Birchtech Corp. 10-K

Item 8. Financial Statements and Supplementary Data BIRCHTECH CORP. AND SUBSIDIARIES (formerly Midwest Energy Emissions Corp.) Index to Financial Information Years Ended December 31, 2024 and 2023 Page Consolidated Financial Statements Report of Independent Registered Public Accounting Firm – Rosenberg Rich Baker Berman, P.A. (PCAOB ID 89 ) F-1 Consolidated Balance Sheets F-3 Consolidated Statements of Operations F-4 Consolidated Statements of Stockholders’ Deficit F-5 Consolidated Statements of Cash Flows F-6 Notes to Consolidated Financial Statements F-7 32 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of Birchtech Corp. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Birchtech Corp (the Company) as of December 31, 2024 and 2023, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Restatement of Prior Periods As discussed in Note 2, the December 31, 2023 consolidated financial statements have been restated to correct a misstatement. Emphasis of Matter Regarding Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has identified conditions, including a net loss and net cash used in operations, that raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 3. The financial statements do not include any adjustments that might results from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provides a reasonable basis for our opinion. F-1 Table of Contents Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Valuation of Profit Share Liability Description of the Matter As of December 31, 2024, the Company recorded a profit share liability of $6.85 million. As discussed in Note 8 to the financial statements, the Company entered into a profit participation preference (the “profit share liability”) with AC Midwest Energy LLC as part of its Unsecured Note Financing Agreement. The Company calculates the fair value of the profit share liability on a quarterly basis utilizing management estimates. The fair value of the profit share liability is calculated using a discounted cash flow model based on estimated future cash payments. The fair value of the profit share liability is determined on a Level 3 measurement. Inherent in the valuation of Level 3 financial instruments are certain significant judgments and estimates related to forecasted cash flows. Changes in these assumptions can significantly impact the valuation of the profit share liability and the gain or loss on change in fair value that is recorded. This required a high degree of auditor judgment and an increased extent of effort when performing audit procedures to evaluate the reasonableness of management’s forecasted cash flows. How We Addressed the Critical Audit Matter in Our Audit To test the profit share liability calculation as of December 31, 2024, we performed the following procedures among others, by which we: · Obtained and reviewed the Unsecured Note Agreement and evaluated management’s assessment of the terms of the agreement. · Evaluated the assumptions regarding the probabilities related to the timing and amount of cash flows by comparing historical information and current events. · Utilized our internal valuation specialist to assist in the assessment of the appropriateness of the valuation methodology and the reasonableness of the discount rate applied, including consideration of conditions affecting market rates. · Tested the clerical accuracy of the profit share liability calculation. /s/ Rosenberg Rich Baker Berman, P.A. We have served as the Company’s auditor since 2023. Somerset, New Jersey March 31, 2025 F-2 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES (formerly Midwest Energy Emissions Corp.) CONSOLIDATED BALANCE SHEETS December 31, 2024 December 31, 2023 (as restated) ASSETS Current assets Cash $ 3,456,082 $ 20,939,762 Accounts receivable 1,823,232 3,076,462 Inventory 621,813 795,164 Prepaid expenses and other assets 198,185 183,621 Total current assets 6,099,312 24,995,009 Security deposits 6,615 5,175 Property and equipment, net 2,350,688 1,595,958 Right of use asset - operating lease 305,142 10,639 Intellectual property, net 1,499,463 1,704,063 Total assets $ 10,261,220 $ 28,310,844 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Accounts payable and accrued expenses (related party $ 37,500 and $ 107,454 at December 31, 2024 and December 31, 2023, respectively) $ 1,702,998 $ 1,558,450 Income tax payable - 437,821 Current portion of operating lease liability 42,733 11,157 Customer credits 167,000 167,000 Accrued salaries 39,280 8,936 Profit share liability – related party 6,853,858 - Total current liabilities 8,805,869 2,183,364 Operating lease liability, net of current portion 263,490 - Secured note payable, net of discount – related party - 239,466 Unsecured note payable, net of discount and issuance costs – related party - 10,979,723 Profit share liability – related party - 14,847,937 Total liabilities 9,069,359 28,250,490 Commitments and contingencies (Note 10) Stockholders’ equity (deficit) Preferred stock, $ 0.001 par value: 2,000,000 shares authorized, no shares issued - - Common stock, $ 0.001 par value; 150,000,000 shares authorized 96,178,153 and 94,360,107 shares issued and outstanding as of December 31, 2024 and December 31, 2023 respectively. 96,178 94,360 Additional paid-in capital 73,848,919 61,917,119 Accumulated deficit ( 72,753,236 ) ( 61,951,125 ) Total stockholders’ equity (deficit) 1,191,861 60,354 Total liabilities and stockholders’ equity (deficit) $ 10,261,220 $ 28,310,844 See accompanying notes to these consolidated financial statements. F-3 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES (formerly Midwest Energy Emissions Corp.) CONSOLIDATED STATEMENTS OF OPERATIONS For the Year Ended December 31, 2024 For the Year Ended December 31, 2023 (as restated) Product revenue $ 14,481,784 $ 17,092,996 License revenue 2,808,125 387,500 Other revenue 116,276 144,874 Revenues $ 17,406,185 $ 17,625,370 Cost of sales ( 10,305,076 ) ( 12,172,374 ) Gross profit 7,101,109 5,452,996 Operating expenses: Impairment loss ( 43,000 ) ( 219,707 ) Selling, general and administrative expenses (related party of $1,116,064 and $554,410) ( 14,216,377 ) ( 14,206,761 ) Total operating expenses ( 14,259,377 ) ( 14,426,468 ) Operating loss ( 7,158,268 ) ( 8,973,472 ) Other income (expense) Income from legal claims - 27,607,776 Interest expense (related party of $245,724 and $1,360,623) ( 267,458 ) ( 1,362,401 ) Loss on change in fair value of profit share and unsecured note ( 3,959,065 ) ( 11,209,677 ) Interest income 293,524 79,301 Total other (expense) income ( 3,932,999 ) 15,114,999 (Loss) income before provision for income taxes ( 11,091,267 ) 6,141,527 Income tax benefit (expense) 289,156 ( 473,213 ) Net (loss) income $ ( 10,802,111 ) $ 5,668,314 Basic & Diluted (loss) income per share: Basic net (loss) income per share $ ( 0.11 ) $ 0.06 Diluted net (loss) income per share $ ( 0.11 ) $ 0.06 Weighted average common shares outstanding: Basic 95,290,548 94,171,695 Diluted 95,290,548 97,452,397 See accompanying notes to these consolidated financial statements. F-4 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES (formerly Midwest Energy Emissions Corp.) CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT Year Ended December 31, 2024 Additional Common Stock Paid-in Accumulated Shares Par Value Capital (Deficit) Total Balance - January 1, 2024 (as restated) 94,360,107 $ 94,360 $ 61,917,119 $ ( 61,951,125 ) $ 60,354 Stock issued for cashless exercise of options 1,706,194 1,706 ( 1,706 ) - - Stock issued for exercise of warrants 25,000 25 17,475 - 17,500 Stock issued for cashless exercise of warrants 86,852 87 ( 87 ) - - Gain on modification of related party debt - - 10,827,195 - 10,827,195 Share based payments - - 1,088,923 - 1,088,923 Net loss - - - ( 10,802,111 ) ( 10,802,111 ) Balance – December 31, 2024 96,178,153 $ 96,178 $ 73,848,919 $ ( 72,753,236 ) $ 1,191,861 Year Ended December 31, 2023 Additional Common Stock Paid-in Accumulated Shares Par Value Capital Deficit Total Balance – January 1, 2023 (as previously reported) 93,087,796 $ 93,088 $ 61,188,442 $ ( 68,698,389 ) $ ( 7,416,859 ) Restatement adjustment - - - 1,078,950 1,078,950 Balance – January 1, 2023 (as restated) 93,087,796 $ 93,088 $ 61,188,442 $ ( 67,619,439 ) $ ( 6,337,909 ) Share based compensation expense - - 520,449 - 520,449 Stock issued for cashless exercise of options 422,311 422 ( 422 ) - - Stock issued for cash exercise of options 850,000 850 208,650 - 209,500 Net income - - - 5,668,314 5,668,314 Balance December 31, 2023 (as restated) 94,360,107 $ 94,360 $ 61,917,119 $ ( 61,951,125 ) $ 60,354 See accompanying notes to these consolidated financial statements. F-5 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES (formerly Midwest Energy Emissions Corp.) CONSOLIDATED STATEMENTS OF CASH FLOWS For the year Ended December 31, 2024 For the year Ended December 31, 2023 (as restated) Cash flows from operating activities Net (loss) income $ ( 10,802,111 ) $ 5,668,314 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Stock-based compensation – amortization of prepaid services - 486,667 Stock-based compensation 1,088,923 33,782 Amortization of discount of notes payable 241,444 1,336,171 Amortization of right to use assets 31,782 40,924 Amortization of patent rights 204,600 205,534 Depreciation expense 11,702 12,927 Impairment loss 43,000 219,707 Non-cash interest revenue ( 57,191 ) ( 79,301 ) Loss on change in fair value of profit share 3,959,065 11,209,677 Changes in operating assets and liabilities Accounts receivable 1,310,421 859,396 Inventory 173,351 195,967 Prepaid expenses and other assets ( 16,004 ) 88,772 Accrued salaries 30,344 ( 58,542 ) Accounts payable and accrued liabilities 144,547 ( 1,388,385 ) Income tax payable ( 437,821 ) 437,821 Operating lease liability ( 31,219 ) ( 43,394 ) Net cash (used in) provided by operating activities ( 4,105,167 ) 19,226,037 Cash flows used in investing activities Purchase of property and equipment ( 809,432 ) - Net cash used in investing activities ( 809,432 ) - Cash flows from financing activities Proceeds from exercise of stock options 17,500 209,500 Repayment of secured notes payable ( 271,686 ) - Repayment of unsecured notes payable ( 12,314,895 ) Net cash (used in) provided by financing activities ( 12,569,081 ) 209,500 Net (decrease) increase in cash and cash equivalents ( 17,483,680 ) 19,435,537 Cash and cash equivalents - beginning of period 20,939,762 1,504,225 Cash and cash equivalents - end of period $ 3,456,082 $ 20,939,762 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 4,023 $ 19,721 Income taxes $ 143,269 $ - SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTIONS Capital from related party debt extinguishments $ 10,827,195 $ - Recognition of ROU asset and operating lease liability $ 326,285 $ - See accompanying notes to these consolidated financial statements. F-6 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES (formerly Midwest Energy Emissions Corp.) NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2024 Note 1 - Organization Birchtech Corp. and MES, Inc. Birchtech Corp., formerly Midwest Energy Emissions Corp. (together with its consolidated subsidiaries, the “Company”), is organized under the laws of the State of Delaware. Effective on October 17, 2024, Midwest Energy Emissions Corp. changed its corporate name to Birchtech, Inc. pursuant to a certificate of amendment to its certificate of incorporation filed with the State of Delaware. MES, Inc. is incorporated in the State of North Dakota. MES, Inc. is a wholly owned subsidiary of Birchtech Corp. The Company is a provider of specialty activated carbon technologies and provides patented sorbent technologies for mercury emissions capture for the coal-fired utility sector and is developing water purification technologies with a specialization on forever chemicals such as PFAS and PFOS. ME2C Sponsor LLC and ME2C Acquisition Corp. ME2C Sponsor LLC is a limited liability company formed in the State of Delaware and is a wholly owned subsidiary of Birchtech Corp. and owns 85 % of ME2C Acquisition Corp. A decision was made in January 2023 to liquidate these entities which are inactive. Note 2 – Restatement of Previously Issued Financial Statements Description of Restatement Adjustments In connection with the preparation of the Company’s consolidated financial statements as of and for the period ended December 31, 2024, management identified an error in the previously