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ORDINARY SHARES PURCHASE WARRANTS ISSUED TO INVESTORS

6 Months Ended

Dec. 31, 2021

ORDINARY SHARES PURCHASE WARRANTS ISSUED TO INVESTORS

ORDINARY SHARES PURCHASE WARRANTS ISSUED TO INVESTORS

NOTE 18. ORDINARY SHARES PURCHASE WARRANTS ISSUED TO INVESTORS

In May and June 2020, the Company consummated two offerings. In connection with the offering, the Company issued to the investors warrants to purchase an aggregate of 911,112 Class A ordinary shares at an exercise price of $2.25 per Class A ordinary share, which was amended to $1.25 per Class A ordinary share on the second offering on June 30, 2020. These warrants are exercisable at any time, and from time to time, in whole or in part, commencing on May 26, 2020 and expire on November 25, 2025. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $1,689,389. Variables used in the option-pricing model include (1) risk-free interest rate at the date of grant (0.40%), (2) expected warrant life of 5.5 years, (3) expected volatility of 99.50%, and (4) expected dividend yield of 0. As of June 30, 2021, all warrants were exercised and all the underlying shares were issued.

In June 2020, the Company issued to the investors warrants to purchase an aggregate of 1,680,000 Class A ordinary shares at an exercise price of $1.25 per Class A ordinary share. These warrants are exercisable at any time, and from time to time, in whole or in part, commencing on June 30, 2020 and expire on December 30, 2025. The fair value of these warrants, using the Black-Scholes option pricing model, on the date of issuance was $1,639,333. Variables used in the option-pricing model include (1) risk-free interest rate at the date of grant (0.35%), (2) expected warrant life of 5.5 years, (3) expected volatility of 104.26%, and (4) expected dividend yield of 0. As of June 30, 2021, all warrants were exercised.

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In June 2021, the Company issued to some institutional investors warrants to purchase an aggregate of up to 8,814,102 Class A Ordinary Shares. The warrants are subject to deemed-liquidation redemption features and are therefore classified as a liability in accordance with FASB ASC 480. The warrant liability is re-valued at each reporting period with the change in fair value recorded through earnings. The Company established the initial fair value of the warrants at $34,860,000. As of June 30, 2021, the fair value of the warrant liability was $29,520,000. During the period from June 14, 2021 (date of initial measurement) through June 30, 2021, there was change in fair value of warrant liability in an aggregate amount of $5,340,000 recorded as a part of offset to the Company’s net loss for the year. As of December 31, 2021, the fair value of the warrant liability was $6,640,000 (¥42,239,816). During the six months ended December 31, 2021, there was change in fair value of warrant liability in an aggregate amount of $22,880,000 recorded as a part of offset to the Company’s net loss from operations for the six months ended December 31, 2021.

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The key inputs into the Black-Scholes model were as follows at their measurement dates:

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​	​	​	​	​	​	​	​	​
​	​	​	​	​		​	June 14, 2021
​	​	December 31,	​	June 30,		​	(Initial
Input		2021		2021			measurement)	​
Stock price		1.31	​	$	4.33		5.01	​
Risk-free interest rate		1.25	%		0.95	%	0.90	%
Volatility		109	%		111	%	111	%
Exercise price		6.24	​		6.24		6.24	​
Warrant life		5.0	years		5.5	years	5.5	years

​

The following table presents information about the Company’s warrants that were measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2021, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value.

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Quoted Prices In

Significant Other

Significant Other

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​

June 30,

​

Active Markets

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Observable Inputs

​

Unobservable Inputs

Description

​

2021

​

(Level 1)

​

(Level 2)

​

(Level 3)

Liabilities:

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​

​

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Warrant liability

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$

29,520,000

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$

—

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$

—

​

$

29,520,000

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​

Quoted Prices In

Significant Other

Significant Other

​

​

December 31,

​

Active Markets

​

Observable Inputs

​

Unobservable Inputs

Description

​

2021

​

(Level 1)

​

(Level 2)

​

(Level 3)

Liabilities:

​

​

​

​

Warrant liability

​

$

6,640,000

​

$

—

​

$

—

​

$

6,640,000

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The following table summarizes the Company’s Warrants activities and status of Warrants at December 31, 2021:

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​	​	​	​	​	​	​	​
​		​		Weighted			Average
​	​	​	​	Average		​	Remaining
​	​	​	​	Exercise Price		​	Period
Warrants	​	Warrants	​	Per Share		​	(Years)
Outstanding as of June 30, 2020		2,591,112	​	$	1.25		5.5
Issued		8,814,102	​		6.24
Forfeited		—	​		—
Exercised		(2,591,112)	​		1.25
Expired		—	​		—
Outstanding as of June 30, 2021		8,814,102	​	$	6.24		5.46
Issued		—	​		—
Forfeited		—	​		—
Exercised		—	​		—
Expired		—	​		—
Outstanding as of December 31, 2021		8,814,102	​	$	6.24		4.96

​

X

- Definition

Tabular disclosure of warrants or rights issued. Warrants and rights outstanding are derivative securities that give the holder the right to purchase securities (usually equity) from the issuer at a specific price within a certain time frame. Warrants are often included in a new debt issue to entice investors by a higher return potential. The main difference between warrants and call options is that warrants are issued and guaranteed by the company, whereas options are exchange instruments and are not issued by the company. Also, the lifetime of a warrant is often measured in years, while the lifetime of a typical option is measured in months. Disclose the title of issue of securities called for by warrants and rights outstanding, the aggregate amount of securities called for by warrants and rights outstanding, the date from which the warrants or rights are exercisable, and the price at which the warrant or right is exercisable.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 718
-SubTopic 10
-Section 50
-Paragraph 1
-Subparagraph (a)
-URI http://asc.fasb.org/extlink&oid=120381028&loc=d3e5047-113901

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 50
-Section S99
-Paragraph 1
-URI http://asc.fasb.org/extlink&oid=6784392&loc=d3e188667-122775

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- References

No definition available.

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