Note 14 - Stockholders' Equity

6 Months Ended

Jun. 30, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 14 - Stockholders’ Equity

Warrants

Following is a summary of the warrant activity for the six months ended June 30, 2016:

	Number of Warrants		Average Exercise Price		Weighted Average Remaining Contractual Term in Years
Outstanding at January 1, 2016		2,050,001		2.74		4.82
Granted		-		-		-
Exercised / surrendered		-		-		-
Expired		-		-		-
Outstanding at June 30, 2016		2,050,001		2.74		4.31
Exercisable at June 30, 2016		2,050,001		2.74		4.31

Shares issued to IR Firm

On July 1, 2014, the Company entered into a contract with an investor relations firm. The Company agreed to issue 100,000 shares of the Company’s common stock to the firm for 12 months of investor relation services.  The fair value of the 100,000 shares of common stock was $462,000; the fair value was calculated based on the stock price of $4.62 per share on July 1, 2014, and was amortized over the service term. During the six months ended June 30, 2016 and 2015, the Company amortized $0 and $231,000 as IR expenses, respectively. During the three months ended June 30, 2016 and 2015, the Company amortized $0 and $115,500 as IR expenses, respectively.

Shares and Warrants issued to Consultants

On July 1, 2013, the Company entered into a consulting agreement with a consulting firm in China for providing management M&A, business strategy and financing consultation services effective July 15, 2013. The Company agreed to issue 50,000 shares of the Company’s common stock to the firm for 12 months of consulting services starting on July 15, 2013. The Company also agreed to issue three-year warrants for the firm to purchase 50,000 shares of the Company’s common stock with an exercise price of $4 per share. Both the common stock and warrants were issued to the consultant or its designees within seven business days upon execution of the Agreement. The fair value of the 50,000 shares of common stock was $200,000 at July 1, 2013, and that amount was amortized over the service term.   

The warrants issued to the consulting firm are exercisable for a fixed number of shares, and are classified as equity instruments. The Company accounted for the warrants issued based on the fair value method under ASC Topic 505, and the fair value of the warrants was calculated using the Black-Scholes model under the following assumptions: estimated life of three years, volatility of 353%, risk-free interest rate of 0.66% and dividend yield of 0%. No estimate of forfeitures was made as the Company has a short history of granting options and warrants. Because these equity-classified warrants are vested immediately and are non-forfeitable; based on ASC 505-50, the performance commitment had been reached at the grant date, and accordingly, the measurement date is the grant date.  The fair value of the warrants issued to the consulting firm at grant date was $194,989, and that amount was amortized over the service term in 2014.  The warrants expired on July 14, 2016.

On August 15, 2014, the Company entered into a consulting agreement with a consulting firm for general business advisory, marketing and administration, and business strategy consulting services effective on September 1, 2014. The Company agreed to issue 10,000 shares of common stock to the firm for 12 months of consulting services starting on September 1, 2014. The fair value of the 10,000 shares of common stock was $42,000, which was calculated based on the stock price of $4.20 per share on September 1, 2014, and was amortized over the service term.  During the six months ended June 30, 2016 and 2015, the Company amortized $0 and $21,000 as consulting expenses, respectively. During the three months ended June 30, 2016 and 2015, the Company recorded $0 and $10,500 each as warrants expense, respectively.

On December 1, 2014, the Company entered into a consulting agreement with a consulting firm for management consulting services effective on December 1, 2014. The Company agreed to issue 60,000 shares of the Company’s common stock to the firm for three years of consulting services. The shares will be issued according to the following vesting schedule set forth as follows: The initial 10,000 shares were required to be issued within 30 days upon signing of the agreement; for the remaining 50,000 shares, the Company will issue to the consultant 10,000 shares of common stock on or before each of June 1, 2015, December 1, 2015, June 1, 2016, December 1, 2016 and June 1, 2017. The Company or the consultant may terminate the agreement at any time by a 90 day written notice to the other party. The fair value of the 60,000 shares was $224,400, which was calculated based on the stock price of $3.74 per share on December 1, 2014 and will be amortized over the service term. During the six months ended June 30, 2016 and 2015, the Company amortized $37,400 and $37,400 as consulting expenses, respectively. During the three months ended June 30, 2016 and 2015, the Company amortized $18,700 and $34,907 as consulting expenses, respectively.

