Annual report pursuant to Section 13 and 15(d)

Equity

v3.22.1
Equity
12 Months Ended
Dec. 31, 2021
Stockholders' Equity Note [Abstract]  
EQUITY

NOTE 11 – EQUITY

 

Common Shares Sold for Cash

 

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. During the year ended December 31, 2021, Jefferies sold an aggregate of 2,206,838 shares of common stock at an average price of $1.30 per share to investors and the Company recorded net proceeds of $2,553,409, net of commission and other offering costs of $306,895. During the year ended December 31, 2020, Jefferies sold an aggregate of 3,913,413 shares of common stock at an average price of $1.74 per share to investors and the Company recorded net proceeds of $6,405,475, net of commission and other offering costs of $398,624.

 

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, the fair market value on transaction date, for an aggregate purchase price of $1,000,000. The closing occurred on April 1, 2020 (See Note 9 - Common Shares Sold to Related Party).

 

Common Shares Issued for Services

 

During the year ended December 31, 2021, the Company issued a total of 1,405,679 shares of its common stock for services rendered and to be rendered. These shares were valued at $1,507,488, 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 $1,075,756 for the year ended December 31, 2021 and reduced accrued liabilities of $276,032 and recorded prepaid expense of $155,700 as of December 31, 2021 which will be amortized over the rest of corresponding service periods.

 

During the year ended December 31, 2020, the Company issued a total of 1,505,921 shares of its common stock for services rendered and to be rendered. These shares were valued at $1,892,520, 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 $1,670,166 for the year ended December 31, 2020 and reduced accrued liabilities of $187,725 and recorded prepaid expense of $34,629 as of December 31, 2020 which will be amortized over the rest of corresponding service periods.

 

Common Shares Issued for Settlement of Accrued Professional Fees

 

In June 2021, the Company issued 167,355 shares of its common stock to settle accrued and unpaid professional fees of $202,500. The 167,355 shares issued had a fair value of $202,500.

 

Common Shares Issued Pursuant to Related Party Debt Settlement Agreement and Release

 

On December 21, 2021, the Company and Mr. Lu entered into and closed a Debt Settlement Agreement and Release pursuant to which The Company settled $3.0 million debt owed under the Line of Credit by issuance of the Company’s 2,400,000 shares of common stock (See Note 9 – Borrowings from Related Party – Line of Credit). The 2.4 million shares issued had a fair value of $3 million.

 

Options

 

The following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at December 31, 2021:

 

  Options Outstanding       Options Exercisable  
  Range of
Exercise
Price
      Number
Outstanding at
December 31,
2021
      Weighted
Average
Remaining
Contractual Life
(Years)
      Weighted
Average
Exercise
Price
      Number
Exercisable at
December 31,
2021
     

Weighted
Average
Exercise
Price

 
$ 0.50       2,000,000       5.11     $ 0.50       2,000,000     $ 0.50  
  1.00 – 1.93       2,955,000       4.80       1.39       2,749,166       1.41  
  2.00 – 2.80       2,740,000       1.76       2.17       2,740,000       2.17  
  4.76       30,000       2.26       4.76       30,000       4.76  
$ 0.50 – 4.76       7,725,000       3.97     $ 1.45       7,519,166     $ 1.46  

 

Stock option activities for the years ended December 31, 2021 and 2020 were as follows:

 

    Number of
Options
    Weighted
Average
Exercise
Price
 
Outstanding at January 1, 2020     5,260,000     $ 1.45  
Granted     1,960,000       1.52  
Expired     (80,000 )     (1.00 )
Outstanding at December 31, 2020     7,140,000       1.48  
Granted     860,000       1.08  
Forfeited / Expired     (275,000 )     (1.01 )
Outstanding at December 31, 2021     7,725,000     $ 1.45  
Options exercisable at December 31, 2021     7,519,166     $ 1.46  
Options expected to vest     205,834     $ 1.04  

 

The aggregate intrinsic value of both stock options outstanding and stock options exercisable at December 31, 2021 was $640,000.

 

The fair values of options granted during the year ended December 31, 2021 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: volatility of 119.21% - 128.42%, risk-free rate of 0.33% - 1.20%, annual dividend yield of 0%, and expected life of 3.00 - 5.00 years. The aggregate fair value of the options granted during the year ended December 31, 2021 was $726,952.

 

The fair values of options granted during the year ended December 31, 2020 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions: volatility of 131.16% - 139.58%, risk-free rate of 0.20% - 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 year ended December 31, 2020 was $2,878,773.

  

Stock-based compensation expense associated with stock options granted amounted to $769,334 and $2,966,052, of which, $544,785 and $2,669,729 was recorded as compensation and related benefits, $157,207 and $240,354 was recorded as professional fees, and $67,342 and $55,969 was recorded as research and development expenses, for the years ended December 31, 2021 and 2020, respectively.

 

A summary of the status of the Company’s nonvested stock options granted as of December 31, 2021 and changes during the years ended December 31, 2021 and 2020 is presented below:

 

    Number of
Options
    Weighted
Average
Exercise
Price
 
Nonvested at January 1, 2020     264,723     $ 2.00  
Granted     1,960,000       1.52  
Vested     (2,006,389 )     (1.62 )
Nonvested at December 31, 2020     218,334       1.18  
Granted     860,000       1.08  
Forfeited     (15,000 )     (1.11 )
Vested     (857,500 )     (1.11 )
Nonvested at December 31, 2021     205,834     $ 1.04  

 

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.