NOTE 9 – STOCKHOLDERS’ EQUITY

(A) Preferred Stock

On December 13, 2013, the Board of Directors (the “Board”) of the Company authorized and approved the creation of a new class of preferred stock consisting of 5,000,000 shares authorized, $0.001 par value. The preferred stock is not convertible into any other class or series of stock. The holders of the preferred stock are entitled to 50 votes for each share held. Voting rights are not subject to adjustment for splits that increase or decrease the common shares outstanding. Upon liquidation, the holders of the shares will be entitled to receive $1.00 per share plus redemption provision before assets distributed to other shareholders. The holders of the shares are entitled to dividends equal to common share dividends. As of December 31, 2025 and 2024, there were 2,000,000 shares of preferred stock outstanding. Once any shares of preferred stock are outstanding, at least 51% of the total number of shares of preferred stock outstanding must approve the following transactions:

(B) Common stock redemption

On October 10, 2023, the Company entered into a Stock Redemption Agreement, whereby the Company purchased 100,000 shares of its common stock from a shareholder for $15,000, or $0.15 per share, which as of December 31, 2025 and 2024, is reflected as treasury stock on the consolidated balance sheet until such time as the shares are cancelled.

On April 23, 2024, following approval by the Board, stockholders holding all of the Company’s outstanding preferred stock approved a stock repurchase program (the “Repurchase Program”), pursuant to which the Company is authorized to purchase up to $1 million of its common stock over an unlimited time period.

During the year ended December 31, 2024, the Company purchased a total of 13,687 shares of its common stock for $8,010 or an average of $0.59 per share, which as of December 31, 2024, is reflected as treasury stock on the consolidated balance sheet until such time as the shares are cancelled.

During the year ended December 31, 2025, the Company purchased a total of 57,000 shares of its common stock for $26,858 or an average of $0.47 per share, which as of December 31, 2025, is reflected as treasury stock on the consolidated balance sheet until such time as the shares are cancelled.

(C) Equity incentive plans

On August 9, 2016, the Company’s Board authorized the 2016 Equity Incentive Plan (the “2016 Plan”) and reserved 10,000,000 shares of common stock for issuance thereunder. The 2016 Plan was approved by shareholders on November 21, 2016. The 2016 Plan’s purpose is to encourage ownership in the Company by employees, officers, directors and consultants whose long-term service the Company considers essential to its continued progress and, thereby, encourage recipients to act in the stockholders’ interest and share in the Company’s success. The 2016 Plan authorizes the grant of awards in the form of options intended to qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended, options that do not qualify (non-statutory stock options) and grants of restricted shares of common stock. Restricted shares granted pursuant to the 2016 Plan are amortized to expense over the vesting period. Options vest and expire over a period not to exceed seven years. If any share of common stock underlying a stock option that has been granted ceases to be subject to a stock option, or if any shares of common stock that are subject to any other stock-based award granted are forfeited or terminate, such shares shall again be available for distribution in connection with future grants and awards under the 2016 Plan. As of December 31, 2025, 1,315,000 stock option awards are outstanding and 1,206,250 options are exercisable under the 2016 Plan As of December 31, 2024, 1,117,500 stock option awards were outstanding and 826,250 options were exercisable under the 2016 Plan. As of December 31, 2025 and 2024, 8,685,000 and 8,882,500 shares, respectively, were available for future issuance under the 2016 Plan.

The Company also continues to maintain its 2014 Equity Compensation Plan (the “2014 Plan”). The 2014 Plan has been superseded by the 2016 Plan. Accordingly, no additional shares subject to the existing 2014 Plan will be issued and the 1,250,000 shares issued upon exercise of stock options were be issued pursuant to the 2014 Plan, if exercised. As of December 31, 2025 and 2024, options to purchase 250,000 and 1,250,000 shares of common stock. respectively, were outstanding and 250,000 and 1,250,000 options were exercisable pursuant to the 2014 Plan, respectively.

(D) Stock options

On November 25, 2024, the Company granted a stock option to purchase 105,000 of the Company’s common stock at an exercise price of $0.49 per share to Board members pursuant to the 2016 Plan. The grant date of the stock option was November 25, 2024 and the option expires on November 25, 2034. The option shall vest evenly on a quarterly basis over 36 months (8,750 options quarterly), beginning immediately. The fair value of this option grant was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 0%; expected volatility of 86.0%; risk-free interest rate of 4.17%; and an estimated holding period of 6.5 years. The Company valued this stock option at a fair value of $35,506 and will record stock-based compensation expense over the vesting period.

On January 21, 2025, the Company granted an aggregate of 525,000 stock options to purchase 525,000 of the Company’s common stock at an exercise price of $0.44 per share to certain Board members pursuant to the 2016 Plan (105,000 stock options each). The grant date of the stock options was January 21, 2025 and the options expire on January 21, 2035. The options shall vest evenly on a quarterly basis over 36 months (8,750 options quarterly), beginning immediately. The fair value of these options grants was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions: dividend yield of 0%; historical volatility of 82.1%; risk-free interest rate of 4.30%; and a holding period of 6.5 years based on the simplified method. The Company valued these stock options at a fair value of $176,504 and will record stock-based compensation expense over the vesting period. On April 23, 2025, three of the Company’s five directors submitted their respective resignations as Board members and accordingly, 262,500 unvested stock options were cancelled.

For the year ended December 31, 2025 and 2024, in connection with the accretion of stock-based option expense, the Company recorded stock option expense over the vesting period of $88,385 and $54,883, respectively. As of December 31, 2025, there was $59,152 of unvested stock-based compensation expense to be recognized through September 2031. The aggregate intrinsic value on December 31, 2025 was $8,400 and was calculated based on the difference between the quoted share price on December 31, 2025 of $0.472 and the exercise price of the underlying options. As of December 31, 2024, there were 2,367,500 options outstanding and 2,051,250 options vested and exercisable. As of December 31, 2024, there was $80,805 of unvested stock-based compensation expense to be recognized through September 2031. The aggregate intrinsic value on December 31, 2024 was $0 and was calculated based on the difference between the quoted share price on December 31, 2024 of $0.54 and the exercise price of the underlying options.

Stock option activities for the year ended December 31, 2025 and 2024 are summarized as follows: