Note 13 – Convertible notes payable and derivative liabilities

On July 11, 2023, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Streeterville Capital, LLC, a Utah limited liability company (the “Investor”), pursuant to which the Company issued the Investor an unsecured promissory note on July 11, 2023 in the original principal amount of $1,100,000 (the “Note”), convertible into Class A ordinary shares, $0.02 par value per share, of the Company (the “Ordinary Shares”), at the conversion price of $4,000,000.00 per shares. The Note bears a simple interest at a rate of 8% per annum. All outstanding principal and accrued interest on the Note will become due and payable twelve months after the purchase price of the Note is delivered by Purchaser to the Company (the “Purchase Price Date”). The Note includes an original issue discount of $80,000 along with $20,000 for Investor’s fees, costs and other transaction expenses incurred in connection with the purchase and sale of the Note with a gross proceed of $1,000,000. The Company may prepay all or a portion of the Note at any time by paying 120% of the outstanding balance elected for pre-payment. The Investor has the right to redeem the Note at any time after the date that is six (6) months from the Purchase Price Date by providing the Company with a redemption notice. Redemptions may be satisfied in cash or Ordinary Shares at the Company’s election. However, the Company will be required to pay the redemption amount in cash, in the event there is an Equity Conditions Failure. If Company chooses to satisfy a redemption in Ordinary Shares, such Ordinary Shares shall be issued at the Conversion Price.

On January 19, 2024, the Investor redeemed $50,000 that was converted into Class A ordinary share of 1 at a conversion price of $500,000.00 per share. On February 16, 2024, the Investor redeemed $50,000 that was converted into Class A ordinary share of 1 at a conversion price of $500,000.00 per share. On April 12, 2024, the Investor redeemed $50,000 that was converted into Class A ordinary shares of 1 at a conversion price of $334,560.00 per share. On May 21, 2024, the Investor redeemed $75,000 that was converted into ordinary shares of 1 at a conversion price of $334,560.00 per share. From July 2024 to October 2024, the Investor redeemed the remaining Note balance of $875,000 and accrued interest of $96,540 from the Note and converted into Class A ordinary shares of 3 at a conversion price of $334,560.00 per share.

On August 13, 2024, the Company entered into a securities purchase agreement with the Investor, pursuant to which the Company issued the Investor an unsecured promissory note on August 13, 2024, in the original principal amount of $1,100,000 (the “Note 2”), convertible into Class A ordinary shares, $0.02 par value per share, of the Company (the “Ordinary Shares”), for $1,000,000 in gross proceeds. The Note bears a simple interest at a rate of 8% per annum. All outstanding principal and accrued interest on the Note 2 will become due and payable twelve months after the purchase price of the Note is delivered by Purchaser to the Company (the “Second Purchase Price Date”). The Note 2 includes an original issue discount of $80,000 along with $20,000 for Investor’s fees, costs and other transaction expenses incurred in connection with the purchase and sale of the Note. The Company may prepay all or a portion of the Note 2 at any time by paying 120% of the outstanding balance elected for pre-payment. The Investor has the right to redeem Note 2 at any time after the date that is six (6) months from the Second Purchase Price Date by providing the Company with a redemption notice. Redemptions may be satisfied in cash or Ordinary Shares at the Company’s election. However, the Company will be required to pay the redemption amount in cash, in the event there is an equity conditions failure. If the Company chooses to satisfy a redemption of Ordinary Shares, such Ordinary Shares shall be issued at the conversion price of $4,000,000.00 per share. In addition, the Note provides that upon the occurrence of an event of default, the interest rate shall accrue on the outstanding balance at the rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. On August 15, 2024, the transaction contemplated by the Purchase Agreement was closed as all the closing conditions of as set forth therein have been satisfied. The Note 2 were repaid on September 30, 2024, upon the closing of the SPA as discussed below.

