vested     (1,523,057 )     (1.63 )
Nonvested at September 30, 2020     501,666     $ 1.59