17.

Warrant liabilities

The Company consummated a registered director offering

January 2018 (

the

“2018

Financing”), as part of the transaction

, the Company

issued to the investors and the placement agent warrants to purchase 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 these warrants as derivative liabilities. As a result, these warrants were remeasured at fair value as of each reporting date 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, 2019			As of March 31, 2020			As of December 31, 2019			As of March 31, 2020

Stock price	$	1.17		$	0.95		$	1.17		$	0.95
Years to maturity		0.55			0.30			1.05			0.80
Risk-free interest rate		1.58	%		0.10	%		1.57	%		0.13	%
Dividend yield		-			-			-			-
Expected volatility		60	%		99	%		80	%		78	%
Exercise Price *	$	1.4927		$	1.4927		$	1.4927		$	1.4927

Fair value of the warrant	$	0.11		$	0.07		$	0.28		$	0.12

Warrant Liabilities (US$’000)	$	71		$	45		$	36		$	16

	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

Warrant Liabilities (US$’000)	$	503		$	793		$	103		$	163

* On

September 25, 2019,

as a result of the close on the

first

half of a private placement with a selected group of investors, the exercise price of the warrants issued in the

2018

Financing that contain the “full ratchet” price protection in the event of subsequent issuances below the applicable exercise price (the “Down round feature”) was adjusted to

$1.4927.

Changes in fair value of warrant liabilities

Three Months Ended

March 31, 2020 (

Unaudited)

		As of March 31, 2020		As of December 31, 2019		Change in Fair Value (gain)/loss
	US$’000		US$’000		US$’000
Fair value of the Warrants:
Investor warrants		45		71		(26	)
Placement agent warrants		16		36		(20	)
Warrant liabilities		61		107		(46	)

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

Warrants issued and outstanding as of

March 31, 2020

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, 2020		774,000	0.63	$	1.4927		774,000	0.63	$	1.4927
Granted/Vested		-					-
Forfeited		-					-
Exercised		-					-
Balance, March 31, 2020 (Unaudited)		774,000	0.38	$	1.4927		774,000	0.38	$	1.4927