Pursuant to the SPA dated September 27, 2024, the Company initially issued senior secured convertible notes (the “Initial Notes”) together with accompanying Series A Warrants to purchase up to 2 Ordinary Shares, with an exercise price of $3,200,000.00 per share (the “Initial Warrants”).

The Initial Notes are convertible into the Company’s Ordinary Shares at the holder’s option, after 45 days from the date of issuance, in whole or in part, until the Initial Note is fully converted, at the lower of (i) $3,200,000.00 (“Conversion Price”), or (ii) a price equal to 90% of the lowest VWAP of the Ordinary Shares during the ten (10)-trading day period immediately preceding the applicable conversion date. If the Company raises funds through subsequent financing, the holder can require the Company to use up to 30% of the proceeds to redeem the Initial Notes at 105% of the principal amount, plus accrued interest. The Conversion Price will also be adjusted proportionately if the Company issues dividends, splits, or combines its Ordinary Shares. The Initial Note is secured by all assets of the Company and its subsidiaries under a certain security agreement and subsidiary guarantee, and the Initial Note ranks senior to all other Company debts and liabilities.

On October 8 and November 25, 2024, the Company entered into note exchange agreements (the “October Exchange Agreement” and the “November Exchange Agreement”) with the purchasers who were parties to the SPA dated September 27, 2024 (the “Purchasers”). Under these agreements, the Initial Notes were delivered back to the Company for cancellation and replaced with new convertible notes having substantially similar terms (the “New Notes” and “New Notes 2”), except that the November Exchange Agreement introduced a floor conversion price of $508,000.00 per share. The exchanges were accounted for as modifications of the original financing, and no new warrants were issued in connection with these replacements. The previously issued Series A Warrants were considered superseded by the note exchange and therefore not revalued or reissued under the new notes. In December 2024, the Purchasers redeemed $6,382,686 that was converted into ordinary shares of 159 at an average conversion price of $40,160.00 per share.

Pursuant to the SPA dated September 27, 2024, the Company may sell to the investors, from time to time, up to US$40,000,000 in the maximum aggregate subscription amount of the Company’s senior secured convertible notes and accompanying ordinary share purchase warrants (“Additional Closings”), with substantially the same terms as the prior issuance.

On January 16, 2025, the Company consummated an additional closing under the same SPA (the “Third Offering”), pursuant to which it issued senior secured convertible notes to the Purchasers in the aggregate principal amount of approximately $8.7 million (the “New Notes 3”), having an original issue discount of 8%, a maturity date twelve months from the date of issuance, bearing an interest rate of 6% per annum, and convertible into Class A Ordinary Shares, par value $0.02 per share, together with Series B Warrants to purchase up to an aggregate of 124 Ordinary Shares (“New Warrants 3”), with an exercise price of $42,200.00 per Ordinary Share. The Series B Warrants represent the only active warrants outstanding as of June 30, 2025. The offering of the New Notes 3 and New Warrants resulted in gross proceeds to the Company of approximately $8.0 million before deducting placement agent fees and other estimated offering expenses.

The New Notes 3 are convertible into the Company’s Ordinary Shares at the holder’s option, immediately upon issuance, in whole or in part, until the New Notes 3 is fully converted, at the lower of (i) the fixed conversion price of $42,200.00 (the “Conversion Price 3”), or (ii) a price equal to the greater of (x) the floor price of $20,000.00 (the “Floor Price 3”) and (y) a price equal to 90% of the lowest VWAP of the Ordinary Shares during the ten (10) Trading Day period immediately preceding the applicable Conversion Date. If the Company raises funds through subsequent financings, the holder can require the Company to use up to 30% of the proceeds to redeem the New Notes 3 at 105% of the principal amount, plus accrued interest. The Conversion Price 3 will also be adjusted proportionately if the Company issues dividends, splits, or combines its Ordinary Shares. The New Note 3 is secured by all assets of the Company and its subsidiaries under a certain security agreement and subsidiary guarantee, and the New Note 3 ranks senior to all other Company debts and liabilities. From July 2025 to August 2025, the investors redeemed the New Note 3 balance of $19,843,562 and accrued interest of $613,826 into Class A ordinary shares of 1,026 at a conversion price of $20,000.00 per share and received approximately $1.9 million cash repayment.