reported financial statements related to the recognition of revenue during the year ended December 31, 2022. The Company entered into a license agreement for which it should have recognized the entire proceeds receivable pursuant to the agreement as revenue during the year ended December 31, 2022. The Company should also have recognized the financing component of the licensing agreement during the fiscal years ended December 31, 2023 and 2024. As a result, the consolidated financial statements reflect the recognition of this additional revenue during the year ended December 31, 2022, removes the revenue recognized and records the financing component of the arrangement during annual and interim periods in the fiscal year ending December 31, 2023 and the interim periods in the fiscal year ending December 31, 2024. The following tables reflect the impact of the restatement to the specific line items presented in the Company’s previously reported consolidated financial statements as of December 31, 2022 and for the year ended December 31, 2023. The accompanying applicable notes to consolidated financial statements have been updated to reflect the effects of the restatement. The impact of the restatement to the consolidated statements of stockholders’ equity (deficit) includes a decrease of $ 843,251 in accumulated deficit as of December 31, 2023 and a $ 1,078,950 decrease to the accumulated deficit as of January 1, 2023. The amounts in the “As previously reported” columns are amounts derived from the Company's previously filed consolidated financial statements. The amounts in the “Restatement adjustments” columns present the impact of the following adjustments: · The recognition of the licensing revenue during the year ended December 31, 2022. · The removal of the licensing revenue recorded during the year ended December 31, 2023. · The recording of the financing component during the year ended December 31, 2023. The amounts in the “As restated” columns are the updated amounts including the impacts from the restatement. F-7 Table of Contents Audited Financial Statements The following table presents the impact of the financial statement adjustments on the Company’s previous reported consolidated Balance Sheet as of December 31, 2023: CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2023 As previously reported Adjustment As restated ASSETS AND STOCKHOLDERS’ EQUITY (DEFICIT) Accounts receivable $ 2,233,211 $ 843,251 $ 3,076,462 Total current assets 24,151,758 843,251 24,995,009 Total assets 27,467,593 843,251 28,310,844 Stockholders’ equity (deficit) Accumulated deficit ( 62,794,376 ) 843,251 ( 61,951,125 ) Total stockholders’ equity (deficit) ( 782,897 ) 843,251 60,354 Total liabilities and stockholders’ equity (deficit) $ 27,467,593 $ 843,251 $ 28,310,844 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the year ended December 31, 2023: CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2023 As previously reported Adjustment As restated Revenue $ 17,940,370 $ ( 315,000 ) $ 17,625,370 Gross Profit 5,767,996 ( 315,000 ) 5,452,996 Operating (loss) income ( 8,658,472 ) ( 315,000 ) ( 8,973,472 ) Interest income - 79,301 79,301 Total other income 15,035,698 79,301 15,114,999 Income (loss) before provision for income taxes 6,377,226 ( 235,699 ) 6,141,527 Net income (loss) $ 5,904,013 $ ( 235,699 ) $ 5,668,314 Net loss per common share - basic and diluted: $ 0.06 $ - $ 0.06 F-8 Table of Contents The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statements of Changes in Stockholder’s Equity for the years ended December 31, 2023 and 2022: Accumulated Deficit As Reported Adjustment As Restated Balance – January 1, 2022 $ ( 67,116,913 ) $ - $ ( 67,116,913 ) Net loss ( 1,581,476 ) 1,078,950 ( 502,526 ) Balance December 31, 2022 ( 68,698,389 ) 1,078,950 ( 67,619,439 ) Net income 5,904,013 ( 235,699 ) 5,668,314 Balance December 31, 2023 $ ( 62,794,376 ) $ ( 843,251 ) $ ( 61,951,125 ) The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the year ended December 31, 2023: CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2023 As previously reported Adjustment As restated Cash flows from operating activities Net income (loss) $ 5,904,013 $ ( 235,699 ) $ 5,668,314 Adjustments to reconcile net loss to net cash Non-cash interest income - ( 79,301 ) ( 79,301 ) Changes in operating assets and liabilities Accounts receivable 544,396 315,000 859,396 Net cash provided by operating activities $ 19,226,037 $ - $ 19,226,037 Note 3 – Going Concern and Financial Condition Under ASC 205-40, Presentation of Financial Statements—Going Concern , the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. As required by ASC 205-40, this evaluation shall initially not take into consideration the potential mitigating effects of plans that have not been fully implemented as of the date the financial statements are issued. Management has assessed the Company’s ability to continue as a going concern in accordance with the requirements of ASC 205-40. The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the consolidated financial statements, the Company had a net loss of approximately $ 10.8 million and cash used in operating activities of approximately $ 4.1 million for the year ended December 31, 2024; had cash of approximately $ 3.5 million at December 31, 2024; and an accumulated deficit of approximately $ 72.8 million at December 31, 2024. The Company’s working capital deficiency at December 31, 2024 was approximately $ 2.7 million. The aforementioned factors raise substantial doubt about the Company’s ability to continue as a going concern within one year from the issuance date of the financial statements. In addition to maintaining its revenue stream from its legacy mercury emissions control business, the Company’s plans and expectations over the next twelve months to mitigate such financial condition include receiving additional cash inflows from the judgment expected in connection with the $ 57.1 million jury verdict awarded to the Company in March 2024, additional licensing revenues and product sales from the other patent litigation recently commenced, and revenues from the Company’s entry into the water treatment business. During 2024, the Company opened two new state of the art laboratories and have added personnel to support our entry into the water business which the Company believes will lead to a vibrant new revenue stream. In addition, management is exploring additional financing opportunities. While management believes these plans will alleviate substantial doubt, there is no assurance that they will be successfully realized or implemented. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue as a going concern within one year after the date the financial statements are issued. F-9 Table of Contents Note 4 - Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations promulgated by the United States Securities and Exchange Commission (“SEC”). Principles of Consolidation The consolidated financial statements include the accounts of Birchtech Corp. (formerly Midwest Energy Emissions Corp.) and its wholly-owned subsidiaries, MES, Inc. and ME2C Sponsor LLC, and ME2C Acquisition Corp. which is 85 % owned by ME2C Sponsor LLC. Intercompany balances and transactions have been eliminated in consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, valuation of equity issuances and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company uses estimates in accounting for, among other items, profit share liability, revenue recognition, allowance for credit losses, stock-based compensation, income tax provisions, excess and obsolete inventory reserve and impairment of intellectual property. Actual results could differ from those estimates. Inventory Inventories are stated at the lower of cost (first-in, first-out basis) or net realizable value. Inventories are periodically evaluated to identify obsolete or otherwise impaired products and are written off when management determines usage is not probable. The Company estimates the balance of excess and obsolete inventory by analyzing inventory by age using last used and original purchase date and existing sales pipeline for which the inventory could be used. As of December 31, 2024 and 2023, the Company had no valuation allowance. Property and Equipment Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For consolidated financial statement purposes, equipment is recorded at cost and depreciated using the straight-line method over their estimated useful lives of 2 to 5 years. Leasehold improvements are recorded at cost and depreciated using the straight-line method over the life of the lease. Expenditures for repairs and maintenance which do not materially extend the useful lives of property and equipment are charged to operations. Management reviews the carrying value of our property and equipment for impairment on an annual basis. Intellectual Property Intellectual property is recorded at cost and amortized over its estimated useful life of 15 years. Management reviews intellectual property for impairment when events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. In the event that impairment indicators exist, a further analysis is performed and if the sum of the expected undiscounted future cash flows resulting from the use of the asset or asset group is less than the carrying amount of the asset or asset group, an impairment loss equal to the excess of the asset or asset group’s carrying value over its fair value is recorded. Management considers historical experience and all available information at the time the estimates of future cash flows are made, however, the actual cash values that could be realized may differ from those that are estimated. Recoverability of Long-Lived and Intangible Assets Long-lived assets and certain identifiable intangibles held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Events relating to recoverability may include significant unfavorable changes in business conditions, recurring losses or a forecasted inability to achieve break-even operating results over an extended period. The Company evaluates the recoverability of long-lived assets based upon forecasted undiscounted cash flows. Should impairment in value be indicated, the carrying value of the long-lived and/or intangible assets would be adjusted, based on estimates of future undiscounted cash flows. F-10 Table of Contents The Company has evaluated the recoverability of the carrying value of the Company’s property and equipment, right of use asset and intellectual property. After completing the assessment of property and equipment for impairment as of December 31, 2024 and 2023, the Company recorded an impairment expense related to property and equipment of $ 43,000 (2023 - $ 219,707 ) which is included in Impairment loss in the Company’s consolidated statements of operations and comprehensive income (loss). The expense was primarily related to the impairment of construction in process costs where management determined that the undiscounted future cash flows were not sufficient to recover the carrying value of these assets over the estimated useful life. Stock-Based Compensation We account for stock-based compensation awards in accordance with the provisions of ASC 718, Compensation-Stock Compensation, which requires equity-based compensation, be reflected in the consolidated financial statements over the period of service which is typically the vesting period based on the estimated fair value of the awards. Fair Value of Financial Instruments The fair value hierarchy has three levels based on the inputs used to determine fair value, which are as follows: ☐ Level 1 — Unadjusted quoted prices available in active markets for the identical assets or liabilities at the measurement date. ☐ Level 2 — Unadjusted quoted prices in active markets for similar assets or liabilities, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability. ☐ Level 3 — Unobservable inputs that cannot be corroborated by observable market data and reflect the use of significant management judgment. These values are generally determined using pricing models for which the assumptions utilize management’s estimates of market participant assumptions. The fair value hierarchy requires the use of observable market data when available. In instances where the inputs used to measure fair value fall into different levels of the fair value hierarchy, the fair value measurement has been determined based