Equity

6 Months Ended

Dec. 31, 2023

Equity [Abstract]

EQUITY

Note 13. EQUITY  

After the close of the stock market on July 7, 2020, the Company effected a l-for-5 reverse stock split of its common stock in order to satisfy continued listing requirements of its common stock on the NASDAQ Capital Market. The reverse stock split was approved by the Company’s board of directors and stockholders and was intended to allow the Company to meet the minimum share price requirement of $1.00 per share for continued listing on the NASDAQ Capital Market. As a result, all common stock share amounts included in this filing have been retroactively reduced by a factor of five, and all common stock per share amounts have been increased by a factor of five. Amounts affected include common stock outstanding, including those that have resulted from the stock options, and warrants exercisable for common stock.

Stock issuances:

On September 17, 2020, the Company entered into a certain securities purchase agreement with certain “non-U.S. Persons” as defined in Regulation S of the Securities Act of 1933, as amended, pursuant to which the Company sold an aggregate of 720,000 shares of the Company’s common stock and warrants to purchase 720,000 shares of common stock at a per share purchase price of $1.46 for a unit of shares of common stock and one warrant. The net proceeds to the Company from the offering was approximately $1.05 million. The warrants became exercisable on March 16, 2021 at an exercise price of $1.825 per share. The warrants may be exercised on a cashless basis if at any time after March 16, 2021, there is no effective registration statement registering the resale of the warrant shares. The warrants will expire on March 16, 2026. The warrants are subject to anti-dilution provisions to reflect stock dividends and splits or other similar transactions. The warrants contain a mandatory exercise right for the Company to force exercise of the warrants if the Company’s common stock trades at or above $4.38 for 20 consecutive trading days, provided, among other things, that the shares issuable upon exercise of the warrants are registered or may be sold pursuant to Rule 144 and the daily trading volume exceeds 60,000 shares of common stock per trading day on each trading day in a period of 20 consecutive trading days prior to the applicable date.

On November 2 and November 3, 2020, the Company issued an aggregate of 860,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”), each share convertible into one share of common stock of the Company, upon the terms and subject to the limitations and considerations set forth in the Certificate of Designation of the Series A Preferred Stock, and warrants to purchase up to 1,032,000 shares of common stock. The purchase price for each share of Series A Preferred Stock and accompanying warrants was $1.66. The net proceeds to the Company from this offering was approximately $1.43 million, not including any proceeds that may be received upon cash exercise of the warrants. The warrants became exercisable six (6) months following the date of issuance at an exercise price of $1.99 per share. The warrants may also be exercised on a cashless basis if at any time after the six-month anniversary of the issuance date, there is no effective registration statement registering the resale of the warrant shares. The warrants will expire five and a half (5.5) years from the date of issuance. The warrants are subject to anti-dilution provisions to reflect stock dividends and splits or other similar transactions. The warrants contain a mandatory exercise right for the Company to force exercise of the warrants if the closing price of the common stock equals or exceeds $5.97 for twenty (20) consecutive trading days, provided, among other things, that the shares issuable upon exercise of the warrants are registered or may be sold pursuant to Rule 144 and the daily trading volume exceeds 60,000 shares of common stock per trading day on each trading day in a period of 20 consecutive trading days prior to the applicable date. In February 2021, the shareholders at the Company’s annual meeting of shareholders approved the preferred shareholders’ right to convert the Series A Preferred Stock into 860,000 shares of common stock. As of June 30, 2022, the shares of Series A Preferred Stock were fully converted to common stock on a one-for-one basis.

On December 8, 2020, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company sold to the investors in a registered direct offering an aggregate of 1,560,000 shares of the common stock at a purchase price of $3.10 per share, and warrants to purchase up to an aggregate of 1,170,000 shares of common stock of the Company at an exercise price of $3.10 per share, for aggregate gross proceeds to the Company of $4,836,000. The warrants were initially exercisable beginning on December 11, 2020 and will expire three and a half (3.5) years from the date of issuance. The exercise price and the number of shares of common stock issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, or other similar transactions, but not as a result of future securities offerings at lower prices.

