11 Issuance of Common Stock and Warrants

3 Months Ended

Sep. 30, 2015

Notes

11 Issuance of Common Stock and Warrants

11           Issuance of Common Stock AND WARRANTS

On September 10, 2015, the Company issued 60,000 shares of common stock to independent directors at $2.01 per share for services rendered by them.

On September 30, 2015 the Company issued 2,352,941 shares of common stock and 1,764,706 common stock purchases warrants (the "Public Warrants" or “warrants”) pursuant to a Securities Purchase Agreement dated as of September 24, 2015. The purchaser was an institutional investor. Warrant will permit the holder to purchase one share of common stock from the Company for a price of $1.74 per share. The warrants will be exercisable from March 31, 2016 until March 31, 2021. The warrants  are classified as equity at the date of issuance. The proceeds for the offerings were $2,739,000, net of issuance costs of $261,000 paid to the placement agent. The proceeds were allocated between common stock and warrant, based on relative fair value. The issuance cost was recorded as a reduction of additional paid in capital.

Aoxing Pharmaceutical Company, Inc. has also issued to the placement agent and its affiliates warrants to purchase 141,176 shares of common stock, the warrants issued to the placement agent and its affiliates are substantially identical to the Public Warrants. The fair value of these shares amounted to $175,150, is classified in the equity at the date of issuance to net off the proceeds from the issuance of the shares and warrants. Cashless exercise of either warrant is permitted only if there is no effective registration statement permitting resale of the common shares underlying the warrants.

The fair value of the warrants issued was estimated by using the Black-Scholes-Merton Option Pricing Model with the following assumptions:

	For the period ended September 30, 2015
Stock price	1.48
Exercise price	1.74
Expected life in years	5
Annualized Volatility		127.39%
Annual Rate of Quarterly Dividends		1.65
Discount Rate - Bond Equivalent Yield		1.37

The Company applied judgment in estimating key assumptions in determining the fair value of the warrants on the date of issuance. The Company used historical data to estimate stock volatilities. The risk-free rates are consistent with the terms of the warrants and are based on the United States Treasury yield curve in effect at the time of issuance.

The weighted average fair value of warrants granted for the period ended September 30, 2015 was $1.24 per share. No warrants were exercised, cancelled or expired during the period ended September 30, 2015.