NOTE 9 – STOCKHOLDERS’ EQUITY

Stock Issuances

During the six months ended June 30, 2026, the company issued 314,882 shares of common stock upon the exercise of 314,882 options at an exercise price of $0.07 a share. As a result, the company received $22,042 in cash proceeds as part of the transaction.

During the six months ended June 30, 2026, the company issued 30,000 shares of common stock upon the exercise of 30,000 options at an exercise price of $0.07 a share. As a result, the company received $2,100 in cash proceeds as part of the transaction.

During the six months ended June 30, 2026, the company issued 20,000 shares of common stock upon the exercise of 20,000 options at an exercise price of $0.40 a share. As a result, the company received $8,000 in cash proceeds as part of the transaction.

During the six months ended June 30, 2026, the company issued 6,600 shares of common stock upon the exercise of 6,600 options at an exercise price of $0.35 a share. As a result, the company received $2,310 in cash proceeds as part of the transaction.

During the six months ended June 30, 2025, the company completed the placement of 8,010,652 shares of its common stock, par value, $0.001 per share, of which 3,738,318 were underlying pre-funded common stock purchase warrants, in a private sale to individual purchasers at a price of $0.75 per share (or $0.749 per underlying share for pre-funded warrants), for aggregate proceeds in the approximate amount of $6,004,250.

During the six months ended June 30, 2025, the company issued 50,000 shares of common stock upon the exercise of 50,000 options at an exercise price of $0.40 a share, for proceeds in the amount of $20,000.

During the six months ended June 30, 2025, restricted stock units covering 11,667 shares of the company’s common stock vested. The company issued 11,667 shares of common stock, and withheld 3,693 shares of common stock from the holder pursuant to their restricted stock unit agreement to cover its tax withholding obligation of $2,733.

During the six months ended June 30, 2025, the company issued 160,000 shares of common stock to consultants in exchange for services rendered. During the six months ended June 30, 2025, the company recognized stock compensation expense of $143,200.

During the six months ended June 30, 2025, the company issued 50,000 shares of common stock upon exercise of warrants at an exercise price of $ 0.06 per share for proceeds in the amount of $3,000.

During the six months ended June 30, 2025, the company issued 170,000 shares of common stock upon the exercise of 170,000 options at an exercise price of $0.07 a share. As a result, the company received $11,900 in cash proceeds as part of the transaction.

During the six months ended June 30, 2025, the company issued 20,000 shares of common stock upon the exercise of 20,000 options at an exercise price of $0.35 a share. As a result, the company received $7,000 in cash proceeds as part of the transaction.

During the six months ended June 30, 2026, restricted stock units covering 11,667 shares of the company’s common stock vested. The company issued 11,667 shares and withheld 3,751 shares of common stock from the holder pursuant to their restricted stock unit agreement to cover its tax withholding obligation of $4,663.  

Preferred Stock

As of June 30, 2026, and December 31, 2025, there were 13,602 shares of Series A Redeemable Convertible Preferred Stock (the “Series A Preferred Stock”) issued and outstanding, respectively. The company has not paid the dividends commencing with the quarterly dividend due August 1, 2013. Dividend arrearages as of June 30, 2026, including previously accrued dividends of $48,079 included in our balance sheet total approximately $447,638. The company’s Board of Directors suspended the declaration of the dividend, commencing with the dividend payable as of February 1, 2015, since the company did not have a surplus (as such term is defined in the Delaware general corporation Law) as of December 31, 2014, until such time as we have a surplus or net profits for a fiscal year.

The Series A Preferred Stock has a liquidation preference of $25.00 per Share. The Series A Preferred Stock bears dividends at the rate of 6.5% of the liquidation preference per share per annum, which accrues from the date of issuance, and is payable quarterly. Dividends may be paid in: (i) cash, (ii) shares of our common stock (valued for such purpose at 95% of the weighted average of the last sales prices of our common stock for each of the trading days in the ten trading day period ending on the third trading day prior to the applicable dividend payment date), provided that the issuance and/or resale of all such shares of our common stock are then covered by an effective registration statement and the company’s common stock is listed on a U.S. national securities exchange or the Nasdaq Stock Market at the time of issuance or (iii) any combination of the foregoing. If the company fails to make a dividend payment within five business days following a dividend payment date, the dividend rate shall immediately and automatically increase by 1% from 6.5% of the liquidation preference per offered share of Series A preferred stock to 7.5% of such liquidation preference. If a payment default shall occur on two consecutive dividend payment dates, the dividend rate shall immediately and automatically increase to 10% of the liquidation preference for as long as such payment default continues and shall immediately and automatically return to the Initial dividend rate at such time as the payment default is no longer continuing.

