NOTE 15. STOCKHOLDERS’ EQUITY.

Options

 At June 30, 2025, the Company had the 2015 Equity Incentive Plan (the “2015 Plan”), which was shareholder-approved and under which 1,700,000 shares were reserved for issuance under the 2015 Plan until that Plan terminated on August 31, 2025. The 2015 Plan expired by its terms on August 31, 2025, after which no further awards may be granted and any shares that remained available for grant were cancelled. Options outstanding on that date remain outstanding and exercisable in accordance with their original terms; accordingly, 1,100,000 options granted under the 2015 Plan remained outstanding at June 30, 2026.

A summary of option activity under the Company’s stock plan for the years ended June 30, 2026 and 2025 is presented below:

The aggregate intrinsic value in the table above is before applicable income taxes and represents the excess amount over the exercise price optionees would have received if all options had been exercised on the last business day of the period indicated, based on the Company’s closing stock price of $0.04, $0.05, and $0.08 at June 30, 2026, 2025, and 2024, respectively.

The range of fair value assumptions related to options granted during the years ended June 30, 2026 and 2025 were as follows:

There were no stock options granted during the year ended June 30, 2026 and 250,000 stock options granted during the year ended June 30, 2025. 

During the year ended June 30, 2026, no stock options were exercised; During the year ended June 30, 2025, 300,000 options were exercised; the Company’s proceeds from stock options exercise under the 2015 Plan were $0.

During fiscal year 2026, no shares of common stock were issued. In fiscal year 2025, the Company issued 286,385 of common stock for stock option under 2015 Equity Incentive Plan.

During the year ended June 30, 2026, 100,000 options were forfeited. During fiscal 2025, no options were forfeited under 2015 Equity Incentive Plan.

The following table summarizes the weighted average characteristics of outstanding stock options as of June 30, 2026: 

We account for stock-based compensation to employees in accordance with FASB ASC 718, Compensation – Stock Compensation. We measure the cost of each stock option at its fair value on the grant date. Each award vests over the subsequent period during which the recipient is required to provide service in exchange for the award (the vesting period). The cost of each award is recognized as expense in the financial statements over the respective vesting period.

All stock option grants made under the Plan were at exercise prices no less than the Company’s closing stock price on the date of grant. Options under the Plan were determined by the board of directors in accordance with the provisions of the plan. The terms of each option grant include vesting, exercise, and other conditions are set forth in a Stock Option Agreement evidencing each grant. No option can have a life in excess of ten (10) years. The Company records compensation expense for employee stock options based on the estimated fair value of the options on the date of grant using the Black-Scholes option-pricing model. The model requires various assumptions, including a risk-free interest rate, the expected term of the options, the expected stock price volatility over the expected term of the options, and the expected dividend yield. Compensation expense for employee stock options is recognized ratably over the vesting term. The Company has no awards with market or performance conditions.

Stock-based compensation expense recognized in the consolidated statements of operations for each of the fiscal years ended June 30, 2026 and 2025 is based on awards ultimately expected to vest.

As of June 30, 2026, total unrecognized stock-based compensation expense related to all unvested stock options was $16,499, which is expected to be expensed over a weighted average period of 1.2 years.

In determining the grant date fair value of option awards under the equity incentive plans, the Company applied the Black-Scholes option pricing model. Based upon limited option exercise history, the Company has generally used the “simplified” method outlined in SEC Staff Accounting Bulletin No. 110 to estimate the expected life of stock option grants. Management believes that the historical volatility of the Company’s stock price on OTCQB best represents the expected volatility over the estimated life of the option. The risk-free interest rate is based upon published U.S. Treasury yield curve rates at the date of grant corresponding to the expected life of the stock option. An assumed dividend yield of zero reflects the fact that the Company has never paid cash dividends and has no intention to pay dividends in the foreseeable future.

The following table summarizes stock-based compensation expense by line item in the consolidated statements of operations, all relating to employee stock plans:

Share Purchase Warrants

As of June 30, 2026 and 2025, there were no share purchase warrants outstanding.

Common Stock

The Company’s authorized common stock was 175,000,000 shares at June 30, 2026 and 2025. Common shareholders are entitled to dividends if and when declared by the Company’s Board of Directors, subject to preferred stockholders dividend rights. As of June 30, 2026, the Company had reserved the following shares of common stock for issuance: 

Preferred Stock

On February 18, 2011, the Company filed an amendment to its Articles of Incorporation, effective February 9, 2011, authorizing the issuance of preferred stock and the Company now has 10,000,000 authorized shares of preferred stock, par value $.0001 per share, of which 4,300,000 shares have been designated and issued as Series A Convertible Preferred Stock. Each share of Series A Convertible Preferred Stock is convertible into one share of common stock and has a liquidation

preference of $.2325 ($1,000,000 in the aggregate). Liquidation payments to the preferred holders have priority and are made in preference to any payments to the holders of common stock. In addition, each share of Series A Convertible Preferred Stock is entitled to the number of votes equal to the result of: (i) the number of shares of common stock of the Company issued and outstanding at the time of such vote multiplied by 1.01; divided by (ii) the total number of Series A Convertible Preferred Shares issued and outstanding at the time of such vote. At each meeting of shareholders of the Company with respect to any and all matters presented to the shareholders of the Company for their action or consideration, including the election of directors, holders of Series A Convertible Preferred Shares shall vote together with the holders of common shares as a single class.