on the lowest level input significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular item to the fair value measurement in its entirety requires judgment, including the consideration of inputs specific to the asset or liability. The profit share liability is the only item measured at fair value on a recurring basis by the Company at December 31, 2024 and December 31, 2023. The profit share liability is considered to be Level 3 measurements. Financial instruments include cash, accounts receivable, accounts payable, and short-term debt. The carrying amounts of these financial instruments approximated fair value at December 31, 2024 and December 31, 2023 due to their short-term maturities. The fair value of the notes payable at December 31, 2023 approximated the carrying amount, as the notes were recently issued at interest rates prevailing in the market. The fair value of the notes payable was determined on a Level 2 measurement. Discounts on issued debt, as well as debt issuance costs, are amortized over the term of the individual notes. At December 31, 2024, the fair value of the profit share liability is calculated using a discounted cash flow model based on estimated future cash payments. The fair value of the profit share liability at December 31, 2023 was also calculated using a discounted cash flow model based on estimated future cash payments. At December 31, 2024 and December 31, 2023, the fair value of the profit share liability was determined on a Level 3 measurement. These values are determined using pricing models for which the assumptions utilized management’s estimates. Significant unobservable inputs include a discount rate of approximately 14.55 % and the projection of future cash flows. F-11 Table of Contents The following tables present the Company’s liabilities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy. Fair Value Measurement as of December 31, 2024 Total Level 1 Level 2 Level 3 Liabilities: Profit share liability – related party (1) $ 6,853,858 $ - $ - $ 6,853,858 Total Liabilities $ 6,853,858 $ - $ - $ 6,853,858 Fair Value Measurement as of December 31, 2023 Total Level 1 Level 2 Level 3 Liabilities: Profit share liability – related party (1) $ 14,847,937 $ - $ - $ 14,847,937 Total Liabilities $ 14,847,937 $ - $ - $ 14,847,937 (1) See Note 8 - Related Party The following tables present the Company’s liabilities that are measured at fair value on a non-recurring basis and are categorized using the fair value hierarchy. Fair Value Measurement as of December 31, 2024 Total Level 1 Level 2 Level 3 Assets: Property and equipment (Construction in progress) $ 1,545,000 $ - $ - $ 1,545,000 Total Assets $ 1,545,000 $ - $ - $ 1,545,000 Fair Value Measurement as of December 31, 2023 Total Level 1 Level 2 Level 3 Assets: Property and equipment (Construction in progress) $ 1,588,000 $ - $ - $ 1,588,000 Total Assets $ 1,588,000 $ - $ - $ 1,588,000 Revenue Recognition The Company records revenue in accordance with ASC 606, Revenue from Contracts with Customers . The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve that core principle, an entity should apply the following steps: Step 1: Identify the contract(s) with a customer. Step 2: Identify the performance obligations in the contract. Step 3: Determine the transaction price. Step 4: Allocate the transaction price to the performance obligations in the contract. Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation. F-12 Table of Contents Revenue is recognized when the Company satisfies its performance obligation under the contract by transferring the promised product to its customer that obtains control of the product. A performance obligation is a promise in a contract to transfer a distinct product to a customer. Most of the Company’s contracts have a single performance obligation, as the promise to transfer products or services is not separately identifiable from other promises in the contract and, therefore, not distinct. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products. As such, revenue is recorded net of returns, allowances, customer discounts, and incentives. Sales and other taxes are excluded from revenues. Invoiced shipping and handling costs are included in revenue. Disaggregation of Revenue The Company generated revenue for the years ended December 31, 2024 and 2023 by (i) delivering product to its commercial customers, (ii) completing and commissioning equipment projects at commercial customer sites and (iii) performing demonstrations of its technology at customers with the intent of entering into long term supply agreements based on the performance of the Company’s products during the demonstrations and (iv) licensing its technology to customers. Revenue for product sales is recognized at the point of time in which the customer obtains control of the product, at the time title passes to the customer upon shipment or delivery of the product based on the applicable shipping terms. Licensing revenue includes the licensing of the Company’s intellectual property (“IP”). Revenue for IP rights is accounted for based on the nature of the promise to grant the license. In determining whether the Company’s promise is to provide a right to access its IP or a right to use its IP, the Company considers the nature of its IP to which the customer will have rights. IP is either functional IP which has significant standalone functionality or symbolic IP which does not have significant standalone functionality. Revenue from functional IP is recognized at the point in time when control of the distinct license is transferred to the customer. Revenue from symbolic IP is recognized over the access period to the Company’s IP. The licenses provide the customer with the right to use the Company’s patented technologies as they exist at a point in time when the license is granted, for the duration of the contract term. The patented technology has stand-alone functionality, and the Company has no obligation to provide any future updates. During the year ended December 31, 2024 the Company recognized $ 2,773,750 (2023 - $ 356,250 ) of revenue for licenses for which revenue was recognized at a point in time and $ 34,375 (2023 - $ 31,250 ) for licenses for which revenue was recognized over time. When a license arrangement contains payment terms beyond one year, a significant financing component may exist. The significant financing component is calculated as the difference between the stated value and present value of the license fees and is recognized as interest income over the payment period. Variable consideration is recorded as revenue only to the extent that a significant reversal of cumulative revenue recognized is not probable of occurring when the uncertainty associated with the variable consideration is subsequently resolved. Significant judgment is required in estimating variable consideration for the performance obligation identified in the contract and this judgment involves assessing factors outside of our influence. Revenue for equipment sales is recognized upon commissioning and customer acceptance of the installed equipment per the terms of the purchase contract. Revenue for demonstrations and consulting services is recognized when performance obligations contained in the contract have been completed, typically the completion of necessary field work and the delivery of any required analysis per the terms of the agreement. The following table presents sales by operating segment disaggregated based on the type of product for the years ended December 31, 2024 and 2023. All sales were in the United States. December 31, 2024 December 31, 2023 Product revenue $ 14,481,784 $ 17,092,996 License revenue 2,808,125 387,500 Demonstrations & Consulting revenue 36,000 90,000 Equipment revenue 80,276 54,874 $ 17,406,185 $ 17,625,370 Accounts receivable and allowance for credit losses Accounts receivable are presented net of an allowance for credit losses. The Company maintains allowances for credit losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, a customer’s payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. Management believed that the accounts receivable were fully collectable and no allowance for credit losses was deemed to be required on its accounts receivable at December 31, 2024. The Company historically has not experienced significant uncollectible accounts receivable. As of December 31, 2024 and December 31, 2023, the Company’s allowance for credit losses was $ 0 , and the Company recorded $ 0 of bad debt expense for both the years ended December 31, 2024 and 2023. F-13 Table of Contents Income Taxes The Company follows the asset and liability method of accounting for income taxes under FASB ASC 740, Income Taxes . Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized. FASB ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon examination by taxing authorities. There were no unrecognized tax benefits as of December 31, 2024 and 2023. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position. The Company is no longer subject to tax examinations by tax authorities for the years prior to 2020. The Company may be subject to potential examination by federal, state, and city taxing authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions, and compliance with federal, state, and city tax laws. Management does not expect that the total amount of unrecognized tax benefits will materially change over the next twelve months. Basic and Diluted Income (Loss) Per Common Share Income (loss) per share – basic is calculated by dividing net income (loss) by the weighted average number of shares of stock outstanding during the year, including shares issuable without additional consideration. Income per share – assuming dilution is calculated by dividing net income by the weighted average number of shares outstanding during the year adjusted for the effect of dilutive potential shares from options and warrants calculated using the treasury stock method and the if-converted method for preferred stock. There were no dilutive potential common shares for year ended December 31, 2024, because the Company incurred a net loss and basic and diluted losses per common share are the same. There are 3,280,702 dilutive stock options and no dilutive warrants for the year ended December 31, 2023 as the Company reported net income for the period. We calculate basic earnings per share by dividing net income by the weighted-average number of common shares outstanding during the reporting period. Diluted earnings per share reflects the effects of potentially dilutive securities. The summary of the basic and diluted earnings per share calculations for the years ended December 31, 2024 and 2023: 2024 2023 Basic: Net Income (Loss) $ ( 10,802,111 ) $ 5,668,314 Weighted-average shares outstanding 95,290,548 94,171,695 Basic $ ( 0.11 ) $ 0.06 2024 2023 Diluted: Net Income (Loss) $ ( 10,802,111 ) $ 5,668,314 Weighted-average shares outstanding 95,290,548 94,171,695 Effect of diluted securities – stock options - 3,280,702 Weighted-average shares used in the calculation of diluted earnings per share 95,290,548 97,452,397 Diluted earnings (loss) per share $ ( 0.11 ) $ 0.06 F-14 Table of Contents Total common stock equivalents excluded from dilutive loss per share are as follows: December 31, December 31, 2024 2023 Stock Options 9,300,000 9,650,000 Warrants - 2,550,000 Total common stock equivalents excluded from dilutive loss per share 9,300,000 12,200,000 Concentration of Credit Risk Financial instruments that subject the Company to credit risk consist of cash and equivalents on deposit with financial institutions and accounts receivable. The Company’s cash as of December 31, 2024 and December 31, 2023 is maintained at high-quality financial institutions and has not incurred any losses to date. Accounts are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $ 250,000 . At December 31, 2024, the Company had $ 2,956,082 (2023 - $ 20,439,762 ) in excess of FDIC limits. Customer and Supplier Concentration For the year ended December 31, 2024, three customers represented 32 %, 13 %, and 10 % of the Company’s revenues, and for the year ended December 31, 2023, three customers represented 28 %, 23 %, and 11 % of the Company’s revenues. At December 31, 2024, three customers represented 32 %, 26 % and 9 % of the Company’s accounts receivable, and at December 31, 2023, four customers represented 32 %, 27 %, 10 % and 8 % of the Company’s accounts receivable. For the year ended December 31, 2024, two suppliers represented 51 % and 35 % of the Company’s purchases. For the year ended December 31, 2023, 91 % of the Company’s purchases related to three suppliers. At December 31, 2024 and 2023, 68 % and 68 % of the Company’s accounts payable and accrued expenses related to two vendors, respectively. The Company believes there are numerous other suppliers that could be substituted should a supplier become unavailable or non-competitive. Contingencies Certain conditions may exist which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company, or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they arise from guarantees, in which case the guarantees would be disclosed. Recently Issued Accounting Standards Issued in June 2021, FASB Accounting Standards Update (ASU) No. 2016-13, Measurement of Credit Losses on Financial Instruments adds to U.S. GAAP an impairment model known as the current expected credit loss (CECL) model, which is based on expected losses rather than incurred losses. