Note 9 – Options to Acquire Common Stock

On December 15, 2022, the Company issued Dr. T.Z. (Ted) Chuang, Advisory Board member, a stock option to acquire an aggregate of 10,000 shares of the common stock of the Company, exercisable for five (5) years at an exercise price of $0.50 per share, subject to vesting. The option vests in equal amounts over a period of one (1) year at the rate of two thousand five hundred (2,500) shares per fiscal quarter at the end of such quarter, commencing in the quarter in which the optionee enters into the grant agreement, and pro-rated for the number of days the optionee serves on the Board of Advisors during the fiscal quarter.

On June 25, 2024, the Company issued Edward Lee, Chairman, a stock option to acquire an aggregate of 1,000,000 shares of the common stock of the Company, exercisable for five (5) years at an exercise price of $0.20 per share, subject to vesting. The option vests in equal amounts over a period of one (1) year at the rate of 250,000 shares per fiscal quarter at the end of such quarter, commencing in June 2024, and pro-rated for the number of days the optionee serves on the Board during the fiscal quarter.

On June 25, 2024, the Company issued Eugene Cha, Director, a stock option to acquire an aggregate of 500,000 shares of the common stock of the Company, exercisable for five (5) years at an exercise price of $0.20 per share, subject to vesting. The option vests in equal amounts over a period of one (1) year at the rate of 125,000 shares per fiscal quarter at the end of such quarter, commencing in June 2024, and pro-rated for the number of days the optionee serves on the Board during the fiscal quarter.

The Company estimated the fair value of stock options it granted to utilizing the Black-Scholes option-pricing model. The volatility component of the calculation is based on the historic volatility of the Company’s stock. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behaviour. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The stock price is considered based on the closing price of the Company’s common stock as of the grant date.

The Company recognizes compensation costs for those shares expected to vest on a straight-line basis over the requisite service period of the awards. During the six month ended May 31, 2026 and 2025, the Company recognized $-0- and $120,000 in stock based compensation related to the vesting of issued stock options.

Determining the assumptions for the expected term and volatility requires management to exercise significant judgment. The expected term represents the weighted-average period that options granted are expected to be outstanding giving consideration to vesting schedules. Since the Company does not have an extended history of actual exercises, the Company has estimated the expected term using a simplified method which calculates the expected term as the average of the time-to-vesting and the contractual life of the awards. Given the limited public market for the Company’s stock, the Company has elected to estimate its expected volatility by benchmarking its volatility to that of several public company issuers that operate within its market segment. The guideline companies’ volatility was increased by a size adjustment premium to compensate for the difference in size between the guideline companies and the Company in its calculation.

Black-Scholes option-pricing model. The Company recognizes the expense related to stock options it has provided individuals to acquire its common stock over the requisite service period (usually the vesting period of one year), utilizing the Black-Scholes option-pricing model. The volatility component of the calculation is based on the historic volatility of the Company’s stock, or the expected future volatility and it is assumed to be 1592.16%. The expected life assumption is primarily based on historical exercise patterns and employee post-vesting termination behaviour. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve for two years in effect at the time of grant and is considered to be 4.45% and the stock price is considered to be $0.16 per share, the closing stock price as of June 25, 2024.