Note 11. Convertible Preferred Stock and Common Stock Warrants

As of June 30, 2025, the Company had issued and outstanding a total of 1,992,000 shares of Series A 8% Convertible Preferred Stock ("Series A Preferred") and 1,359,000 shares of Series B Convertible Preferred Stock ("Series B Preferred"). The Series A Preferred and Series B Preferred are convertible into a total of 670,200 shares of common stock. Dividends payable on these preferred shares accrue at the rate of 8% per year and are payable quarterly in stock or cash at the option of the Company. The Company generally pays the dividends on the preferred stock by issuing shares of our common stock. The formula for paying these dividends using common stock in lieu of cash can change the effective yield on the dividend to more or less than 8% depending on the market price of the common stock at the time of issuance. Certain redemption rights are attached to the Series A Preferred and Series B Preferred, but none of the redemption rights for cash are deemed outside the control of the Company. The redemption rights deemed outside the control of the Company require common stock payments or an increase in the dividend rate. The Series A Preferred and Series B Preferred includes a liquidation preference under which investors would receive cash equal to the stated value of their stock plus unpaid dividends. A forced conversion can be initiated based on a formula related to share price and trading volumes.

As of June 30, 2025, the Company had no warrants to issued and outstanding.

In connection with each of the issuances of the Series A Preferred, the Series B Preferred and the Series C Preferred, the Company recorded a deemed dividend related to a beneficial conversion feature, which reflects the difference between the underlying common share value of the Series A Preferred, the Series B Preferred, and the Series C Preferred shares as if converted, based on the closing price of the Company's common stock on the date of the applicable transaction, less an amount of the purchase price assigned to the Series A Preferred, the Series B Preferred or the Series C Preferred, as applicable, in an allocation of purchase price between the preferred shares and common stock purchase warrants that were issued with the Series A Preferred, the Series B Preferred and the Series C Preferred.

The Company chose to pay preferred stock dividends by issuing common shares valued at $702,223 in fiscal year 2025 and $730,873 in fiscal year 2024. At June 30, 2025, there was $348,873 in accrued dividends payable for the quarter ended June 30, 2025, which were paid by issuing 2,557,957 shares of common stock in July 2025.

In case of liquidation, dissolution or winding up of the Company, preferred stock has preferential treatment beginning with the Series A Preferred, then the Series B Preferred. After preferential amounts, if any, to which the holders of preferred stock may be entitled, the holders of all outstanding shares of common stock shall be entitled to share ratably in the remaining assets of the Company. The liquidation preference is as follows:

	Shares Designated	Shares Outstanding		Liquidation Value/ Preference
Series A Preferred	2,000,000	1,992,000	$	4,980,000
Series B Preferred	1,800,000	1,359,000		3,397,500

In case of certain change in control transactions, , and certain other triggering events identified in Section 9 the Certificates of Designations, Preferences, and Rights of the Series A and Series B Preferred Stock, holders of Series A and Series B Preferred Stock have the right to require the Company to redeem their shares of such preferred stock at a redemption price equal to 130% of the stated value of the shares. The aggregate redemption payment that would result from a triggering event, assuming full exercise of such redemption rights by the holders of the Series A and Series B Preferred Stock, is as follows:

	Shares Designated	Shares Outstanding		Triggering Redemption Value
Series A Preferred	2,000,000	1,992,000	$	6,474,000
Series B Preferred	1,800,000	1,359,000		4,416,750