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Early application of the amendments is permitted. Effective January 1, 2023, the Company adopted ASU No. 2016-13. The adoption of ASU No. 2016-13 did not have a material effect on the accompanying consolidated financial statements. F-15 Table of Contents In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which amends and enhances the disclosure requirements for reportable segments. All disclosure requirements under this standard will also be required for public entities with a single reportable segment. The new standard will be effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within fiscal years beginning after December 15, 2024. The Company adopted ASU 2023-07 effective for its Annual Report on Form 10-K for the year ended December 31, 2024 and subsequent interim periods. Since ASU 2023-07 addresses only disclosures, the adoption of ASU 2023-07 did not have a significant impact on its consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which is intended to provide enhancements to annual income tax disclosures. The standard will require more detailed information in the rate reconciliation table and for income taxes paid, among other enhancements. The standard is effective for years beginning after December 15, 2024 and early adoption is permitted. The Company is evaluating this standard to determine if adoption will have a material impact on the Company’s consolidated financial statements. In November 2024, the FASB issued ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses . This ASU requires entities to disaggregate expense items in the notes to the financial statements and requires disclosure of specified information related to purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The amendments in this ASU are effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027. Companies have the option to apply the guidance either on a retrospective or prospective basis, and early adoption is permitted. The Company is currently evaluating the impact of the ASU on its consolidated financial statements and related disclosures. In January 2025, the FASB issued ASU No. 2025-01, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date . This ASU amends the effective date of ASU No. 2024-03 to clarify that all public business entities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU No. 2024-03 is permitted. Note 5 - Inventory Inventory was comprised of the following at December 31, 2024 and December 31, 2023: December 31, December 31, 2024 2023 Raw Materials $ 169,527 $ 200,496 Spare Parts - 17,912 Finished Goods 452,286 576,756 $ 621,813 $ 795,164 Note 6 - Property and Equipment, Net Property and equipment at December 31, 2024 and December 31, 2023 are as follows: December 31, December 31, 2024 2023 Equipment & installation $ 1,096,979 $ 1,095,139 Leasehold improvements 117,512 101,821 Trucking equipment 911,377 845,102 Lab equipment 725,626 - Office equipment, computer equipment and software 1,874 1,874 Total equipment 2,853,368 2,043,936 Less: accumulated depreciation ( 2,047,680 ) ( 2,035,978 ) Construction in process 1,545,000 1,588,000 Property and equipment, net $ 2,350,688 $ 1,595,958 F-16 Table of Contents The Company uses the straight-line method of depreciation over estimated useful lives of 2 to 5 years. During the year ended December 31, 2024 and 2023 depreciation expense was $ 11,702 and $ 12,927 , respectively. At December 31, 2024, lab equipment included $ 725,626 of lab equipment not yet placed in service. At December 31, 2024 and 2023, the Company concluded that Company’s plant construction in process asset had become impaired based on the existing and anticipated future economic outlook. As a result, the Company impaired the asset to reduce the carrying value to fair value. Estimated fair value of the impaired long-lived asset is based on the estimated cost to replace the asset. As a result of the uncertain cash flows related to the Company’s capitalized construction costs, the Company has recorded an impairment charge of $ 43,000 (2023 - $ 219,707 ). Note 7 - Intellectual Property License and patent costs capitalized as of December 31, 2024 and December 31, 2023 are as follows: December 31, December 31, 2024 2023 Licenses and patents $ 3,068,995 $ 3,068,995 Less: Accumulated amortization ( 1,569,532 ) ( 1,364,932 ) Intellectual property, net $ 1,499,463 $ 1,704,063 Amortization expense for the year ended December 31, 2024 and 2023 was $ 204,600 and $ 205,534 , respectively. Estimated annual amortization for each of the next 5 years and thereafter is as follows: Annual amortization for the years ended: December 31, 2025 $ 204,600 December 31, 2026 204,600 December 31, 2027 204,600 December 31, 2028 204,600 December 31, 2029 204,600 Thereafter 476,463 Total $ 1,499,463 Note 8 - Related Party Secured Note Payable On November 29, 2016, pursuant to a restated financing agreement entered with AC Midwest Energy, LLC (“AC Midwest”) on November 1, 2016, the Company closed on a secured note with AC Midwest (the “AC Midwest Secured Note”), which was to mature on December 15, 2018 . AC Midwest is wholly-owned by a stockholder of the Company. The AC Midwest Secured Note is guaranteed by MES, is non-convertible and bears interest at a rate of 15.0 % per annum, payable quarterly in arrears on or before the last day of each fiscal quarter. On February 25, 2019, per Amendment No. 3 to the Amended and Restated Financing Agreement, AC Midwest extended the maturity date from December 15, 2018 to August 25, 2022. On October 28, 2022, the Company, along with MES, and AC Midwest, executed Amendment No. 4 to the Amended and Restated Financing Agreement pursuant to which the maturity date of the AC Midwest Secured Note was extended to August 25, 2025. In addition, the interest rate on the remaining principal balance was reduced from 15.0% to 9.0% per annum . The Company has accounted for the extension as debt extinguishment with a related party. As such the Company recorded a capital contribution of $ 54,983 for the year ended December 31, 2022 on this exchange which is related to the difference in fair value of the note on the date of the exchange. F-17 Table of Contents On February 27, 2024, the Company paid AC Midwest $275,625 representing the remaining principal balance under the AC Midwest Secured Note of $271,686 plus interest of $3,939 . As a result of the repayment of the remaining principal balance under the AC Midwest Secured Debt, the Company and AC Midwest executed a Satisfaction and Discharge of Secured Debt confirming the cancellation of the AC Midwest Secured Note. As of December 31, 2024 and December 31, 2023, total principal of $ 0 and $ 271,686 , respectively, was outstanding on this note. Interest expense for the years ended December 31, 2024 and 2023 was $ 4,279 and $ 43,955 , respectively. Amortized discount recorded as interest expense for the years ended December 31, 2024 and 2023 was $ 32,220 and $ 19,504 , respectively. As of December 31, 2024 and 2023, the unamortized balance of the discount was $Nil and $ 32,220 , respectively. Unsecured Note Payable The Company has the following unsecured note payable - related party outstanding as of December 31, 2024 and December 31, 2023: December 31, December 31, 2024 2023 Unsecured note payable $ 13,154,931 $ 13,154,931 Repayments ( 12,314,895 ) - Less fair value adjustment on extinguishment, net of amortized discount of $1,965,984 and $1,547,536, respectively ( 960,000 ) ( 2,175,208 ) Plus fair value adjustment 119,964 - Total unsecured note payable - 10,979,723 Less current portion - - Unsecured note payable, net of current portion $ - $ 10,979,723 On November 29, 2016, pursuant to a restated financing agreement entered with AC Midwest on November 1, 2016, the Company closed on an unsecured note with AC Midwest (the “AC Midwest Subordinated Note”), which was to mature on December 15, 2020 . On February 25, 2019, the Company, entered into an Unsecured Note Financing Agreement (the “Unsecured Note Financing Agreement”) with AC Midwest, pursuant to which AC Midwest issued an unsecured note in the principal amount of $ 13,154,931 (the “AC Midwest Unsecured Note”), which represented the outstanding principal and accrued and unpaid interest at closing. The AC Midwest Unsecured Note, which replaced the AC Midwest Subordinated Note, was scheduled to mature on August 25, 2022 and bear a zero cash interest rate. The Company determined that the rate of interest on the AC Midwest Subordinated Note was a below market rate of interest and determined that a discount of $ 6,916,687 should be recorded. This discount was based on an applicable market rate for unsecured debt for the Company of 21 % and is being amortized as interest expense over the life of the loan. On August 30, 2022, AC Midwest agreed to an extension of the maturity date of the AC Midwest Unsecured Note (and AC Midwest Secured Note) from August 25, 2022 to September 30, 2022. Such extension was expected to provide the Company sufficient time in which to conclude the process of negotiating certain changes and modifications to such financing arrangements. On September 28, 2022, AC Midwest agreed to an additional short-term extension of such maturity date from September 30, 2022 to October 31, 2022. The Company has accounted for the extension as debt extinguishment with a related party. As such the Company recorded a capital contribution of $ 488,274 on this exchange which is related to the difference in fair value of the note on the date of the exchange. F-18 Table of Contents On October 28, 2022, the Company, along with MES, and AC Midwest, executed Amendment No. 1 to Unsecured Note Financing Agreement pursuant to which the maturity date of the AC Midwest Unsecured Note was extended to August 25, 2025. In addition, the parties agreed that the Profit Share (see “Profit Share” below) be increased by $ 4,500,000 from $ 13,154,931 (representing 1.0 times the original principal amount) to $ 17,654,931 . The Company has accounted for the extension as debt extinguishment with a related party. As such the Company recorded a capital contribution of $ 3,234,469 on this exchange which is related to the difference in fair value of the note on the date of the exchange. On February 27, 2024, the Company entered into an Unsecured Debt Restructuring Agreement (the “Debt Restructuring Agreement”) with AC Midwest which replaces and supersedes the Unsecured Note Financing Agreement. Pursuant to the Debt Restructuring Agreement, on February 27, 2024, the Company (i) paid AC Midwest $ 9,040,000 as a reduction in the outstanding principal balance of the AC Midwest Unsecured Note, and (ii) issued to AC Midwest a new unsecured replacement note representing the remaining outstanding principal balance of the Unsecured Note in the principal amount of $ 4,114,931 (the “New Note”). In addition, within 30 days, the Company would either facilitate the private sale to third parties of certain shares of common stock of the Company held by AC Midwest for a purchase price of no less than $960,000, which amount shall be applied as a credit against the principal balance due on the New Note dollar for dollar, or pay AC Midwest $960,000 toward the principal balance due on the New Note. The private sale of shares for the purchase price of $960,000 was completed on March 11, 2024. Any remaining principal balance on the New