On January 27, 2021, the Company entered into a securities purchase agreement with certain non-U.S. investors pursuant to which the Company sold to the investors an aggregate of 1,086,956 shares of common stock and warrants to purchase 5,434,780 shares of common stock of the Company. The net proceeds to the Company from this offering was approximately $4.0 million. The purchase price for each share of common stock and five warrants was $3.68, and the exercise price per warrant is $5.00. The warrants became exercisable at any time during the period beginning on or after July 27, 2021 and ending on or prior on January 27, 2026; provided, however, that the value of the total number of the Company’s issued and outstanding shares of common stock, multiplied by the NASDAQ official closing bid price of the common stock will equal or exceed $0.3 billion for a three consecutive month period prior to an exercise.

On February 6, 2021, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company sold to the investors from the Company in a registered direct offering, an aggregate of 1,998,500 shares of the common stock of the Company at a purchase price of $6.805 per share. The Company also sold to the investors warrants to purchase up to an aggregate of 1,998,500 shares of common stock at an exercise price of $6.805 per share. The warrants are exercisable upon issuance and expire five and a half (5.5) years from the date of issuance. The exercise price and the number of shares of common stock issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, or other similar transactions, but not as a result of future securities offerings at lower prices. Net proceeds to the Company from this offering was approximately $12.4 million. 1,215,000 warrants were redeemed by the Company on January 6, 2022.

On February 9, 2021, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company sold to the investors in a registered direct offering, an aggregate of 3,655,000 shares of the common stock of the Company at a purchase price of $7.80 per share and warrants to purchase up to an aggregate of 3,655,000 shares of common stock at an exercise price of $7.80 per share. The warrants were exercisable upon issuance and expire five and a half (5.5) years from the date of issuance. Net proceeds to the Company from the sale of the shares and the warrants was approximately $26.1 million. The exercise price and the number of shares of common stock issuable upon exercise of the warrants are subject to adjustment in the event of stock splits or dividends, or other similar transactions, but not as a result of future securities offerings at lower prices.

On December 14, 2021, the Company entered into a securities purchase agreement with certain non-U.S. investors and accredited investors pursuant to which the Company sold to the investors an aggregate of 3,228,807 shares of common stock, no par value, and warrants to purchase 4,843,210 shares of common stock. The purchase price for each share of common stock and one and a half warrants was $3.26, and the exercise price per warrant is $4.00. The Company received net proceeds of $10,525,819. In connection with the issuance, the Company issued 500,000 shares to a consultant for assisting the Company in finding potential investors. The warrants are exercisable during the period beginning on or after June 14, 2022 and ending on or prior to 5:00 p.m. (New York City time) on December 13, 2026 provided, however, that the total value of the number of the Company’s issued and outstanding shares of common stock, multiplied by the NASDAQ official closing bid price of the common stock shall equal or exceed $150,000,000 for a three consecutive month period prior to an exercise.

The Company’s outstanding warrants are classified as equity since they qualify for exception from derivative accounting as they are considered to be indexed to the Company’s own stock and require net share settlement. The fair value of the warrants was recorded as additional paid-in capital from the issuance of common stock. On January 6, 2022, the Company entered into warrant purchase agreements with certain warrant holders pursuant to which the Company agreed to buy back an aggregate of 3,974,000 warrants from the warrant holders.

On January 6, 2022, the Company entered into warrant purchase agreements with certain warrant holders pursuant to which the Company agreed to buy back an aggregate of 3,870,800 warrants from the warrant holders. These warrants were sold in three previous transactions that closed on March 14, 2018, February 10, 2021 and February 11, 2021. The purchase price for each warrant was $2.00. Following announcement of the Company’s entry into these agreements on January 6, 2022, the Company agreed to repurchase an additional 103,200 warrants from other warrant holders on the same term. The aggregate number of warrants repurchased under the agreements was 3,974,000.

