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Note 12 - Stockholders' Equity
 9 Months Ended
Mar. 31, 2023
Notes to Financial Statements  
Equity [Text Block]

NOTE 12.

STOCKHOLDERS' EQUITY

 

Common Stock Issued in Underwritten Offering

 

On March 9, 2022, the Company entered into an underwriting agreement (the “Underwriting Agreement”) between the Company and Maxim Group LLC (the “Underwriter”), relating to the Company’s upsized underwritten public offering (the “Offering”) of 1,650,000 shares (the “Shares”) of the Company’s common stock, par value $0.001 per share (the “Common Stock”). The Offering was made pursuant to the Company’s registration statement on Form S-1 (File No. 333-261522), previously filed with Securities Exchange Commission (SEC) and subsequently declared effective by the SEC on March 9, 2022.

 

Pursuant to the Underwriting Agreement, the public offering price was $2.00 per Share (the "Offering Price"), and the Underwriter purchased the Shares at a 7.0% discount to the public Offering Price. The Company granted the Underwriter the option to purchase, within 45 days from the date of the Underwriting Agreement, an additional 247,500 shares of Common Stock at the same price per share as the Shares (the “Over-Allotment Option”), which the Underwriter exercised in full on March 11, 2022. Maxim Group LLC acted as sole book-running manager for the Offering.

 

The Underwriting Agreement includes customary representations, warranties and agreements by the Company, customary conditions to closing, indemnification obligations of the Company and the Underwriter, including liabilities under the Securities Act of 1933, as amended, other obligations of the parties and termination provisions. In addition, pursuant to the terms of the Underwriting Agreement and related “lock-up” agreements, the Company, each director and executive officer of the Company and certain significant stockholders of the Company have agreed not to sell, transfer or otherwise dispose of securities of the Company, without the prior written consent of the Underwriter, for a 180-day period, subject to certain limitations therein.

 

In exchange for the Underwriter’s services, the Company agreed to (i) sell the Common Stock to the Underwriter at a purchase price of $1.86 per share of Common Stock, reflecting the underwriting discount of 7%, and (ii) issue the Underwriter (or its designees) the Warrants to purchase shares of Common Stock equal to 5.0% of the aggregate number of shares of Common Stock sold in the Offering, along with associated registration rights (the “Underwriter’s Warrants”).

 

On March 14, 2022, the Offering closed resulting in the Company selling a total of 1,897,500 shares of common stock, including 247,500 shares sold pursuant to the full exercise of the underwriter’s over-allotment option. Gross proceeds from the offering were approximately $3,795,000 before underwriting discounts and other estimated offering expenses which totaled $265,650 and $545,090, respectively. There has been no material change in the planned use of proceeds as described in our final prospectus filed with the SEC on March 9, 2022 pursuant to Rule 424(b)(4).

 

Warrants to Purchase Common Stock

 

On March 14, 2022, pursuant to the Underwriting Agreement, the Company issued the Underwriter’s Warrants to purchase up to an aggregate of 82,500 shares of Common Stock as compensation for their services related to this issuance. The Underwriter’s Warrants may be exercised beginning on September 14, 2022, until March 14, 2027. The initial exercise price of each Warrant is $2.40 per share, which represents 120% of the Offering Price. The total fair value of the warrants granted to the Underwriter was $132,000. The Company estimated the fair value of the warrants using the Black-Scholes option pricing model using the following assumptions: Risk-free interest rate of 2.10%, expected life of 5 years, dividend yield of 0% and volatility of 117%. As the warrant issuance was for services rendered related to an equity issuance, no expense was recognized for the three and nine months ending March 31, 2023 or the year ended June 30, 2022 related to the issuance.

 

Convertible Preferred Stock

 

The Company has 50,000,000 shares authorized to issue as Preferred Stock. The Preferred Stock is designated into two series, 5,000,000 designated as Series A, and 45,000,000 designated as Series B. As of March 31, 2023 and June 30, 2022 there were no issued or outstanding shares of Series A stock.

 

Each issued Series B Convertible Preferred Stock is convertible into 20 shares of common stock and carries a vote of 20 shares of common stock in all matters brought before the shareholders for a vote. On January 15, 2021, the Company converted 3,672 shares of Series B Convertible Preferred Stock to 73,440 shares of common stock per the request of the shareholder and pursuant to the stock designation. After conversion, there remain 49,360 shares of Series B Convertible Preferred Stock outstanding as of March 31, 2023 and June 30, 2022.

 

Stock-based Compensation

 

During the nine months ending March 31, 2023 the Company's 2021 Omnibus Equity Incentive Plan issued 288,733 employee restricted stock awards (“RSA”). The fair value at the date of grant was $394,000 or $1.36 per share with the awards vesting over periods between 2023 and 2027.

 

  

Restricted Stock Outstanding as of March 31, 2023

 
  

Number of Shares

  Weighted Average Grant Date Fair Value 

Unvested as of June 30, 2022

  -  $- 

Granted – quarter ending September 30, 2022

  277,037  $1.35 

Granted – quarter ending March 31, 2023

  11,696  $1.71 

Vested

  -  $- 

Forfeited

  -  $- 

Unvested as of March 31, 2023

  288,733  $1.36 

Expected to vest

  288,733     

 

The following table summarizes the activities for the Company's stock options plan for the nine months ending March 31, 2023.

 

  

Options Outstanding as of March 31, 2023

 
  

Outstanding Stock Options

  Weighted Average Exercise Price 

Outstanding as of June 30, 2022

  -  $- 

Granted – granted quarter ending December 31, 2022

  50,000  $1.45 

Granted – granted quarter ending March 31, 2023

  220,000  $1.64 

Exercised

  -  $- 

Forfeited

  -  $- 

Outstanding and expected to vest as of March 31, 2023

  270,000  $1.61 

Exercisable as of March 31, 2023

  -  $- 

 

The estimated aggregate intrinsic value of stock options exercisable as of March 31, 2023 was $44,550. As of March 31, 2023, there was a total of $406,695 of unrecognized compensation expense related to outstanding stock options that will be recognized over a weighted average period of 4 years. The fair value of these options, calculated using the Black-Scholes option-pricing model was determined to be $423,800 using the following assumptions: expected term of 6.63 years, volatility of 192%, risk free interest rate of 3.59%, and expected dividend rate of 0%. The aggregate expected stock-based compensation expense remaining to be recognized reflects only awards as of March 31, 2023 and assumes no forfeiture activity. The Company expects to recognize this expense over the remaining weighted-average period of 2.3 years.

 

Fiscal Period

    

Remaining three months of fiscal 2023

 $37,222 

Fiscal 2024

  182,919 

Fiscal 2025

  217,798 

Fiscal 2026

  253,875 

Fiscal 2027

  84,191 

Total stock-based compensation

 $776,005 

 

There were no shares issued for vendor services during the three and nine months ending March 31, 2023 and March 31, 2022.