Note shall be due August 27, 2024 (the “New Note Maturity Date”), which is six months from February 27, 2024. Until repaid in full, the New Note shall accrue interest at a rate equal to SOFR plus 2.0 % per annum. The New Note completely replaced and superseded the AC Midwest Unsecured Note, which shall be of no further force and effect. On August 26 and 27, 2024, the Company repaid AC Midwest the remaining principal of $ 3,154,931 on the New Note together with accrued interest of $ 119,964 . As a result, the only remaining debt obligation under the Debt Restructuring Agreement is the profit participation as described below. The Company has accounted for the February 27, 2024 modification as debt extinguishment with a related party. As such the Company recorded a capital charge of $ 1,005,984 on this exchange which is related to the difference in fair value of the New Note on the date of the exchange. The New Note represented a hybrid instrument and the Company elected to apply fair value option accounting to the New Note. Cash flows of the hybrid instrument in its entirety are discounted at an appropriate rate for the applicable duration of the instrument. Interest on the interest-bearing portion of the instrument that is held to maturity is aggregated as loss on change in fair value of profit share and unsecured note in the consolidated statements of operations. Amortized discount recorded as interest expense for the years ended December 31, 2024 and 2023 was $ 209,224 and $ 1,316,667 , respectively. As of December 31, 2024 and 2023, the unamortized balance of the discount was $Nil and $ 2,175,208 , respectively. Profit Share Pursuant to the Unsecured Note Financing Agreement, AC Midwest was also entitled to a “non-recourse” profit participation preference equal to 1.0 times the original principal amount of the AC Midwest Unsecured Note which on October 28, 2022 was increased to $ 17,654,931 (the “Profit Share”). Prior to maturity, the outstanding principal, as well as the Profit Share, were to be paid from Net Litigation Proceeds from claims relating to the Company’s intellectual property, Net Revenue Share, Adjusted Free Cash Flow and Equity Offering Net Proceeds (as such terms are defined in the Unsecured Note Financing Agreement). Any remaining principal balance due on the Unsecured Note would be due and payable in full on the maturity date. The Profit Share, however, if not paid in full on or before the maturity date would remain subject to the Unsecured Note Financing Agreement until full and final payment. Pursuant to the Debt Restructuring Agreement, AC Midwest was granted a profit participation preference equal to $ 7,900,000 (the “Restructured Profit Share”) which replaces and supersedes the terms and conditions of the Profit Share in the amount of $ 17,654,931 provided for in the Unsecured Note Financing Agreement, which shall be of no further force and effect. The Restructured Profit Share is “non-recourse” and shall only be paid from Net Litigation Proceeds (as defined in the Debt Restructuring Agreement) from claims relating to the Company’s intellectual property. Following the receipt of any Net Litigation Proceeds, the Company shall prepay any remaining principal balance of the New Note and pay the Restructured Profit Share in an amount equal to 75.0 % of such Net Litigation Proceeds until the New Note and Restructured Profit Share have been paid in full. The Restructured Profit Share, if not paid in full on or before the New Note Maturity Date, shall remain subject to the terms of the Debt Restructuring Agreement. F-19 Table of Contents In addition to facilitating the private sale to third parties as described above, AC Midwest granted the Company the exclusive right until December 31, 2024 to facilitate the sale of all or a portion of the remaining balance of the shares of common stock of the Company held by AC Midwest, which proceeds above a certain amount will be applied as a credit against the Restructured Profit Share dollar for dollar (the “Facilitation Credit”). As of December 31, 2024, the Company had not facilitated the sale of any portion of the remaining shares held by AC Midwest. As a result, no Facilitation Credit has been issued to the Company. The Company has accounted for the February 27, 2024 modification as debt extinguishment with a related party. As such the Company recorded a capital contribution of $ 11,833,179 on this exchange which is related to the difference in fair value of the Restructured Profit Share on the date of the exchange. The Company is utilizing the methodology behind the ASC 815, Derivatives and Hedging and ASC 480, Distinguishing Liabilities from Equity to determine how to account for the profit-sharing portion of the note payable. Although the transaction is not indexed to MEEC’s common stock the profit sharing has the characteristics of a freestanding financial instrument because the profit sharing is not callable by the lender, it will be paid out past the maturity of the Unsecured Note Payable and, the fair value will fluctuate over time based on payment predictions. The Profit Share was determined to have a fair value of $ 3,389,043 upon grant. The fair value of the Profit Share upon grant included $ 3,422,400 attributed to the Facilitation Credit which reduced the fair value of the Profit Share liability. At December 31, 2024, the Facilitation Credit had expired and the fair value attributed to the feature was $0. This increased the fair value of the Profit Share at December 31, 2024, and increased the loss on change in fair value of the profit share recorded during the year ended December 31, 2024 by $ 3,422,400 . The discounted cash flow model assumptions used at December 31, 2024 to calculate the Profit Share liability included: the projected full repayment of the profit share liability of $7,900,000 upon the receipt of Net Litigation Proceeds in 2025, and an annual market interest rate of 14.55% . The discounted cash flow model assumptions used at December 31, 2023 to calculate the Profit Share liability included: the projected full repayment of the profit share liability of $ 17,654,931 upon the receipt of Net Litigation Proceeds in 2025, and an annual market interest rate of 14.55 %. The profit share liability will be marked to market every quarter utilizing management’s estimates. The following are the changes in the profit share liability (the only Level 3 financial instrument) during the years ended December 31, 2024 and 2023: Profit Share as of January 1, 2023 $ 3,638,260 Addition - Loss on change in fair value of profit share 11,209,677 Profit Share as of December 31, 2023 $ 14,847,937 Profit Share as of January 1, 2024 $ 14,847,937 Modification ( 11,833,179 ) Loss on change in fair value of profit share 3,839,100 Profit Share as of December 31, 2024 $ 6,853,858 Related Party Transactions Kaye Cooper Kay & Rosenberg, LLP provides certain legal services to the Company and was paid $ 431,444 and $ 393,111 for the years ended December 31, 2024 and 2023, respectively, for legal services rendered and disbursement incurred. David M. Kaye, a Director of the Company, is a partner of the law firm. At December 31, 2024 and December 31, 2023, $ 37,500 and $ 33,333 , respectively, was owed to the firm for services rendered. On January 31, 2023, the Company entered into a License and Supply Agreement with Dakin Holdings Ltd., a company incorporated in Barbados (“Dakin”), effective as of January 1, 2023 (the “Dakin Agreement”), pursuant to which Dakin has granted to the Company (i) a limited license to manufacture and produce for Dakin products comprising certain intellectual property owned by Dakin (the “Dakin IP”), and (ii) an exclusive license to commercialize the Dakin IP in the United States. In addition, the Company shall pay Dakin a license fee of $ 12,500 per month for a three-year period commencing as of the effective date and ending December 31, 2025, and pay Dakin a royalty on all sales in the United States of the products comprising the Dakin IP made by the Company. On November 18, 2024, the parties entered into an amendment to the Dakin Agreement which eliminated all further monthly license fees after September 30, 2024. Dakin is a company owned and controlled by the Company’s Chief Executive Officer and President. The Dakin Agreement is for a term of ten years unless terminated earlier under certain circumstances as set forth therein. For the years ended December 31, 2024 and 2023, Dakin incurred $ 112,500 and $ 150,000 license fees. At December 31, 2024 and 2023, $Nil and $ 25,000 was owed to Dakin for license fees. F-20 Table of Contents On May 28, 2024, the Company entered into an Administrative Services Agreement with Greenberg Enterprises, LLC (“Greenberg Enterprises”), pursuant to which Greenberg Enterprises will be paid for certain administrative support provided to the Company since January 1, 2024 and administrative support to be provided in the future to the Company including but not limited to general office and technical support, project management and support, and vendor relations support. Such agreement was terminated effective in December 2024. During the year ended December 31, 2024, Greenberg Enterprises provided $ 237,020 for administrative services and $ 335,100 for expense reimbursement. At December 31, 2024, $Nil was owed to Greenberg Enterprises pursuant to the agreement. Greenberg Enterprises is a company owned and controlled by Christopher Greenberg, Chairman of the Board of the Company. Note 9 - Operating Leases On July 1, 2015, the Company entered into a five-year lease for warehouse space in Corsicana, Texas. The Company is also responsible for the pro rata share of the projected monthly expenses for the property taxes. The current pro rata share is $ 882 . On June 1, 2019, the lease was extended to March 31, 2024, and on March 28, 2024, the lease was further extended for an additional five years from March 31, 2024 to March 31, 2029 . Rent is $3,750 monthly until March 31, 2026 and then $3,866 per month until March 31, 2029 . The Company recorded a right of use asset and an operating lease liability of $ 161,728 . This amount represents the difference between the value from the remaining lease and the extended lease. On August 1, 2024, the Company entered into a 3 -year lease for laboratory space in Grand Forks, North Dakota. The lease contains an option to extend for a further three years that the Company is reasonably certain to exercise. As a result, the additional three year extension is included as part of the least term. Rent is $1,400 monthly until July 31, 2027 , and then effectively $1,540 per month until July 31, 2030. Upon commencement of the lease the Company recorded a right of use asset and an operating lease liability of $ 69,615 . On November 22, 2024, the Company entered into an approximate 3 -year lease for laboratory space in State College, Pennsylvania, commencing December 15, 2024 and ending November 30, 2027. The lease contains an option to extend for a further three years that the Company is reasonably certain to exercise. As a result, the additional three year extension is included as part of the lease term. Rent is $1,800 monthly until November 30, 2025, $1,860 monthly thereafter until November 30, 2026, and $1,920 monthly thereafter until November 30, 2027 . During the option period, rent is $1,980 monthly from December 1, 2027 to November 30, 2028, $2,040 monthly thereafter through November 30, 2029, and $2,100 monthly thereafter through November 30, 2030. Upon commencement of the lease the Company recorded a right of use asset and an operating lease liability of $ 94,942 . For the years ended December 31, 2024 and 2023, the Company recorded an operating lease right of use asset and liabilities as follows: December 31, December 31, 2024 2023 Right of use asset - operating lease $ 305,142 $ 10,639 Current portion of operating lease liability 42,733 11,157 Operating lease liability 306,233 - Future remaining minimum lease payments under these non-cancelable leases are as follows: For the twelve months ended December 31, 2025 $ 83,460 2026 85,224 2027 86,992 2028 88,692 2029 54,618 Thereafter 33,880 Total 432,866 Less discount ( 126,643 ) Total lease liabilities 306,223 Less current portion ( 42,733 ) Operating lease obligation, net of current portion $ 263,490 F-21 Table of Contents The weighted average remaining lease term for operating leases is 5.2 years and the weighted