On March 1, 2015, the Company entered into a marketing agreement with a consultant for marketing and product promotion services effective on March 1, 2015. The Company agreed to grant the consultant $100,000 worth of shares of the Company’s common stock for 12 months of consulting services starting on March 1, 2015. The shares vested immediately on March 1, 2015. The share price was calculated as the average closing price per share for ten trading days immediately prior to the execution of the agreement and was amortized over the service term. On March 9, 2015, the Company issued 38,745 shares at an average price of $2.581 per share to the consultant. During the six months ended June 30, 2016 and 2015, the Company amortized $16,667 and $33,333 as consulting expenses, respectively. During the three months ended June 30, 2016 and 2015, the Company amortized $0 and $25,000 as consulting expenses, respectively.

On September 14, 2015, the Company entered into a business marketing advisory agreement with a consultant for marketing and general consulting services effective on August 15, 2015. The Company agreed to pay the consultant a monthly fee of $5,000 and also granted 18,348 shares of the Company’s common stock to the consultant for 12 months of services starting on August 15, 2015. Twenty-five percent (25%) of those shares vested on November 15, 2015, 25% on February 15, 2016, 25% on May 15, 2016 and the remaining 25% vest on August 15, 2016. The fair value of the 18,348 shares was $45,870, which was calculated based on the stock price of $2.50 per share on August 15, 2015 and will be amortized over the service term. During the six months ended June 30, 2016, the Company amortized $22,936 as consulting expenses. During the three months ended June 30, 2016, the Company amortized $11,468 as consulting expenses.

On February 1, 2016, the Company entered into a marketing agreement with a consultant for marketing development strategies and consulting services for 15 months. The Company agreed to grant the consultant 10,000 shares of the Company’s common stock per month, for a total commitment of 150,000 shares of common stock. The fair value of the 150,000 shares was $204,000, which was calculated based on the stock price of $1.36 per share on February 1, 2016, the date the agreement was executed, and will be amortized over the service term. During the six months ended June 30, 2016, the Company amortized $68,000 as consulting expenses. During the three months ended June 30, 2016, the Company amortized $40,800 as consulting expenses.

On February 1, 2016, the Company entered into an agreement with a consultant for E-Commerce consulting service with a term of 24 months. The Company agreed to grant the consultant 10,000 shares of the Company’s common stock a month, for a total commitment of 240,000 shares. Twelve and half percent (12.5%) of those shares vest on April 30, 2016, 12.5% on July 30, 2016, 12.5% on October 31, 2016, 12.5% on January 31, 2017, 12.5% on April 30, 2017, 12.5% on July 30, 2017, 12.5% on October 31, 2017 and the remaining 12.5% on January 31, 2018. The fair value of the 240,000 shares was $326,400, which was calculated based on the stock price of $1.36 per share on February 1, 2016, the date the agreement was executed, and will be amortized over the service term. During the six months ended June 30, 2016, the Company amortized $68,000 as consulting expenses. During the three months ended June 30, 2016, the Company amortized $40,800 as consulting expenses.

On February 1, 2016, the Company entered into a consulting agreement with a consultant for planning, coordinating and strategy implementation services for a term of 6 months. The Company agreed to grant the consultant $10,000 worth of shares of the Company’s common stock per month. During the six months ended June 30, 2016, 68,000 shares vested, based on the stock price of $1.34, $1.17, $1.00, $0.55 and $0.42 per share on February 29, 2016, March 31, 2016, April 30, 2016, May 31, 2016 and June 30, 2016, respectively. During the six months ended June 30, 2016, the Company amortized $50,000 as consulting expense. During the three months ended June 30, 2016, the Company amortized $30,000 as consulting expenses.

Shares and Warrants issued through Private Placement

Private Placement on April 14, 2014

On April 14, 2014, the Company entered into a Securities Purchase Agreement with certain purchasers (the “Buyers”) pursuant to which the Company sold to the Buyers, in a registered direct offering, an aggregate of 1,320,059 shares of common stock, par value $0.001 per share, at a negotiated purchase price of $6.78 per share, for aggregate gross proceeds to the Company of $8.95 million,before deducting fees to the placement agent of $716,000 and other estimated offering expenses of $20,000 payable by the Company.