On November 15, 2023, the Company entered into a Subscription Agreement with ten individual investors, under which the Company agreed to sell to the Investors an aggregate of 17,000,000 shares of its Common Stock and 17,000,000 warrants, with each warrant initially exercisable to purchase one share of Common Stock at an exercise price of $0.607 per share (each a “Warrant” and collectively, “Warrants”), at an aggregate price of US$9,860,000 in a private placement. On December 13, 2023, the Company issued an aggregate of 17,000,000 shares of its common stock to the investors. On January 26, 2024, the Company entered into an Amendment to Subscription Agreement with the ten investors. The Amendment to Subscription Agreement provides, among other things, that Nasdaq’s authorization shall have been obtained for the issuance of the securities under the Subscription Agreement and the Company stockholders’ approval shall have been obtained before the Warrants are issued to the Investors. As of the date of this report, the issuance of the warrants is still awaiting approval from the Company’s stockholders.

Following is a summary of the status of warrants outstanding and exercisable as of December 31, 2023

	Warrants		Weighted Average Exercise Price
Warrants outstanding, as of June 30, 2023		12,088,490	$	4.33
Issued		-		-
Exercised		-		-
Expired		-		-
Warrants outstanding, as of December 31, 2023		12,088,490	$	4.33
Warrants exercisable, as of December 31, 2023		12,088,490	$	4.33

Warrants Outstanding	Warrants Exercisable		Weighted Average Exercise Price		Average Remaining Contractual Life
2020 warrants, 2,922,000		181,000	$	1.83	1.66 years
2021 warrants, 15,931,490		11,907,490	$	4.94	2.56 years

Stock-based compensation:

By action taken as of August 13, 2021, the Board of Directors (the “Board”) of the Company and the Compensation Committee of the Board (the “Committee”) approved a one-time award of a total of 1,020,000 shares of common stock under the Company’s 2014 Stock Incentive Plan (the “Plan”) including grants of (i) 600,000 shares to Chief Executive Officer, Lei Cao, (ii) 200,000 shares to acting Chief Financial Officer, Tuo Pan, (iii) 160,000 shares to Board member, Zhikang Huang, (iv) 20,000 shares to Board member, Jing Wang, (v) 20,000 shares to Board member, Xiaohuan Huang, and (vi) 20,000 shares to Board member, Tieliang Liu. The shares were valued at an aggregate of $2,927,400 based on the grant date fair value of such shares. 

On November 18, 2021, Mr. Jing Wang retired from his positions as a member of the Board, the Chairperson of the Compensation Committee, a member of Nominating/Corporate Governance Committee, and a member of the Audit Committee. In connection with Mr. Wang’s retirement, the Company granted Mr. Wang 100,000 shares of common stock under the Company’s 2021 stock incentive plan, which shares were valued at $377,000 based on the grant date fair value.

On February 4, 2022, the Company approved a one-time award of a total of 500,000 shares of common stock under the Company’s 2021 Stock Incentive Plan to certain executive officers of the Company, including Chief Executive Officer, Yang Jie (300,000 shares), Chief Operating Officer, Jing Shan (100,000 shares), and Chief Technology Officer, Shi Qiu (100,000 shares). The total fair value of the grants amounts to $2,740,000 based on the grant date fair value of $5.48 per share.

On February 16, 2022, the Company’s Board approved a consulting agreement pursuant to which the Company agreed to pay the consultant a monthly fee of $10,000 and 100,000 shares of the Company’s common stock. The shares were valued at $7.42 at grant date with a grant date fair value of $742,000 to be amortized through October 31, 2022.

During the three months ended December 31, 2023 and 2022, nil and $82,444 were recorded as stock-based compensation expense, respectively. During the six months ended December 31, 2023 and 2022, nil and $329,777 were recorded as stock-based compensation expense, respectively.