average discount rate used in calculating the operating lease asset and liability is 14.55 %. For the years ended December 31, 2024 and 2023, payments on lease obligations were $ 52,871 and $ 45,000 , respectively, and amortization on the right of use assets was $ 31,782 and $ 40,924 , respectively. For the years ended December 31, 2024 and 2023, the Company’s lease cost consists of the following components, each of which is included in costs and expenses within the Company’s consolidated statements of operations: December 31, 2024 December 31, 2023 Operating lease costs $ 53,595 $ 45,310 Note 10 - Commitments and Contingencies Fixed Price Contract The Company’s multi-year contracts with its commercial customers contain fixed prices for product. These contracts expire between 2023 and 2025 and expose the Company to the potential risks associated with rising material costs during that same period. Legal proceedings On July 17, 2019, the Company initiated patent litigation against certain defendants in the U.S. District Court for the District of Delaware for infringement of certain United States patents owned by the Company . These patents relate to the Company’s two-part Sorbent Enhancement Additive (SEA ® ) process for mercury removal from coal-fired power plants. Named as defendants in the lawsuit were (i) Vistra Energy Corp., AEP Generation Resources Inc., NRG Energy, Inc., Talen Energy Corporation, and certain of their respective affiliated entities, all of which are owners and/or operators of coal-fired power plants in the United States, and (ii) Arthur J. Gallagher & Co., DTE REF Holdings, LLC, CERT Coal Holdings LLC, Chem-Mod LLC, and certain of their respective affiliated entities, and additional named and unnamed defendants, all of which operate or are involved in operations of coal facilities in the United States. In the lawsuit, the Company alleges that each of the defendants has willfully infringed certain of the Company’s patents and seeks unspecified damages, attorneys’ fees, costs and injunctive relief. During 2020, each of the four major utility defendants in the above action filed petitions for Inter Partes Review with the United States Patent and Trademark Office, seeking to invalidate certain claims to the patents which are subject to the litigation. Between July 2020 and January 2021, we entered into agreements with each of the four major utility defendants in such action which included certain monetary arrangements and pursuant to which we have dismissed all claims brought against each of them and their affiliates, and such parties have withdrawn from petitions for Inter Partes Review with the United States Patent and Trademark Office. Such agreements entered into with such parties provide each of them and their affiliates with a non-exclusive license to certain Company patents (related to the Company’s two-part Sorbent Enhancement Additive (SEA®) process) for use in connection with such parties’ coal-fired power plants. Subsequently, and as a result of certain rulings by the Court, certain defendants were dismissed in the action, certain defendants were added and certain originally named defendants remained in the action. A jury trial was scheduled for November 13, 2023. On November 9, 2023, the Company entered into a confidential binding term sheet with Arthur J. Gallagher & Co., and various of its affiliated entities (collectively “AJG”), and DTE Energy Resources LLC and various of its affiliated entities (collectively “DTE”), to resolve the patent litigation. Pursuant to the term sheet, all claims and counterclaims asserted by the parties in such patent litigation have been dismissed with prejudice, although such term sheet does not affect any other claim brought against the remaining CERT defendants. The financial aspects of the term sheet remain confidential pursuant to its terms. F-22 Table of Contents In addition, effective November 9, 2023, Alistar Enterprises, LLC (“Alistar”), one of the remaining CERT defendants, entered into a settlement agreement with the Company which provided that all claims and counterclaims asserted in the action between the Company and Alistar be dismissed with prejudice. The financial terms of such settlement remain confidential. Effective as of December 28, 2023, and in connection with the term sheet described above, the Company, along with its wholly-owned subsidiary, MES, Inc., and (a) Chem-Mod LLC (“Chem-Mod”), (b) Arthur J. Gallagher & Co. and AJG Coal, LLC, and (c) DTE Energy Co. and DTE Energy Resources, LLC, entered into a paid license of U.S. Patent No. 8,168,147, U.S. Patent No. 10,343,114, U.S. Patent No. 10,589,225, U.S. Patent No. 10,596,517 and U.S. Patent No. 10,668,430 and their foreign equivalents and related patent applications and patents, which licenses the use of refined coal or the Chem-Mod Solution in conjunction with activated carbon. This license applies to Chem-Mod and certain of its licensees, sub-licensees, and their customers, for the remaining term of such patents. By its terms, the license does not cover the use of activated carbon with coal that is not either refined coal or coal made by or for use with the Chem-Mod Solution in a manner authorized by the license. The parties to the license have mutually released all claims that any past use of the Chem-Mod Solution in connection with the production or use of refined coal with activated carbon by entities other than the CERT defendants and their customers infringes the asserted patents and related intellectual property, and all claims that could have been brought challenging the validity of such patents. The remaining CERT defendants and their customers (for activities relating to the CERT defendants) are not included within the scope of the license. The Court rescheduled the trial as to the claims against the remaining CERT defendants to begin on February 26, 2024. Following a five-day trial, on March 1, 2024, a federal jury in the U.S. District Court for the District of Delaware awarded a $ 57.1 million patent infringement verdict in favor of the Company against the remaining group of CERT defendants. Such group of affiliated defendants included multiple limited liability companies with refined coal industry operations, including CERT Operations II LLC, CERT Operations IV LLC, CERT Operations V LLC, and CERT Operations RCB LLC. The jury determined that these defendants infringed our patented technologies for mercury emissions and were liable for willful infringement, along with inducing and contributory infringement. Following the trial, various post-trial motions and applications were made by the parties. We are awaiting rulings from the Court. In July 2024, the Company commenced three patent infringement lawsuits against multiple defendants, including coal-fired power utilities, in three separate U.S. District Courts in Arizona, Iowa and Missouri. Such lawsuits claim infringement of the Company’s patent rights related to the Company’s mercury emissions reduction technologies. Named as defendants in the action filed in the U.S. District Court for the District of Arizona are Tucson Electric Power Co., San Carlos Resources, Inc., Salt River Project Agricultural Improvement and Power District, Tri-State Generation and Transmission Association, Inc., Springerville Unit 3 Holding LLC, and Springerville Unit 3 Partnership LP. Named as defendants in the action filed in the U.S. District Court for the Southern District of Iowa are Berkshire Hathaway Energy Company, MidAmerican Energy Company, PacifiCorp, Alliant Energy Corporation, Interstate Power and Light Company, and Wisconsin Power and Light Company, and named as defendants in the action filed in the U.S. District Court for the Eastern District of Missouri are Ameren Corp. and Union Electric Co. In each lawsuit, the Company requests a trial by jury against the defendants and seeks damages, costs, and legal expenses, along with a finding of willful infringement by the defendants, and an injunction prohibiting the defendants from further acts of infringement. Effective as of October 8, 2024, the Company entered into agreement with one of the utilities and an affiliated entity named as defendants in the patent infringement lawsuit commenced by the Company in July 2024 in the U.S. District Court in Arizona (the “Arizona Action”). Such agreement provides such parties and their affiliates with a non-exclusive license to certain Company patents related to the Company’s two-part Sorbent Enhancement Additive (SEA®) process for use in connection with a certain designated coal-fired power plant operated by such utility. The agreement includes a one-time license fee which has been received by the Company, and provides the Company with a right of first refusal for certain of such utility’s product supply for mercury emissions capture at such designated power plant. Such lawsuit will continue against the other non-affiliated defendants named in the Arizona Action. On December 17, 2024, a United States Judicial Panel on Multidistrict Litigation ordered that the above three patent infringement lawsuits be consolidated and centralized in the Southern District of Iowa for coordinated or consolidated pretrial proceedings (the “Transfer Order”). F-23 Table of Contents See “Note 16 – Subsequent Events” for information on an agreement entered into with another party named as a defendant in the Arizona Action, along with information of the commencement of additional patent litigation and filing of petitions for Inter Partes Review with the United States Patent and Trademark Office. Except for the foregoing disclosures, the Company is not presently aware of any other material pending legal proceedings to which the Company is a party or of which any of its property is the subject. Litigation, including patent litigation, is inherently subject to uncertainties. As such, there can be no assurance that the Company will be successful in litigating and/or settling any of these claims. The Company expenses legal costs relating to patent litigation as incurred. Note 11 - Stock Based Compensation Stock Based Compensation The Company accounts for stock-based compensation awards in accordance with the provisions of ASC 718, which addresses the accounting for employee stock options which requires that the cost of all employee stock options, as well as other equity-based compensation arrangements, be reflected in the unaudited condensed consolidated financial statements over the vesting period based on the estimated fair value of the awards. Stock based compensation consists of the amortization of common stock, stock options, restricted share units and warrants issued to employees, directors and consultants. For the years ended December 31, 2024 and 2023, stock-based compensation expense amounted to $ 1,088,922 and $ 520,449 , respectively. Such expense is classified in selling, general and administrative expenses. On July 3, 2023, the Board of Directors of the Company approved and adopted the Company’s Amended and Restated 2014 Equity Incentive Plan (the “2014 Plan”) and the Company’s Amended and Restated 2017 Equity Incentive Plan (the “2017 Plan”) which amended the Company’s previously adopted 2014 Equity Incentive Plan and 2017 Equity Incentive Plans. Such amendments were made in accordance with the requirements of the TSX Venture Exchange. The 2014 Equity Incentive Plan was first approved by the Board on January 10, 2014. The 2017 Equity Incentive Plan replaced the 2014 Equity Incentive Plan, which was terminated by the Board on April 28, 2017. As a result of such termination, no additional awards may be granted under the 2014 Equity Incentive Plan but previously granted awards shall remain outstanding in accordance with their terms and conditions. The 2017 Plan was adopted by the Board on February 9, 2017. As amended by the Board on July 3, 2023, the maximum number of shares of common stock that may be issued under the 2017 Plan after July 3, 2023 is 14,078,459 , and to the extent any award (or portion thereof) outstanding under the 2014 Plan expires, terminates or is cancelled, surrendered or forfeited for any reason on or after July 3, 2023, the shares of common stock subject to such award (or portion thereof) shall be added to and increase the foregoing limit, to a maximum of 4,775,000 additional shares of common stock. (On July 3, 2023, there were 4,775,000 options and no other types of awards outstanding under the 2014 Plan.) On October 29, 2024, the