As part of the transaction, the Buyers also received (i) Series A warrants to purchase up to 660,030 shares of common stock in the aggregate at an exercise price of $8.48 per share (the “Series A Warrants”); (ii) Series B warrants to purchase up to 633,628 shares of common stock in the aggregate at an exercise price of $6.82 per share (the “Series B Warrants”); and (iii) Series C warrants to purchase up to 310,478 shares of common stock in the aggregate at an exercise price of $8.53 per share (the “Series C Warrants” and together with the Series A Warrants and the Series B Warrants, the “Warrants”). According to FASB ASC 815-40-15, these Warrants will be classified as a liability on the balance sheet, initially recorded at fair value with changes in fair value recorded in earnings at each reporting period as they had a settlement provision for adjusting the strike price if new equity is issued at a later date at a price below the strike price.

The Series A Warrants had a term of four years and are exercisable by the holders at any time after the date of issuance. The Series B Warrants had a term of six months and are exercisable by the holders at any time after the date of issuance. All of the Series B Warrants expired on October 14, 2014 and none of the Series B warrants have been exercised. The Series C Warrants have a term of four years and are exercisable by the holders at any time after the date of issuance. After the six month anniversary of the issuance date of the Series C Warrants, to the extent that a holder of Series C Warrant exercised less than 70% of such holder’s Series B Warrants and the closing sale price of the common stock was equal to or greater than $9.81 for a period of ten consecutive trading days, and the Company could purchase the entire then-remaining portion of such holder’s Series C Warrants for $1,000. On October 14, 2014, the Company’s closing sale price of the common stock was not equal to or greater than $9.81 for a period of ten consecutive trading days, accordingly, the Company cannot purchase the entire then-remaining portion of such holder’s Series C Warrants for $1,000.

In addition, at the closing, the Company granted the placement agent or its designees warrants to purchase that number of shares of common stock of the Company equal to seven percent (7%) of the aggregate number of shares placed in the placement (the “Placement Agent Warrants”).  The Placement Agent Warrants had the same terms, including exercise price, anti-dilution and registration rights, as the warrants issued to the investors in the placement.  At the closing, the placement agent and its designees received Placement Agent Warrants to purchase up to 92,404 shares of common stock.

The Company estimated the fair value of its warrants as of June 30, 2015 using the Binomial option pricing model using the following assumptions:

	Series A Warrants	Series C Warrants	Placement Agent Warrants			Total
At June 30, 2015:
Market price of common stock ($)				1.87
Number of shares of common stock underlying the warrants				9,242			9,242
Exercise price ($)				8.48
Remaining contractual life (years):				2.79
Dividend yield:				–
Expected volatility:				69	%
Risk-free interest rate:				1.01	%
Fair value ($)				1,764			1,764

The Company recorded $749,452 and $1,722,097 as expense from change in fair value and extinguishment of the warrant liability for the six and three months ended June 30, 2015, respectively.

In connection with a Securities Purchase Agreement entered into on May 28, 2015, the Company issued 660,030 shares of common stock to the holders of the Company’s Series A Warrants in exchange for the termination and surrender of such warrants, 310,478 shares of the Company’s common stock was issued to the holders of the Company’s Series C Warrants in exchange for the surrender and termination of such warrants, and 92,404 shares of the Company’s common stock were issued to the placement agent of the Company’s Placement AgentWarrants in exchange for the surrender and termination of such warrants.  As of June 30, 2016, there were no warrants from the April 14, 2014 private placement outstanding.

Private Placement on May 28, 2015

On May 28, 2015, the Company entered into a Securities Purchase Agreement with certain purchasers (the “Purchasers”) pursuant to which the Company offered to the Purchasers, in a registered direct offering, an aggregate of 2,970,509 shares of common stock, par value $0.001 per share. Of these, 2,000,001 shares were sold to the Purchasers at a negotiated purchase price of $2.00 per share, for aggregate gross proceeds to the Company of $4,000,002, before deducting fees to the placement agent and other estimated offering expenses payable by the Company. In accordance with the terms of the Purchase Agreement entered on April 14, 2014, the outstanding 2014 Series A Warrants were exchanged for 660,030 shares of common stock, and the outstanding 2014 Series C Warrants were exchanged for 310,478 shares of common stock.

In a concurrent private placement, the Company also sold to the Purchasers a warrant to purchase one share of the Company’s common stock for each share purchased for cash in the offering, pursuant to that certain common stock Purchase Warrant, by and between the Company and each Purchaser (the “2015 Warrants”). The 2015 Warrants will be exercisable beginning on the six month anniversary of the date of issuance (the "Initial Exercise Date") at an exercise price of $2.71 per share and will expire on the five year anniversary of the Initial Exercise Date. The purchase price of one share of the Company’s common stock under the 2015 Warrants is equal to the exercise price.