On September 4, 2025, the Company entered into a Payoff Letter Agreement with each of the holders (the “Holders”) of the Company’s outstanding New Notes 3. Pursuant to the Payoff Letter Agreement, the Company and the Holders agreed to fully and finally settle the remaining outstanding principal balances of the New Notes 3 through a one-time conversion into Class A ordinary shares, par value $0.02 per share, at a fixed conversion price of $920.00 per share into 3,602 Class A ordinary shares.

On March 10, 2026, the Company entered into a securities purchase agreement (the “SPA 12”) with certain institutional investors for the purchase and sale of up to $10 million of convertible notes (New Notes 4) and warrants to purchase the Company’s Class A ordinary shares, having a nominal or par value of $0.02 each to take place in up to two tranches. The first tranche includes (a) $6 million in principal amount of the Company’s Senior 10% Original Issue Discount Convertible Promissory Notes (the “First Tranche Notes”) and (b) warrants (the “First Tranche Warrants”) to purchase up to 33,784 ordinary shares. The Company also agreed to issue 23,168 Class A ordinary shares (the “Pre-Delivery Shares”), together with the First Tranche Notes, the First Tranche Warrants, and the Class A ordinary shares underlying the First Tranche Notes and the First Tranche Warrants, the “Securities”) to the investors. The first tranche offering resulted in gross proceeds to the Company of $5.4 million, before deducting placement agent fees and other offering expenses. The Company intends to use the net proceeds from the offering for general corporate and working capital purposes. The offering closed on March 12, 2026.

The First Tranche Notes bear no interest and are convertible immediately upon issuance, subject to certain exceptions, into the Class A ordinary shares at an initial conversion price equal to the lower of (i) $148.08, or (ii) a price equal to the greater of (x) the initial floor price (the “Floor Price”) of $13.936, subject to adjustment, or (y) an “Alternative Conversion Price,” equal to 90% of the lowest daily VWAP during the ten trading days immediately preceding the conversion date. If the Alternative Conversion Price is less than the Floor Price in effect, the Company is obligated to issue a number of shares equal to the conversion amount divided by such Floor Price, and either pay to the First Tranche Note holder in cash by via transfer of immediately available funds, or add to the outstanding principal of the First Tranche Notes an amount described in the First Tranche Notes. The First Tranche Notes are secured by each subsidiary of the Company and rank senior to all other Company debts and liabilities.

The First Tranche Warrants are exercisable immediately upon issuance, subject to certain exceptions, will expire five years from the initial date of exercise, and have an initial exercise price of $148.08 per share (subject to a market price adjustment in the event of a share consolidation) and contain certain anti-dilution provisions. Notwithstanding anything herein to the contrary, at any time or times from and after the occurrence and during the continuance of any event of default, the holders may elect to exercise all or any portion of this Warrant at an alternative exercise price equal to 80% of the VWAP for the trading day immediately preceding the date of such exercise.

The Company issued the Pre-Delivery Shares for the investors to hold against the Company’s delivery of Ordinary Shares upon the conversion of the First Tranche Notes or the exercise of the First Tranche Warrants. The investors may not vote or dispose of the Pre-Delivery Shares until their conversion or exercise. With respect to each investor, during the period beginning on the date on which the applicable investor’s New Note 4 is no longer outstanding following the final closing, and ending on the date that is six-months after such date (as applicable, the “Purchase Right Period”), such investor will have the right, but not the obligation, to purchase all or any portion or portions of its Pre-Delivery Shares at a price per share equal to 90% of the average of the daily VWAPs for the 10 trading days immediately preceding such purchase. The purchaser hereby covenants and agrees that if the purchaser holds any Pre-Delivery Shares after the end of the Purchase Right Period which have not been purchased, such remaining Pre-Delivery Shares shall be deemed surrendered and cancelled by the purchaser on such date.