Board approved certain non-material amendments to the 2014 Plan and 2017 Plan which amendments were made in connection with the listing of the Company’s shares on the Toronto Stock Exchange (“TSX”) and graduation from the TSX Venture Exchange to the TSX. As of December 31, 2024, there were 5,741,306 shares remaining available for issuance under the 2017 Plan. Common Stock On November 8, 2022, the Company issued a total of 3,000,000 shares of common stock to the Chief Executive Officer. These shares of common stock were valued at $ 960,000 in accordance with FASB ASC Topic 718. The fair value of the shares will be amortized as an expense over the vesting period. The shares became fully vested on November 8, 2024. The expense for the years ended December 31, 2024 and 2023 was $ 402,666 and $ 486,667 , respectively. Stock Options On February 1, 2023, the Company issued (i) 850,000 shares of common stock to the Company’s Chairman of the Board upon a cash exercise of options to purchase an aggregate of 850,000 shares of common stock at exercise prices ranging from $ 0.19 to $ 0.27 per share or $ 209,500 in the aggregate, (ii) 110,000 shares of common stock to the Company’s Chief Executive Officer upon a cashless exercise of an option to purchase 250,000 shares of common stock at an exercise price of $ 0.28 per share based upon a market price of $ 0.50 per share as determined under the terms of the option, and (iii) 155,000 shares of common stock to a director of the Company upon a cashless exercise of an option to purchase 250,000 shares of common stock at an exercise price of $ 0.19 per share based upon a market price of $ 0.50 per share as determined under the terms of the option. F-24 Table of Contents On February 20, 2023, the Company issued 17,858 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 50,000 shares of common stock at an exercise price of $ 0.27 per share based upon a market price of $ 0.42 per share as determined under the terms of the option. Between February 21, 2023 and February 23, 2023, the Company issued an aggregate of 29,022 shares of common stock to three employees and one former employee upon a cashless exercise of options to purchase an aggregate of 80,000 shares of common stock at an exercise price of $0.27 per share based upon market prices ranging from $ 0.42 to $ 0.43 per share as determined under the terms of the options. On March 8, 2023, and pursuant to an advisor agreement dated March 1, 2023 with a nonaffiliated third party, the Company granted a nonqualified stock option under the 2017 Equity Incentive Plan to such third party to acquire 125,000 shares of the Company’s common stock at an exercise price of $ 0.40 per share, representing the fair market value of the common stock on the date of grant as determined under the 2017 Equity Incentive Plan. Fifty percent of the option shall vest and become exercisable on September 1, 2023, and the remaining fifty percent shall vest and become exercisable on March 1, 2024. The option will expire five years after the date of grant. Based on a Black-Scholes valuation model, these options were valued at $ 30,933 , in accordance with FASB ASC Topic 718. The fair value of the shares was being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over twelve months. The valuation assumptions included an expected duration of 2.9 years, volatility of 98 %, discount rate of 4.71 % and dividends of $ 0 . On September 30, 2023, the advisor agreement was terminated resulting in 50.0% of the option remaining unvested and unexercisable. On April 4, 2023, and pursuant to a consulting agreement effective April 1, 2023 with a nonaffiliated third party, the Company granted a nonqualified stock option under the 2017 Equity Incentive Plan to such third party to acquire 250,000 shares of the Company’s common stock at an exercise price of $ 0.39 per share, representing the fair market value of the common stock on the date of grant as determined under the 2017 Equity Incentive Plan. Fifty percent of the option shall vest and become exercisable on October 1, 2023 and the remaining fifty percent shall vest and become exercisable on April 1, 2024. The option will expire five years after the date of grant . Based on a Black-Scholes valuation model, these options were valued at $ 59,690 , in accordance with FASB ASC Topic 718. The fair value of the shares was being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over twelve months. The valuation assumptions included an expected duration of 2.9 years, volatility of 98 %, discount rate of 3.60 % and dividends of $ 0 . On August 28, 2023, the consulting agreement was terminated resulting in the option remaining unvested and being deemed terminated. On May 26, 2023, a new director was appointed to the Board of Directors and was granted a nonqualified stock option to acquire 125,000 shares of the Company’s common stock exercisable at $ 0.41 per share. Fifty percent of the option shall vest and become exercisable on November 26, 2023, and the remaining fifty percent shall vest and become exercisable on May 26, 2024. The option will expire five years after the date of grant. Based on a Black-Scholes valuation model, these options were valued at $ 30,527 , in accordance with FASB ASC Topic 718. The fair value of the shares is being amortized to selling, general and administrative expenses within the Company’s consolidated statements of operations over twelve months. During the years ended December 31, 2024 and 2023, the Company recognized $ 12,211 and $ 18,316 , respectively, of stock-based compensation. The valuation assumptions included an expected duration of 2.88 years, volatility of 97 %, discount rate of 4.23 % and dividends of $ 0 . On June 5, 2023, the Company issued 1,629 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 6,875 shares of common stock at an exercise price of $ 0.29 per share based upon a market price of $ 0.38 per share as determined under the terms of the options. On June 6, 2023, the Company issued an aggregate of 3,426 shares of common stock to an employee upon a cashless exercise of options to purchase an aggregate of 7,655 shares of common stock at exercise prices ranging from $ 0.17 to $ 0.29 per share based upon a market price of $ 0.38 per share as determined under the terms of the options. On June 7, 2023, the Company issued 1,352 shares of common stock to a director upon a cashless exercise of an option to purchase 6,250 shares of common stock at an exercise price of $ 0.29 per share based upon a market price of $ 0.37 per share as determined under the terms of the options. F-25 Table of Contents On June 28, 2023, the Company issued (i) 5,213 shares of common stock to the Company’s Chief Executive Officer upon a cashless exercise of options to purchase an aggregate of 24,687 shares of common stock at exercise prices ranging from $ 0.21 to $ 0.29 per share based upon a market price of $ 0.30 per shares as determined under the terms of the options, (ii) 4,125 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 13,750 shares of common stock at an exercise price of $ 0.21 per share based upon a market price of $ 0.30 per share as determined under the terms of the option, and (iii) 1,875 shares of common stock to a director upon a cashless exercise of an option to purchase 6,250 shares of common stock at an exercise price of $ 0.21 per share based upon a market price of $ 0.30 per share as determined under the terms of the options. On July 28, 2023, the Company issued (i) 8,007 shares of common stock to the Company’s Chief Executive Officer upon a cashless exercise of an option to purchase 16,458 shares of common stock, (ii) 6,690 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 13,750 shares of common stock, and (iii) 3,041 shares of common stock to a director upon a cashless exercise of an option to purchase 6,250 shares of common stock. All of such options had an exercise price of $ 0.17 per share and such share issuances were based upon a volume weighted average price (“VWAP”) of $ 0.3311 per share as determined under the terms of the options. On September 29, 2023, the Company issued (i) 5,555 shares of common stock to the Company’s Chief Executive Officer upon a cashless exercise of an option to purchase 16,458 shares of common stock, (ii) 4,641 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 13,750 shares of common stock, (iii) 2,109 shares of common stock to a director upon a cashless exercise of an option to purchase 6,250 shares of common stock, and (iv) 1,033 shares of common stock to an employee upon a cashless exercise of an option to purchase 3,062 shares of common stock. All of such options had an exercise price of $ 0.26 per share and such share issuances were based upon a VWAP of $ 0.3925 per share as determined under the terms of the options. On October 30, 2023, the Company issued 1,450 shares of common stock to an employee upon a cashless exercise of an option to purchase 3,062 shares of common stock at any exercise price of $ 0.20 per share based upon a VWAP of $ 0.3799 per share as determined under the term of the options. On October 31, 2023, the Company issued (i) 8,346 shares of common stock to the Company’s Chief Executive Officer upon a cashless exercise of an option to purchase 16,458 shares of common stock, (ii) 6,973 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 13,750 shares of common stock, and (iii) 3,169 shares of common stock to a director upon a cashless exercise of an option to purchase 6,250 shares of common stock. All of such options had an exercise price of $ 0.20 per share and such share issuances were based upon a VWAP of $ 0.4058 per share as determined under the terms of the options. On November 29, 2023, the Company issued 2,001 shares of common stock to an employee upon a cashless exercise of an option to purchase 3,062 shares of common stock at an exercise price of $ 0.33 per share based upon a VWAP of $ 0.9527 per share as determined under the term of the options. On November 30, 2023, the Company issued (i) 9,104 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 13,750 shares of common stock at an exercise price of $ 0.33 per share, (ii) 4,138 shares of common stock to a director upon a cashless exercise of an option to purchase 6,250 shares of common stock at an exercise price of $ 0.33 per share, and (iii) 9,400 shares of common stock to a former employee upon a cashless exercise of options to purchase a total of 18,750 shares of common stock, with exercises prices of ranging from $ 0.25 to $ 0.33 per share. All of such share issuances were based upon a VWAP of $ 0.9768 per share as determined under the terms of the options. On December 11, 2023, the Company issued (i) 10,278 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 13,750 shares of common stock, and (ii) 4,672 shares of common stock to a director upon a cashless exercise of an option to purchase 6,250 shares of common stock. All of such options had an exercise price of 0.25 per share and such share issuances were based upon a VWAP of $ 0.9902 per share as determined under the terms of the options. On December 13, 2023, the Company issued 2,204 shares of common stock to an employee upon a cashless exercise of an option to purchase 3,062 shares of common stock at an exercise price of $ 0.25 per share based upon a VWAP of $ 0.8931 per share as determined under the term of the options. F-26 Table of Contents On January 15, 2024, the Company granted nonqualified stock options to certain directors, executive officers and employees to acquire an aggregate of 1,000,000 shares of the Company’s common stock under the 2017 Plan. The options granted are exercisable at $ 0.88 per share, representing the fair market value of the common stock on the date of grant as determined under the 2017 Plan. The options are fully vested and exercisable as of the date of grant and will expire five years thereafter. Based on a Black-Scholes valuation model, these options were valued at $ 632,214 , in accordance with FASB ASC Topic 718, which was expensed on the issuance date in selling, general and administrative expenses within the Company’s consolidated statements of operations. The valuation assumptions included an expected duration of 5 years, volatility of 93 %, discount rate of 3.84 % and dividends of $ 0 . On February 27, 2024, the Company issued 9,285 shares of common stock to a former employee upon a cashless exercise of an option to purchase 18,750 shares