9. Mandatorily Redeemable Preferred Stock

Series C Preferred Stock

On December 23, 2025, the Company issued a total of $8.0 million of its newly designated non-convertible mandatorily redeemable Series C Preferred Stock, no par value, through a private placement of 1,600 preferred shares priced at $5,000 per share that matures on April 2, 2027, to Clarkston Companies, Inc., an entity affiliated with Jeffrey Hakala, a member of the Board of Directors of the Company.

The Series C Preferred Stock requires quarterly dividend payments at a dividend rate of 15.0% per annum. The Company recorded $30,000 of interest expense for the twelve months ended December 31, 2025, related to the dividends from the Series C Preferred Stock.

Series B Preferred Stock

On February 27, 2025 and March 3, 2025, the Company issued a total of $7.5 million of its newly designated non-convertible mandatorily redeemable Series B Preferred Stock, no par value, through a private placement of 1,500 preferred shares priced at $5,000 per share that matures on December 31, 2026, and issued the Purchaser (as defined below) common stock purchase warrants (the "Warrants") to purchase 4,000,000 shares at an exercise price of $1.50 per share.

The Warrants entitle the Purchaser to purchase up to 4,000,000 shares of the Company’s common stock at an exercise price of $1.50 per share. The Warrants will expire on January 31, 2027.

The Series B Preferred Stock was sold to Clarkston 91 West LLC (the "Purchaser"), an entity affiliated with Gerald and Jeffrey Hakala, who were both at such time members of the Board of Directors of the Company. The Company used the proceeds for working capital and general corporate purposes. The Series B Preferred Shares may be redeemed early at the Company's option at a price equal to the Series B face value. Each share of the Series B Preferred Stock entitles the Holder to 3,000 votes on each matter properly submitted to the Company's shareholders for their vote, however the aggregate voting

The Series B Preferred Stock requires quarterly dividend payments at a rate equal to the prime rate of Waterford Bank, N.A. plus 600 basis points, or 12.0%, whichever is higher. As of December 31, 2025, this equated to an annualized rate of 13.0%. The Company recorded $838,000 of interest expense for the twelve months ended December 31, 2025, related to the dividends from the Series B Preferred Stock.

The $7.5 million of Series B Preferred Stock, and the Warrants issued contemporaneously, were both fair valued as of the issuance date. The Warrants were valued at $1.9 million and the Series B Preferred Stock was valued at $5.6 million. The fair value of the Warrants was recorded as additional paid-in capital. The fair value measurement of the mandatorily redeemable Series B Preferred Stock was determined using a trinomial lattice model. The model was selected in consideration of the Company's optional redemption rights. Key assumptions in the analysis included the following as of the date of issuance:

The total liability recorded for the Series B Preferred Stock was $5.6 million. The Series B Preferred Stock liability will be accreted to its maximum redemption value over the term maturing on December 31, 2026, using the effective interest method. The increases in the redemption amount are recorded with corresponding adjustments to the interest expense. The Series B Preferred Stock accreted by $804,000 for the year ended December 31, 2025.

The value of the Warrants increased book value through additional paid-in capital by $0.16 per share. Over time, as the preferred stock liability increases to $7.5 million face value, the $0.16 per share of book value will decrease through retained earnings.

The scheduled principal payment of the Company's Series B Preferred Stock is $7.5 million due on December 31, 2026.

The Company redeemed all of the $7.5 million of Series B Preferred Stock in February 2026. See Note 20 ~ Subsequent Events for further details.