The Company evaluated the embedded features of the First Tranche Notes in accordance with ASC 470 and ASC 815. Based on this evaluation, the embedded conversion feature (“Conversion Feature”) is required to be bifurcated from the host debt instrument and accounted for separately as a derivative liability. The Conversion Feature is not considered clearly and closely related to the debt host and meets the definition of a derivative under ASC 815. In addition, the First Tranche Notes are not otherwise measured at fair value through earnings, and the Conversion Feature does not qualify for the scope exception for instruments indexed to the Company’s own stock due to variable-priced settlement provisions.

The Company evaluated the First Tranche Warrants in accordance with ASC 480 and ASC 815. Based on this evaluation, the warrants are free from the debt instrument and do not meet all of the criteria for equity classification, and accordingly, accounted for separately as a derivative liability.

Accordingly, the Conversion Feature and First Tranche Warrants are initially measured at fair value and recorded as derivative liabilities, with subsequent changes in fair value recognized in earnings in the period in which they occur.

At issuance, the Company allocated the proceeds between the warrants derivative liabilities, conversion feature derivative liabilities and the host debt using an allocation approach consistent with the measurement basis of each component. The warrants and conversion feature derivative liabilities were recorded at their fair value, with the residual proceeds attributed to the host debt. The fair values of the First Tranche Warrants and the Conversion Feature were determined using a Binomial Tree model. Key assumptions include the Company’s stock price, volatility, risk-free interest rate, discount rate for the Company, Alternative Conversion Price and Floor Price, and contractual term of the notes and warrants.

Debt discount and issuance costs were attributed to the host debt as those costs were primarily incurred to obtain debt financing. Debt discount recorded as a reduction of the carrying amount of the debt and amortized over the term of the First Tranche Notes using the effective interest method.

As of the issuance date of the First Tranche Notes and First Tranche Warrants, valuation assumptions for the Conversion Feature and First Tranche Warrants included stock prices of $69.68 and $69.68, a volatility assumption of 71.40% and 68.07%, and risk-free rates of 3.59 % and 3.88%, respectively.

Valuation assumptions for Conversion Feature on each conversion and principal addition date included stock prices from $5.04 to $32.00, a volatility assumption from 71.96% to 78.87%, and risk-free rates from 3.57 % to 3.93%.

As of June 30, 2026, the fair values of the conversion feature and First Tranche Warrants were remeasured to $15,221 and $400,185, respectively, and were classified as derivative liabilities. Valuation assumptions as of June 30, 2026 for the conversion feature and First Tranche Warrants included stock prices of $5.04, a volatility assumption of 77.39% and 68.93%, and risk-free rates of 3.92% and 4.18%.

The fair value measurement of the Conversion Feature and First Tranche Warrants represent Level 3 inputs under the fair value hierarchy due to the use of unobservable inputs. The following table provides information related to the Company’s derivative liabilities measured at fair value as of the dates indicated below:

The Company has convertible notes, net of unamortized discounts as follows:

As of June 30, 2026, and 2025, the convertible notes balance amount to $1,791,015 and $4,014,122, respectively. For the years ended June 30, 2026, 2025 and 2024, interest expense of the convertible notes was $492,972, $294,625 and $81,922, respectively, and amortization of debt issuance costs was $4,373,078, which included $3,185,540 amortization expenses for the First Tranche Notes, $6,023,259 and $100,000, respectively.

As of June 30, 2026, and 2025, the derivative liabilities balance amount to $415,406, which included the conversion feature of First Tranche Notes of $15,221 and First Tranche Warrants of $400,185, and nil, respectively. For the years ended June 30, 2026, 2025 and 2024, the change in fair value of the conversion feature of First Tranche Notes was $806,700, nil and nil, respectively, and change in fair value of First Tranche Warrants was $605,607, nil and nil, respectively.