The warrants issued in the private placement described above are exercisable for a fixed number of shares, and are classified as equity instruments under ASC 815-40-25-10. The Company accounted for the warrants issued in the 2015 private placement based on the fair value method under ASC Topic 505, and the fair value of the warrants was calculated using the Black-Scholes model under the following assumptions: estimated life of 5 years, volatility of 107%, risk-free interest rate of 1.55% and dividend yield of 0%. No estimate of forfeitures was made as the Company has a short history of granting options and warrants. The fair value of the warrants issued to investors at grant date was $3,147,530.

Shares Issued to Independent Directors

In July 2014, the Company entered into restricted stock award agreements (under the 2014 Omnibus Long-Term Incentive Plan) with four independent directors of the Board. The Company agreed to grant 5,000 shares of the Company’s common stock to one independent director and 4,000 shares to each of three other of its independent directors with a grant date of July 9, 2014. The restricted period lapses as to 25% of the restricted stock on each of the three-month, six-month, nine-month and twelve-month anniversaries of the grant date. The fair value of these shares was $75,990, which was calculated based on the stock price of $4.47 per share on July 9, 2014. During the six months ended June 30, 2016 and 2015, the Company amortized $0 and $40,212 as directors’ stock compensation expenses, respectively. During the three months ended June 30, 2016 and 2015, the Company amortized $0 and $20,217 as directors’ stock compensation expenses, respectively.

In March 2015, the Company entered into restricted stock award agreements (under the 2014 Omnibus Long-Term Incentive Plan) with three independent directors of the Board. The Company agreed to grant 12,195 shares of the Company’s common stock to each of these independent directors with a grant date of March 24, 2015. The restricted period lapses as to 25% of the restricted stock on September 30, 2015, December 31, 2015, March 31, 2016 and June 30, 2016, subject to the director remaining in the continuous service of the Company or its affiliates on each applicable vesting date. The fair value of these shares was $119,999, which was calculated based on the stock price of $3.28 per share on March 24, 2015. During the six months ended June 30, 2016 and 2015, the Company amortized $26,959 and $32,548 as directors’ stock compensation expenses, respectively. During the three months ended June 30, 2016 and 2015, the Company amortized $0 and $32,548 as directors’ stock compensation expenses, respectively.

In May 2015, the Company entered into a restricted stock award agreement (under the 2014 Omnibus Long-Term Incentive Plan) with a new independent director. The Company agreed to grant 12,195 shares of the Company’s common stock to the new independent director with a grant date of May 19, 2015. The restricted period lapses as to 25% of the restricted stock on September 30, 2015, December 31, 2015, March 31, 2016 and June 30, 2016, subject to the director remaining in the continuous service of the Company or its affiliates on each applicable vesting date. The fair value of these shares was $38,292, which was calculated based on the stock price of $3.14 per share on May 19, 2015. During the six months ended June 30, 2016 and 2015, the Company amortized $14,478 and $9,547 as directors’ stock compensation expenses, respectively. During the three months ended June 30, 2016 and 2015, the Company amortized $4,826 and $9,547 as directors’ stock compensation expenses, respectively.

Shares Issued to Employees

On May 18, 2016, the Company entered into agreements with three designers for product design services for a term of 24 months. The Company agreed to grant each designer 240,000 shares of the Company’s common stock. Twenty five percent (25%) of those shares vest on May 31, 2016, 25% on December 18, 2016, 25% on June 18, 2017 and the remaining 25% on December 18, 2017. The fair value of these shares was $388,800, which was calculated based on the stock price of $0.54 per share on May 18, 2016, the date the agreement was executed, and will be amortized over the service term. During the six and three months ended June 30, 2016, the Company amortized $23,435 as stock compensation expenses.

On May 20, 2016, the Company entered into restricted stock award agreements (under the 2014 Omnibus Long-Term Incentive Plan) with the Company’s non-director employees for their hard work and dedication for the past years. The Company’s agreed to grant an aggregate 600,000 shares of the Company’s common stock to the Company’s employees on May 20, 2016. The shares were fully vested as of the grant date. The fair value of these shares was $366,000, which was calculated based on the stock price of $0.61 per share on May 20, 2016. During the six and three months ended June 30, 2016, the Company recorded $366,000 as stock compensation expenses.