16.

Warrant liabilities

January 17, 2018,

the Company consummated a registered direct offering of

2,150,001

shares of the Company’s common stock to certain institutional investors at a purchase price of

$5.15

per share (“the Financing”). As part of the transaction, the Company also issued to the investors and the placement agent warrants for the purchase of up to

645,000

and

129,000

shares of the Company’s common stock at an exercise price of

$6.60

per share, respectively.

The Company accounted for the warrants issuing in the Financing as derivative liabilities, as the strike price of the warrants is dominated in a currency (U.S. dollar) other than the functional currency of the Company (Renminbi or Yuan) and is

not

considered index to the Company’s own stock. As a result, these warrants were remeasured at fair value with changes in fair value be recorded in earnings in each reporting period.

Fair value of the warrants

The Company used Binomial model to determine the fair value of the Warrants based on the assumptions summarized as below:

	Investors warrants						Placement agent warrants
		As of December 31, 2018			As of March 31, 2019			As of December 31, 2018			As of March 31, 2019

Stock price	$	1.34		$	1.95		$	1.34		$	1.95
Years to maturity		1.55			1.30			2.05			1.80
Risk-free interest rate		2.50	%		2.27	%		2.50	%		2.27	%
Dividend yield		-			-			-			-
Expected volatility		199	%		216	%		176	%		187	%
Exercise Price	$	6.60		$	6.60		$	6.60		$	6.60

Fair value of the warrant	$	0.78		$	1.23		$	0.80		$	1.26

	Investors warrants						Placement agent warrants
		As of January 17, 2018			As of March 31, 2018			As of January 17, 2018			As of March 31, 2018

Stock price	$	3.98		$	1.67		$	3.98		$	1.67
Years to maturity		2.5			2.3			3.0			2.8
Risk-free interest rate		2.22	%		2.35	%		2.39	%		2.50	%
Dividend yield		-			-			-			-
Expected volatility		158	%		164	%		147	%		152	%
Exercise Price	$	6.60		$	6.60		$	6.60		$	6.60

Fair value of the warrant	$	2.93		$	1.03		$	2.99		$	1.06

Changes in fair value of warrant liabilities

Three Months Ended

March 31, 2019 (

Unaudited)

	As of March 31, 2019	As of December 31, 2018	Change in Fair Value (gain)/loss
	US$’000	US$’000	US$’000
Fair value of the Warrants:
Investor warrants	793	503	290
Placement agent warrants	163	103	60
Warrant liabilities	956	606	350

Three Months Ended

March 31, 2018 (

Unaudited)

	As of March 31, 2018	As of January 17, 2018	Change in Fair Value (gain)/loss
	US$’000	US$’000	US$’000
Fair value of the Warrants:
Investor warrants	664	1,890	(1,226	)
Placement agent warrants	137	385	(248	)
Warrant liabilities	801	2,275	(1,474	)

Warrants issued and outstanding as of

March 31, 2019

and their movements during the

three

months then ended are as follows:

	Warrant Outstanding					Warrant Exercisable
		Number of underlying shares	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number of underlying shares	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price

Balance, January 1, 2019		774,000	1.63	$	6.60		774,000	1.63	$	6.60
Granted/Vested		-					-
Forfeited		-					-
Exercised		-					-
Balance, March 31, 2019 (Unaudited)		774,000	1.38	$	6.60		774,000	1.38	$	6.60