XML 32 R22.htm IDEA: XBRL DOCUMENT v3.22.2.2
Equity
 3 Months Ended
Sep. 30, 2022
Equity [Abstract]  
Equity

Note 16 – Equity

 

Common Stock

  

During the year ended June 30, 2022, the Company issued 40,019 shares of restricted common stock for RSUs vested in the quarter ended September 30, 2021.

 

On February 15, 2022, as part of the consideration for the acquisition of Anivia and subsidiaries, the Company issued 3,083,700 restricted shares of the Company’s common stock, valued at $2.27 per share, which was the closing price of the Company’s Common Stock as traded on Nasdaq on February 15, 2022. These shares have a lock-up period of 180 days and are subject to insider trading restrictions. The fair value of the shares was $5,528,373, calculated with a discount of lack of marketability of 21%, which is determined using the Black Scholes Model.

 

As of September 30, 2022 and June 30, 2022, there were 29,572,382 and 29,572,382 shares of Common Stock issued and outstanding, respectively.

 

Preferred Stock

 

The Company’s Preferred Stock was authorized as “blank check” series of Preferred Stock, providing that the Board of Directors is expressly authorized, subject to limitations prescribed by law, by resolution or resolutions and by filing a certificate pursuant to the applicable law of the State of Nevada, to provide, out of the authorized but unissued shares of Preferred Stock, for series of Preferred Stock, and to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof. As of September 30, 2022 and June 30, 2022, respectively, there were no shares of Preferred Stock issued and outstanding.

 

Equity Incentive Plan

 

On May 5, 2021, the Company’s Board of Directors adopted, and its stockholders approved and ratified, the iPower Inc. Amended and Restated 2020 Equity Incentive Plan (the “Plan”). The Plan allows for the issuance of up to 5,000,000 shares of Common Stock, whether in the form of options, restricted stock, restricted stock units, stock appreciation rights, performance units, performance shares and other stock or cash awards. The general purpose of the Plan is to provide an incentive to the Company’s directors, officers, employees, consultants and advisors by enabling them to share in the future growth of the Company’s business. On November 16, 2021, we filed a registration statement on Form S-8 registering all shares issuable under the Plan.

 

Restricted Stock Unit

 

Following completion of the IPO on May 11, 2021, pursuant to their letter agreements, the Company awarded a total of 46,546 restricted stock units (“RSUs”) under the Plan to its independent directors, Chief Financial Officer, and certain other employees and consultants, all of which are subject to certain vesting conditions in the next 12 months and restrictions until filing of a Form S-8 for registration of the shares. On November 16, 2021, we filed a registration statement on Form S-8 registering all shares issuable under the Plan. The fair value of the RSUs was determined to be based on $5.00 per share, the initial listing price of the Company’s common stock on the grant date. The fair value of RSUs issued subsequent to IPO date was based on the stock price on each grant date. During the three months ended September 30, 2022, the Company granted an additional 29,806 shares of RSUs. For the three months ended September 30, 2022 and 2021, the Company recorded $27,500 and $103,054 of stock-based compensation expense. As of September 30, 2022 and June 30, 2022, the unvested number of RSUs was 3,304 and 6,608 and the unamortized expense was $7,500 and $15,000, respectively.

 

Information relating to RSU grants is summarized as follows:  

         
   Total RSUs Issued   Total Fair Market Value of RSUs Issued as Compensation (1) 
RSUs granted, but not vested, at June 30, 2022   6,608      
RSUs granted   29,806   $20,000 
RSUs forfeited   –      
RSUs vested   (33,110)     
RSUs granted, but not vested, at September 30, 2022   3,304      

 _____________________

(1) The total fair value was based on the current stock price on the grant date.

 

As of September 30, 2022, of the 166,176 vested RSUs, 40,019 shares of Common Stock were issued, and 126,157 shares were to be issued upon setup of the plan administration account.

 

Stock Option

 

On May 12, 2022, the Compensation Committee of the Board of Directors approved an incentive plan for the Company’s executive officers consisting of a cash performance bonus of $60,000 to be awarded to Kevin Vassily, CFO of the Company, and stock option grants (the “Option Grants”) in the amount of (i) 3,000,000 shares to Chenlong Tan, CEO and (ii) 330,000 shares to Mr. Vassily. The Option Grants, which were issued on May 13, 2022, have an exercise price of $1.12, a contractual term of 10 years and consist of six vesting tranches with a vesting schedule based entirely on the attainment of both designated operational milestones (performance conditions) and market conditions (together, the “Designated Milestones”), which are set forth in six vesting tranches, assuming continued employment of the recipients through the date on which such Designated Milestones are achieved. Each of the six vesting tranches for the Option Grants will vest when both (i) the market capitalization milestone for such tranche, which begins at $150 million for the first tranche and increases by increments of $50 million through the fourth tranche and $100 million thereafter (based on achieving such market capitalization for five consecutive trading days), has been achieved, and (ii) any one of the following six operational milestones focused on revenue or any one of the six operational milestones focused on operating income have been achieved during a given fiscal year.

 

The achievement status of the operational milestones as of September 30, 2022 was as follows:

 

 Revenue in Fiscal Year    Operating Income in Fiscal Year 
 Milestone         Milestone      
 (in Millions)    Achievement Status    (in Millions)    Achievement Status 
                  
$90    Probable   $6    Probable 
$100    Probable   $8    Probable 
$125    Probable   $10    Probable 
$150    Probable   $12    – 
$200    Probable   $16    – 
$250    –   $20    – 

 

The Company evaluated the performance condition and market condition under ASC 718-10-20. The Option Grants are considered an award containing a performance and a market condition and both conditions (in this case at least one of the performance conditions) must be satisfied for the award to vest. The market condition is incorporated into the fair value of the award, and that fair value is recognized over the longer of the implied service period or requisite service period if it is probable that one of the performance conditions will be met. In relation to the five awards deemed probable to vest, the recognition period ranges from 2.93 years to 9.64 years. If the performance condition is ultimately not met, compensation cost related to the award should not be recognized (or should be reversed to the extent any expense has been recognized related to such tranche) because the vesting condition in the award would not have been satisfied.

 

On the grant date, a Monte Carlo simulation was used to determine for each tranche (i) a fixed amount of expense for such tranche and (ii) the future time when the market capitalization milestone for such tranche was expected to be achieved. Separately, based on a subjective assessment of our future financial performance, each quarter we determine whether it is probable that we will achieve each operational milestone that has not previously been achieved or deemed probable of achievement and if so, the future time when we expect to achieve that operational milestone. The Monte Carlo simulation utilized the following inputs:

 

  · Stock Price - $1.12
  · Volatility – 95.65%
  · Term –10 years
  · Risk Free Rate of Return – 2.93%
  · Dividend Yield – 0%

 

The total fair value of the Option Grants was $3.2 million of which, at June 30, 2022, $2.3 million is deemed probable of vesting. As of September 30, 2022, none of the options had vested. For the three months ended September 30, 2022 and 2021, the Company recorded $110,382 and $0 of stock-based compensation expense related to the Option Grants. Unrecognized compensation cost related to tranches probable of vesting is approximately $2.1 million and will be recognized over 2.8 years to 9.5 years, depending on the tranche.