NOTE 12. STOCKHOLDERS’ EQUITY

Warrants to Purchase Common Stock

In connection with the Company’s underwritten public offering in fiscal 2022, the Company issued the underwriter’s warrants to purchase up to an aggregate of 82,500 shares of Common Stock as compensation for their services related to this issuance. The warrants may be exercised until March 14, 2027. The exercise price of each warrant is $2.40 per share. As of June 30, 2025, no warrants were exercised.

Convertible Preferred Stock

The Company has 50,000,000 shares authorized to issue as Preferred Stock. The Preferred Stock is designated into two series: 5,000,000 shares designated as Series A and 45,000,000 shares designated as Series B. As of June 30, 2025 there are no issued or outstanding shares of Series A stock.

Each issued Series B Convertible Preferred Stock is convertible into 20 shares of common stock and carries a vote of 20 shares of common stock in all matters brought before the shareholders for a vote. During fiscal year 2025, 36,058 shares of Series B Preferred Stock were converted into 721,160 shares of common stock. There are 13,302 and 49,360 shares of Series B Convertible Preferred Stock outstanding as of June 30, 2025 and 2024, respectively.

Stock-based Compensation

In 2021, the Company adopted the 2021 Omnibus Equity Incentive Plan (“Equity Plan”) which provides for the grant of stock-based awards, including stock options, restricted stock awards (“RSAs”) and restricted stock units (“RSUs”), to employees and non-employees. A total of 5,000,000 shares of common stock are authorized for issuance under the Plan, of which 3,772,485 are available for future grants as of June 30, 2025.

The fair value of stock options is estimated on the date of grant using the Black-Scholes option pricing model and recognized as compensation on a straight-line basis between the date of grant and the date the options become fully vested. Stock options issued have a term of ten years. The fair value of the options granted were estimated using the following assumptions:

 SCHEDULE OF SHARE BASED COMPENSATION

The fair value of RSAs is estimated on the grant date based on the closing quoted market price of the Company’s stock and the RSAs generally vest over a four-year period following issuance date, subject to continued service. The fair value of RSAs is recognized as compensation on a straight-line basis between the date of grant and the date the RSAs become fully vested.

During fiscal 2025 and 2024, the following activity occurred under the Company’s Equity Plan.

 SCHEDULE OF SHARE BASED COMPENSATION STOCK OPTIONS

The total fair value of the stock option grants, calculated using the Black-Scholes option-pricing model using the assumptions noted above, was determined to be $0.1 million and $0.3 million for fiscal 2025 and 2024, respectively. The weighted average remaining contractual term of the stock options outstanding as of June 30, 2025 was 8.3 years. The aggregate intrinsic value of stock options outstanding as of June 30, 2025 was zero.

Stock-based compensation relating to RSAs totaled $0.7 million and $0.3 million for the years ended June 30, 2025 and 2024, respectively, and are included in salaries and compensation in the Consolidated Statements of Operations. Holders of RSAs generally have the rights and privileges of a stockholder with respect to the shares of common stock granted to the holder, including the right to vote such shares and the right to receive dividends with respect to such shares. However, all cash and stock dividends and distributions shall be held back by the Company for the holder’s account until such time as the related portion of the restricted stock award vests (at which time such dividends or distributions, as applicable, shall be released and paid).

Stock-based compensation expense relating to stock options and RSAs totaled $0.8 million and $0.4 million for the years ending June 30, 2025 and 2024, respectively, and are included in the Consolidated Statements of Operations. As of June 30, 2025, there was $0.2 million of unrecognized compensation expense related to outstanding stock options that will be recognized over a remaining weighted average period of 2.4 years and there was $0.2 million of unrecognized compensation expense related to outstanding RSAs that will be recognized over a remaining weighted average period of 1.0 year. The aggregate expected stock-based compensation expense remaining to be recognized reflects only awards as of June 30, 2025 and assumes no forfeiture activity.

There were no shares issued for vendor services during the years ending June 30, 2025 and 2024.