NOTE 8. EQUITY

Common Stock Issued

Common stock issued to Employees as Compensation

During the six months ended December 31, 2025, the Company issued 21,000 unrestricted shares of common stock to an employee as compensation and recorded share-based compensation expense of approximately $0.03 million in sales and marketing expenses in the condensed consolidated statement of operations.

During the six months ended December 31, 2024, the Company issued 16,000 unrestricted shares of common stock to an employee as compensation and recorded share-based compensation expense of approximately $0.01 million in sales and marketing expenses in the condensed consolidated statement of operations.

Securities Purchase Agreements (“SPA”)

In December 2024, the Company completed a SPA with an institutional investor selling 1,990,000 shares of common stock at $2.65 per share and prefunded warrants to purchase up to 760,000 shares of common stock at $2.649 per warrant (which is convertible to one share of common stock on a one for one basis). The prefunded warrants had an exercise price of $0.001 per share of common stock, and were exercised in full in January 2025 for a de minimis amount (760,000 shares at $0.001 per share).

The Company realized total net proceeds (after underwriting and professional fees) of $6.79 million from the December 2024 SPA.

Exercise of Warrants

In December 2024, an institutional investor exercised warrants (issued in connection with the November 2021 SPA) convertible into 100,000 shares of common stock. The Company realized proceeds of $0.18 million ($1.75 per share).

Common stock issued for Exercise of Stock Options

During the six months ended December 31, 2024, the Company issued approximately 8,000 shares of common stock in cashless transactions upon exercise of the respective option grants and realized cash proceeds of zero.

Warrants

In connection with the July 2021 initial public offering (“IPO”), the November 2021 Securities Purchase Agreement (“SPA”) and the December 2024 SPA, the Company issued warrants, which are exercisable into Company common shares on a one-for-one basis, as detailed below. The warrants are not publicly traded.

The remaining outstanding warrants as of December 31, 2025 are:

 SCHEDULE OF WARRANTS OUTSTANDING   

Employee Stock-Based Compensation

Stock Option issuance to Executives

In February 2023, pursuant to the Equity Incentive Plan, the Company granted certain executive officers 2.20 million stock options as a long-term incentive. The options have an exercise price of $7.00 per share. 0.22 million of these options vest ratably over four years (“Initial Options”). The remainder (“Target Options”) vest in fixed amounts based on achieving various revenue or common stock prices within seven years of grant date. Given the Company’s current stock price and revenue, the Company views the achievement of the milestones that would trigger vesting of the Target Options as remote.

Equity Incentive Plan

The Company’s 2016 Equity Incentive Plan (the “Plan”), as amended, has approximately 13.17 million common shares reserved for issuance. As of December 31, 2025, there were approximately 7.33 million shares available for issuance under the Plan. The shares available are after the granting of 1.98 million shares of executive Target Options.

The Company recognizes compensation expense relating to awards ratably over the requisite period, which is generally the vesting period.

Stock options have been recorded at their fair value. The Black-Scholes option-pricing model assumptions used to value the issuance of stock options under the Plan for the specific periods below are noted in the following table:

   SCHEDULE OF STOCK OPTION FAIR VALUE ASSUMPTION 

The grant date fair value for options granted during the six months ended December 31, 2025 and 2024 was approximately $0.33 million and $0.11 million, respectively.

The following is a summary of the Company’s stock option activity for the six months ended December 31, 2025 and 2024, excluding the executive Target Options:

  SUMMARY OF STOCK OPTION ACTIVITY   

The above table excludes executive Target Options: 1,980,000 granted, $7.00 exercise price, 7.1 remaining term in years, no intrinsic value. Vesting of these is considered remote.

The above table excludes executive Target Options: 1,980,000 granted, $7.00 exercise price, 8.1 remaining term in years, no intrinsic value. Vesting of these is considered remote.

The intrinsic value of stock options activity for the six months ended December 31, 2025 and 2024 was computed using a fair market value (fiscal year to date VWAP – volume weighted average price) of the common stock of $1.47 per share and $2.41 per share, respectively.

The intrinsic value of stock options outstanding and exercisable as of December 31, 2025 and 2024 was computed using NASDAQ market closing prices of the common stock of $0.93 per share and $2.47 per share, respectively.

The Company’s stock option-based expense for the three months ended December 31, 2025 and 2024 consisted of the following:

    SCHEDULE OF STOCK OPTION BASED EXPENSE 

There is no expense included for the executive officers’ Target Options.

As of December 31, 2025 total unrecognized compensation expense to employees, board members and vendors related to stock options was approximately $0.78 million (excluding executive Target Options of $8.08 million, which vesting and expense is considered remote) and is expected to be recognized over a weighted average period of 1.42 years (which excludes the executive Target Options).