PREFERRED STOCK

12 Months Ended

Dec. 31, 2025

Note 16 PREFERRED STOCK

Series A Preferred Stock

In August 2021, the Company issued 80,000 shares of preferred shares at an issue price of $2.50 per share to certain investors. The preferred shares are non-voting and non-redeemable. The holder of the preferred shares will have priority over the holders of ordinary shares of the Company on the assets and funds of the Company available for distribution in a distribution of assets on liquidation, winding up or dissolution of the Company.

As of December 31, 2025 and 2024, there were 80,000 shares of Series A Preferred Stock issued and outstanding.

Series B Preferred Stock

On August 28, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations with the Secretary of State of Nevada, designating up to 1,000,000 shares of Series B Preferred Stock, par value $0.001 per share. Each share of Series B Preferred Stock has a stated value of $1,000.

On August 29, 2025, the Company entered into a securities purchase agreement (the “Series B Preferred Purchase Agreement”) with an institutional accredited investor (the Series B Preferred Investor”). Pursuant to the Series B Preferred Purchase Agreement, the Company sold 3,500 shares of Series B Preferred Stock at a purchase price of $910 per share. The aggregate purchase price received by the Company was $2,635,000, net of issuance cost of $550,000. The Company may, subject to certain conditions, sell up to an additional 10,000 shares of Series B Preferred Stock to the Series B Preferred Investor in one or more subsequent closings.

The key terms of the Series B Preferred Stock are as follows:

	·	Dividends: Beginning October 1, 2025, holders are entitled to receive mandatory monthly dividends at an annual rate of 9.0% of the aggregate stated value. Dividends are payable in cash or, at the Company’s option, in shares of the Company’s common stock.
	·	Conversion: The Series B Preferred Stock is convertible at any time at the option of the holder into shares of common stock. The conversion price is $1.80 per share of Common Stock, subject to adjustment. The conversion is subject to a beneficial ownership limitation which prohibits a holder from converting if, after conversion, the holder would own in excess of 4.99% (or 9.99% upon election) of the total outstanding Common Stock.
	·	Ranking: The Series B Preferred Stock ranks senior to the common stock and the Company’s Series A Preferred Stock with respect to preferences on dividends, distributions, and payments upon liquidation.
	·	Voting Rights: The Series B Preferred Stock has no voting rights.
	·	Redemption: The Series B Preferred Stock is redeemable at the Company’s option at any time. Holders have the option to require the Company to redeem the shares at any time after the two-year anniversary of the initial issuance date. Upon the occurrence of certain events of default, holders may require a mandatory redemption at a price equal to 125% of the stated value plus any accrued and unpaid dividends.

The Series B Preferred Stock is redeemable upon the occurrence of a deemed liquidation event that is not solely within the control of the Company and is classified as mezzanine equity on the consolidated balance sheets. The carrying values of Series B Preferred Stock have not been adjusted to their liquidation preferences as these events have not occurred through December 31, 2025. Carrying values will be adjusted to their liquidation preferences if and when it becomes probable that such events will occur.

The conversion feature of the Series B Preferred Stock permits holders to convert the preferred stock into a fixed number of shares of the Company’s common stock at a fixed conversion price, subject to customary anti-dilution adjustments. The Company concluded that the conversion feature qualifies for the equity scope exception under ASC 815 and therefore was not bifurcated as an embedded derivative.

As of December 31, 2025, the Company did not have any financial liabilities subject to amortized cost measurement.

The preferred stock was initially recognized at fair value based on an independent valuation and is subsequently measured at amortized cost using the effective interest method. The instrument contains features that result in liability classification under applicable accounting guidance.

The carrying amount of the preferred stock is presented net of unamortized discounts. The discounts primarily arose from the allocation of proceeds to certain features of the instrument at issuance. Such discounts are amortized to interest expense over the expected term using the effective interest rate method.