Each share of Series A Preferred Stock is convertible at any time at the option of the holder into a number of shares of common stock equal to the liquidation preference (plus any unpaid dividends for periods prior to the dividend payment date immediately preceding the date of conversion by the holder) divided by the conversion price (initially $12.00 per share, subject to adjustment in the event of a stock dividend or split, reorganization, recapitalization or similar event). If the closing sale price of the common stock is greater than 140% of the conversion price on 20 out of 30 trading days, the company may redeem the Series A Preferred Stock in whole or in part at any time through October 31, 2010, upon at least 30 days’ notice, at a redemption price, payable in cash, equal to 100% of the liquidation preference of the shares to be redeemed, plus unpaid dividends thereon to, but excluding, the redemption date, subject to certain conditions. In addition, beginning November 1, 2010, the company may redeem the Series A Preferred Stock in whole or in part, upon at least 30 days’ notice, at a redemption price, payable in cash, equal to 100% of the liquidation preference of the Series A Preferred Stock to be redeemed, plus unpaid dividends thereon to, but excluding, the redemption date, under certain conditions.

If a change of control occurs, each holder of shares of Series A Convertible Preferred Stock that are outstanding immediately prior to the change of control shall have the right to require the corporation to purchase, out of legally available funds, any outstanding shares of Series A Convertible Preferred Stock at the defined purchase price. The purchase price is defined as: per share of Preferred Stock, 101% of the liquidation preference thereof, plus all unpaid and accumulated dividends, if any, to the date of purchase thereof. The purchase price is payable, at the corporation’s option, (x) in cash, (y) in shares of the common stock at a discount of 5% from the fair market value of Common Stock on the Purchase Date (i.e. valued at 95% of the fair market value of the Common Stock on the Purchase Date), or (z) any combination thereof.

If the Corporation pays all or a portion of the Purchase Price in Common Stock, no fractional shares of Common Stock will be issued; instead, the company will round the applicable number of shares of Common Stock up to the nearest whole number of shares; provided that the Corporation may pay the Purchase Price (or a portion thereof), whether in cash or in shares of Common Stock, only if the Corporation has funds legally available for such payment and may pay the Purchase Price (or a portion thereof) in shares of its Common Stock only if (i) the Common Stock is listed on a U.S. national securities exchange or the Nasdaq Stock Market at the time of issuance and (ii) a shelf registration statement covering the issuance by the Corporation and/or resales of the Common Stock issuable as payment of the Purchase Price is effective on the Payment Date unless such shares are eligible for immediate resale in the public market by non-affiliates of the Corporation.

Stock Option and Stock Issuance Plan

Effective November 12, 2018, the company’s Board of Directors adopted the 2018 Incentive Stock Plan. The plan provides for the allocation and issuance of stock, restricted stock purchase offers and options (both incentive stock options and non-qualified stock options) to officers, directors, employees and consultants of the company. The board reserved a total of 50,000,000 shares for possible issuance under the 2018 plan. Effective July 25, 2025, the Board of Directors adopted the 2025 Equity Incentive Plan, which was approved by the stockholders at the 2025 Annual Meeting. The board has reserved 35,000,000 shares plus any remaining shares under the 2018 plan for issuance under the 2025 plan. To date, no grants have been made under the 2025 plan.

The company has, from time to time, also granted non-plan options and restricted stock units to certain officers, directors, employees and consultants. Total stock-based compensation expense for grants to officers, employees and consultants was $2,682,337 and $2,154,764 for the six months ended June 30, 2026, and 2025, respectively, which was charged to general and administrative expense.

The $2,682,337 stock-based compensation for the six months ended June 30, 2026, was comprised of $1,846,810 option expense and $835,527 expense from the vesting of restricted stock.

As of June 30, 2026, the company has $8,396,432 of unrecognized compensation cost related to unvested stock options granted and outstanding, net of estimated forfeitures. The cost is expected to be recognized on a weighted average basis over a period of approximately six years.

The following table summarizes the activity of our stock options for the six months ended June 30, 2026:

We determine the fair value of option grant share-based awards at their grant date, using a Black-Scholes- Merton Option- Pricing Model applying the assumptions in the following table:

The fair value of restricted stock and restricted stock units was estimated using the closing price of our common stock on the date of award and recognized as an expense over the requisite service period. Restricted stock activity for the six months ended June 30, 2026, was as follows:

As of June 30, 2026, and December 31, 2025, there was $701,729 and $1,542,756 respectively in unrecognized stock- based compensation related to unvested restricted stock agreements, net of estimated forfeitures. The cost is expected to be recognized on a weighted average basis over a period of approximately 1.25 years.

On October 9, 2025, the company completed the placement of 5,995,674 shares of its common stock (or pre-funded warrants in lieu thereof) to a group of existing accredited investors at a purchase price of $1.80 per share. The pre-funded warrants are exercisable immediately upon issuance at a price of $0.001 per share until exercised. The company assessed the pre-funded warrants for appropriate balance sheet classification and concluded that the pre-funded warrants are freestanding equity-linked financial instruments that meet the criteria for equity classification under ASC 480 and ASC 815. Accordingly, they are classified as equity and accounted for as a component of common stock at the time of issuance. The company also determined that the prefunded warrants should be included in the determination of basic and diluted earnings per share in accordance with ASC 260, Earnings per Share. Accordingly, the tables below do not include prefunded warrants of 5,961,774 at June 30, 2026 and December 31, 2025.

Warrant stock activity for the six months ended June 30, 2026, was as follows: