| EQUITY | Note
14. 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 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, no par value, and warrants to purchase 720,000 shares at a per share purchase price of
$1.46. The net proceeds to the Company from such offering were approximately $1.05 million. The warrants became exercisable on March
16, 2021 at an exercise price of $1.825 per share. The warrants may also be exercised on a cashless basis if at any time after March
16, 2021, there is no effective registration statement registering, or no current prospectus available for, 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 convertible into one share of common stock, no par value, of 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 is $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, or no current prospectus available for, 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 approved
the preferred shareholders’ right to convert 860,000 shares of Series A Preferred Stock into 860,000 shares
of common stock in the Company’s annual meeting of shareholders. As of June 30, 2022, the Series A Preferred Stock have been 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 thereto pursuant to which the Company
sold to the investors, and the investors purchased from the Company, in a registered direct offering, an aggregate of 1,560,000 shares
of the common stock of the Company, no par value per share, 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 are 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 thereto pursuant to which
the Company sold to the investors, and the investors purchased from the Company, an aggregate of 1,086,956 shares of common
stock, no par value, and warrants to purchase 5,434,780 shares. The net proceeds to the Company from this offering were approximately
$4.0 million. The purchase price for each share of common stock and five warrants is $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 but not thereafter; provided, however, that 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 shall 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, and the investors purchased from the Company, in a registered direct offering, an aggregate of 1,998,500 shares
of the common stock of the Company, no par value per share, at a purchase price of $6.805 per share. Net proceeds to the Company
from the sale of the shares and the warrants, after deducting estimated offering expenses and placement agent fees, were approximately
$12.4 million. 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. On
February 9, 2021, the Company entered into a securities purchase agreement with certain investors pursuant to which the Company sold
to the investors, and the investors purchased from the Company, in a registered direct offering, an aggregate of 3,655,000 shares
of the common stock of the Company, no par value per share, at a purchase price of $7.80 per share. Net proceeds to the Company
from the sale of the shares and the warrants, after deducting estimated offering expenses and placement agent fees, were approximately
$26.1 million. The Company also sold to the investors 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 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. On
December 14, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with non-U.S. investors
and accredited investors pursuant to which the Company sold to the investors, and the investors agreed to purchase from the Company,
an aggregate of 3,228,807 shares of common stock, no par value, and warrants to purchase 4,843,210 shares. 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 proceed of $10,525,819 and issued 3,228,807 shares and 4,843,210 warrants. In connection with the
issuance, the Company issued 500,000 shares to a consultant in assisting the Company in finding potential investors. The
warrants will be exercisable at any time during the Exercise Window. The “Exercise Window” means 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 but not thereafter; provided, however,
that 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 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 common stock On
January 6, 2022, the Company entered into Warrant Purchase Agreements with certain warrant holders (the “Sellers”) pursuant
to which the Company agreed to buy back an aggregate of 3,870,800 warrants (the “Warrants”) from the Sellers, and
the Sellers agreed to sell the Warrants back to the Company. These Warrants were sold to these Sellers in three previous transactions
that closed on February 11, 2021, February 10, 2021, and March 14, 2018. The purchase price for each Warrant is $2.00. Following announcement
of the Warrant Purchase Agreements on January 6, 2022, the Company agreed to repurchase an additional 103,200 warrants from
other Sellers on the same terms as the previously announced Warrant Purchase Agreements. The aggregate number of warrants repurchased
under the Warrant Purchase Agreements was 3,974,000. On
January 7, 2022, the Company wired the purchase price to each Seller. Each Seller has agreed to deliver the Warrant to the Company for
cancellation as soon as practicable following the closing date, but in no event later than January 13, 2022. The Warrants are deemed
cancelled upon the receipt by the Sellers of the purchase price. On
November 15, 2023, the Company entered into a subscription agreement with ten individual investors, under which the Company agreed to
sell an aggregate of 1,700,000 shares of its Common Stock and 1,700,000 warrants, with each warrant initially exercisable to purchase
one share of Common Stock at an exercise price of $6.07 per share, at an aggregate price of US$9,860,000 in a private placement. On December
13, 2023, the Company issued an aggregate of 1,700,000 shares of its common stock to the investors. The company received US$9,860,000
but subsequently returned the funds to the investors because the 1,700,000 warrants, issuable as part of the transaction, could not be
issued timely due to certain outstanding warrant terms. The investors returned the funds to the Company on January 4, 2024 after the
warrant terms were finalized. On January 26, 2024, the Company entered into an amendment to the subscription agreement which provides,
among other things, that Nasdaq’s authorization must be obtained for the issuance of the securities under the subscription agreement
and the Company stockholders’ approval shall be obtained before the 1,700,000 warrants are issued to the investors. Nasdaq has
authorized the issuance of the Common Stock and the conditional issuance of the warrants. 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 June 30, 2024
Warrants Weighted
Warrants outstanding, as of June
30, 2023 1,219,182 $ 43.67
Issued
Exercised (10,333 ) 8.75
Repurchased
Warrants outstanding, as
of June 30, 2024 1,208,849 $ 44.05
Warrants exercisable, as
of June 30, 2024 1,208,849 $ 44.05 Warrants Outstanding Warrants Weighted Exercise Average 2020 warrants - 292,200 18,100 $ 18.3 1.18 years 2021 warrants - 1,593,149 1,190,749 $ 49.4 2.06 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 the common stock under
the Company’s 2014 Stock Incentive Plan (the “Plan”) to, including (i) a one-time stock award grant of 600,000 shares
to Chief Executive Officer, Lei Cao, (ii) a one-time stock award grant of 200,000 shares to acting Chief Financial Officer,
Tuo Pan, (iii) a one-time stock award grant of 160,000 shares to Board member, Zhikang Huang, (iv) a one-time stock award grant
of 20,000 shares to Board member, Jing Wang, (v) a one-time stock award grant of 20,000 shares to Board member, Xiaohuan
Huang, and (vi) a one-time stock award grant of 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 position as a member of the Board, the Chairperson of the 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 share price of $5.48. On
February 16, 2022, the Company’s Board approved a consulting agreement pursuant to which the Company will 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. Stock compensation expenses for this
contract were $412,222 for the year ended June 30, 2023. In
connection with the purchase order between SOSNY and Thor Miner (see note 2), the Company issued 800,000 restricted shares
to Future Tech Business Consulting (“Future Tech”) pursuant to an Advisory Agreement under which Future Tech was to assist
to the Company to find suitable buyers for cryptocurrency mining machines sold by Thor Miner. The shares were valued at approximately
$3.6 million and the Company recorded the full amount as stock compensation expense for the year ended June 30, 2023. During
the years ended June 30, 2024 and 2023, nil Stock
Options: A
summary of the outstanding options is presented in the table below:
Options Weighted
Options outstanding, as of June
30, 2023 2,000 $ 10.05
Granted
Exercised
Cancelled,
forfeited or expired (2,000 ) -
Options outstanding, as
of June 30, 2024 - $ -
Options exercisable, as
of June 30, 2024 - $ - Following
is a summary of the status of options outstanding and exercisable as of June 30, 2024:
Outstanding
Options Exercisable
Options
Exercise
Price Number Average Life Average Number Average Life
$ years $ years |
