NOTE 15. STOCK-BASED COMPENSATION 

In October 2022, the board of directors and stockholders of the Company approved the 2022 Equity Incentive Plan (as amended, the “Plan”) pursuant to which up to 15,000,000 shares of common stock may be issued pursuant to options, restricted stock or RSUs grants. The Plan is administered by the Compensation Committee of the Board of Directors. Awards under the Plan may be granted to officers, directors, employees and those consultants who qualify as a consultant or advisor under the instructions to the Company’s Form S-8 (File No. 333-273458) initially filed with U.S. Securities and Exchange Commission on July 26, 2023, and amended on November 15, 2024. The Compensation Committee has broad discretion in making awards, provided that any options shall be exercisable at the fair market value on the date of grant.

Restricted stock

During the years ended June 30, 2025 and 2024, 206,271 and 148,216 shares of common stock were issued to the Company’s board of directors and service providers in settlement of restricted stock granted under the Plan, respectively. Restricted stock granted to directors vests over three months and was fully vested as of June 30, 2025. The Company recognized stock-based compensation expense totaling $1,251,328 and $826,996 during the year ended June 30, 2025 and 2024, which were related to the restricted stock issued to the Company’s board of directors and a service provider, based on the grant date fair value of the awards. There are $15,909 unrecognized compensation expenses related to the restricted stock awards granted to one service provider as of June 30, 2025.

In June 2024, the Company entered into consulting agreements with two consultants which provide for the issuance of up to 150,000 shares of common stock to each consultant (a total of 300,000 shares of common stock). Under the terms of the consulting agreements, (a) 25,000 shares of common stock vested upon execution of the consulting agreements (a total of 50,000 shares of common stock), (b) 100,000 shares of common stock will vest upon the attainment of five separate sales-based targets, in 20,000 share increments (a total of 200,000 shares of common stock), and (c) 25,000 shares of common stock will vest on October 1, 2027, if the consulting agreements have not been terminated (a total of 50,000 shares of common stock). The Company estimated the grant date fair value of the restricted stock to be $7.14 per share. Upon execution of the consulting agreements, the Company issued a total of 50,000 shares of common stock and recognized stock-based compensation expense totaling $357,000.

In July 2024, the Company entered into consulting agreements with two consultants, which provide for the issuance of up to 140,000 shares of common stock to each consultant (a total of 280,000 shares of common stock). Under the terms of the consulting agreements, these 140,000 shares of common stock will vest upon the attainment of six separate sales-based targets, in 20,000 share increments, if the consulting agreements have not been terminated.

In July 2024, the Company entered into consulting agreements with two consultants, which provide for the issuance of up to 400,000 shares of common stock to each consultant (a total of 800,000 shares of common stock). Under the terms of the consulting agreements, (a) 75,000 shares of common stock vested upon execution of the consulting agreements (a total of 150,000 shares of common stock issued during the three months ended September 30, 2024), (b) 300,000 shares of common stock will vest upon the attainment of three separate sales-based targets, in 100,000 share increments (a total of 300,000 shares of common stock), and (c) 25,000 shares of common stock will vest upon the attainment of one separate sales-based target, if the consulting agreements have not been terminated. These consultant agreements were cancelled during the year ended June 30, 2025. Upon cancellation, 150,000 shares from the consultant agreements had been vested and issued, and there were 650,000 unissued and unvested shares being cancelled.

The shares of common stock that vest upon the attainment of the sales-based targets include performance-based vesting conditions, which the Company has determined were not probable of being achieved at June 30, 2025. As such, the Company has not recognized any compensation expense as of June 30, 2025, related to the restricted common stock with performance-based vesting conditions. The shares of common stock that vest on October 1, 2027, include time-based vesting criteria. For these shares, the Company recognizes stock-based compensation expense based on the grant date fair value on a straight-line basis over the required service period. For the year ended June 30, 2025, the stock-based compensation expense related to the restricted common stock with time-based vesting conditions was zero.

Stock Options

The following is a summary of stock option activity transactions as of and for the years ended June 30, 2025 and 2024:

The aggregate intrinsic value of options outstanding with an exercise price less than the closing price of the Company’s common stock as of June 30, 2025 was $0. Aggregate intrinsic value represents the value of the Company’s closing stock price on the last trading day of the period in excess of the weighted-average exercise price multiplied by the number of options outstanding or exercisable.

Total expense of options vested for the years ended June 30, 2025 and 2024, was $513,553 and $3,607,816, respectively. The options granted during year ended June 30, 2025 were valued using the binomial option pricing model based on the following range of assumptions:

RSUs

RSUs granted to employees vest cumulatively as to one-third of the restricted stock units on each of the first three anniversaries of the date of grant based on continues service. Each vested RSU entitles holder to receive one share of common stock upon exercise. RSUs are accounted for as equity using the fair value method, which requires measurement and recognition of compensation expense for all awards granted to employees, directors and consultants based upon the grant-date fair value.

Total expense for the RSUs during the years ended June 30, 2025 and 2024 was $3,851,401 and $1,588,470, respectively. During the years ended June 30, 2025 and 2024, there were 516,827 and 0 shares issued as a result of employees exercising vested RSUs granted to them.

The following table summarizes the allocation of stock-based compensation in the accompanying consolidated statements of operations and comprehensive loss:

As of June 30, 2025, the Company had approximately $5,562,026 in unrecognized compensation expenses related to all non-vested options and RSUs that will be recognized over the weighted-average period of 2.3 years.