of common stock covered by an option to purchase a total of 100,000 shares of common stock, with an exercise price of $ 0.27 per share. Such share issuance was based upon a VWAP of $ 0.9230 per share as determined under the terms of the option. On June 24, 2024, the Company issued (i) 886,456 shares of common stock to the Company’s Chief Executive Officer upon a cashless exercise of an option to purchase 1,500,000 shares of common stock at an exercise price of $ 0.27 per share, and (ii) 672,867 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of options to purchase an aggregate of 1,600,000 shares of common stock at exercise prices ranging from $ 0.27 to $ 0.45 per share. Such share issuances were based upon a VWAP of $ 0.6601 per share as determined under the terms of the options. On June 28, 2024, the Company issued (i) 46,409 shares of common stock to an employee upon a cashless exercise of options to purchase an aggregate of 300,000 shares of common stock at exercise prices ranging from $ 0.27 to $ 0.61 per share, (ii) 44,065 shares of common stock to an employee upon a cashless exercise of an option to purchase 75,000 shares of common stock covered by an option to purchase a total of 100,000 shares of common stock with an exercise price of $0.27 per share, and (iii) 15,000 shares of common stock to a former employee upon a cashless exercise of an option to purchase 25,531 shares of common stock covered by an option to purchase a total of 500,000 shares of common stock with an exercise price of $ 0.27 per share. Such share issuances were based upon a VWAP of $ 0.6546 per share as determined under the terms of the options. On August 3, 2024, the Company issued 32,112 shares of common stock to a former consultant upon a cashless exercise of an option to purchase 62,500 shares of common stock, with an exercise price of $ 0.40 per share. Such share issuance was based upon a VWAP of $ 0.8227 per share as determined under the terms of the option. A summary of stock option activity is presented below: Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Shares Price Life (years) Value December 31, 2023 17,037,500 $ 0.53 1.47 6,970,750 Grants 1,000,000 0.88 Expirations ( 5,155,719 ) 0.64 Exercised ( 3,581,781 ) 0.35 December 31, 2024 9,300,000 $ 0.58 1.75 12,500 Options exercisable at: December 31, 2024 9,300,000 0.58 1.75 12,500 The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $0.51 as of December 31, 2024 (the last trading day of the month of December 2024), which would have been received by the option holders had all option holders exercised their options as of that date. F-27 Table of Contents Stock options exercised during the year ended December 31, 2024 include none that were exercised for cash and 3,581,781 which were a cashless exercise. Restricted Share Units On January 15, 2024, the Company granted 50,000 restricted share units (“RSUs”) to a director pursuant to the 2017 Plan. The RSUs will vest one year from the date of grant on January 15, 2025. Once vested, each RSU represents the right to receive one share of the Company’s common stock . These shares of common stock were valued at $ 43,500 in accordance with FASB ASC Topic 718. The fair value of the shares will be amortized as an expense over the vesting period. The shares become fully vested on January 15, 2025. The expense for the year ended December 31, 2024 was $ 41,832 . Note 12 - Warrants The Company utilized a Black-Scholes options pricing model to value warrants at the issuance date. This model requires the input of highly subjective assumptions such as the expected stock price volatility and the expected period until the warrants are exercised. When calculating the value of warrants issued, the Company uses a volatility factor, a risk-free interest rate and the life of the warrant for the exercise period. No warrants were issued during the years ended December 31, 2024 and 2023. The following warrants were exercised during the years ended December 31, 2024 and 2023: On June 17, 2024, the Company issued an aggregate of 16,665 shares of common stock to certain warrant holders upon the cashless exercise of warrants to purchase an aggregate of 600,000 shares of common stock at an exercise price of $ 0.70 per share based upon a market value of $ 0.72 per share as determined under the terms of the warrants. On June 18, 2024, the Company issued 3,521 shares of common stock to a certain warrant holder upon the cashless exercise of a warrant to purchase 250,000 shares of common stock at an exercise price of $ 0.70 per share based upon a market value of $ 0.71 per share as determined under the terms of the warrant. On August 5, 2024, the Company issued 66,666 shares of common stock to a certain warrant holder upon the cashless exercise of a warrant to purchase 400,000 shares of common stock at an exercise price of $ 0.70 per share based upon a market value of $ 0.84 per share as determined under the terms of the warrant. On August 22, 2024, the Company issued 25,000 shares of common stock to a certain warrant holder upon a cash exercise of a warrant to purchase 25,000 shares of common stock at an exercise price of $ 0.70 per share or $ 17,500 in the aggregate. The following is a summary of the Company’s warrant activity: Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Shares Price Life (years) Value December 31, 2023 2,550,000 $ 0.70 0.60 $ - Grants - - - - Expirations ( 1,275,000 ) 0.70 - - Exercised ( 1,275,000 ) 0.70 - - December 31, 2024 - $ - - $ - Warrants exercisable at: December 31, 2024 - $ - - $ - F-28 Table of Contents The following table summarizes information about common stock warrants outstanding at December 31, 2024: Outstanding and Exercisable Exercise Price Number Outstanding Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Price $ - - - $ - Note 13 – Taxes Below is breakdown of the income tax provisions for the years ended December 31: 2024 2023 Federal Current $ - $ - Deferred - - State and local Current ( 303,321 ) 473,000 Deferred - - Income tax provision $ ( 303,321 ) $ 473,000 The expected tax expense (benefit) based on the statutory rate is reconciled with actual tax expense (benefit) as follows: For the Year Ended December 31, 2024 For the Year Ended December 31, 2023 U.S. federal statutory rate 21 .0 % 21 .0 % State taxes 1.9 % 9.8 % Deferred tax asset adjustments ( 11.5 )% 4.3 % Non-deductible amortization of debt discount ( 0.4 )% - % Other non-deductible items ( 0.1 )% 1.9 % Non-taxable change in profit share liability ( 8.6 )% 41.7 % Change in valuation allowance ( 0.3 )% ( 70.3 )% Income tax provision 2.6 % 8.4 % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows at December 31: 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 3,595,000 $ 2,751,000 Stock based compensation 799,000 1,517,000 Other 152,000 186,000 Total deferred tax assets 4,546,000 4,454,000 Deferred tax liability: IRC Section 481(a) adjustment ( 125,000 ) - Valuation Allowance ( 4,421,000 ) ( 4,454,000 ) Net deferred tax asset $ - $ - F-29 Table of Contents As of December 31, 2024, the Company has U.S. federal net operating loss carryovers (“NOLs”) of approximately $ 16,632,000 available to offset taxable net income in a given year of which $ 3,769,000 expires from 2035 through 2037 and $ 12,863,000 does not expire. The Company also has state NOL carryforwards of approximately $ 2,306,000 which start to expire in 2025 . If not used, these NOLs may be subject to limitation under Internal Revenue Code Section 382 should there be a greater than 50% ownership change as determined under the regulations. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation for taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, Management believes that significant uncertainty exists with respect to future realization of the deferred tax assets and has therefore established a full valuation allowance. For the years ended December 31, 2024 and 2023, the valuation allowance (decreased) by ($ 33,000 ) and $( 3,973,000 ), respectively. The Company evaluated the provisions of ASC 740-10 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10 prescribes a comprehensive model for how a company should recognize, present, and disclose uncertain positions that the Company has taken or expects to take in its tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the net benefit recognized and measured pursuant to the interpretation are referred to as “unrecognized benefits.” A liability is recognized (or amount of net operating loss carry forward or amount of tax refundable is reduced) for unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10. There were no unrecognized tax benefits as of December 31, 2024. The Company is no longer subject to tax examinations by tax authorities for years prior to 2020. If applicable, interest costs related to the unrecognized tax benefits are required to be calculated and would be classified as “Other expenses – Interest” in the statement of operations. Penalties would be recognized as a component of “General and administrative.” No interest or penalties on unpaid tax were recorded during the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024 and 2023, no liability for unrecognized tax benefits was required to be reported. The Company does not expect any significant changes in its unrecognized tax benefits in the next year. Note 14 – Segment and Geographic Information The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer (the “CEO”). The Company is a provider of specialty activated carbon technologies and, at December 31, 2024, had one operating segment, which entails the providing of patented sorbent technologies for mercury emissions capture for the coal-fired utility sector in the United States. There are no segment managers who are held accountable for operations, operating results or plans for levels or components below the consolidated unit level. Accordingly, management has determined that the Company has a single operating and reportable segment. The accounting policies related to operating and reportable segments are the same as those described in Note 4, “Basis of Presentation and Summary of Significant Accounting Policies”. The primary measure of segment profit or loss is consolidated net income as presented below and is used the by CEO for the purpose of evaluating segment performance and allocation of budget to support business expansion, new product development and operational efficiencies. F-30 Table of Contents 2024 2023 Material sales $ 14,481,784 $ 17,092,996 License fees 2,808,125 387,500 Other revenues 116,276 144,874 Total revenues 17,406,185 17,625,370 Material costs ( 7,686,447 ) ( 8,898,747 ) Blending and milling ( 377,598 ) ( 769,167 ) Shipping ( 1,081,781 ) ( 1,380,051 ) Other cost of goods sold ( 700,279 ) ( 652,688 ) Compensation and benefits ( 6,148,100 ) ( 2,577,473 ) Stock-based compensation ( 1,088,922 ) ( 573,783 ) Amortization and depreciation ( 248,084 ) ( 228,962 ) Consulting fees ( 879,800 ) ( 109,381 ) Professional fees ( 4,722,313 ) ( 9,717,572 ) General and administrative ( 1,588,129 ) ( 1,471,311 ) Change in fair value of profit share ( 3,959,065 ) ( 11,209,677 ) Interest expense ( 267,458 ) ( 1,362,401 ) Impairment loss ( 43,000 ) ( 219,707 ) Income tax benefit (expense) 289,156 ( 473,213 ) Income from legal claims - 27,607,776 Interest income 293,524 79,301 Segment net (loss) income ( 10,802,111 ) 5,668,314 Reconciliation of profit or loss Adjustments and reconciling items - - Consolidated net (loss) income $ ( 10,802,111 ) $ 5,668,314 The segment assets are not reviewed by the CODM at a different asset level or category and is reviewed at the consolidated level. Note 15 - Subsequent Events On January 2, 2025, and pursuant to an investor relations consulting agreement effective as of January 1, 2025 with a nonaffiliated third party, the Company granted a nonqualified stock option under the 2017 Plan to such third party to acquire 250,000 shares of the Company’s common stock at an exercise price of $ 0.51 per share, representing the fair market value of the common stock on the date of grant as determined under the 2017 Plan. Twenty-five percent of the option shall vest and become exercisable three months following the grant date and twenty-five percent shall vest every three months thereafter such that the option shall be fully vested one year following the grant date. The option will expire three years after the grant date. Effective as of January 7, 2025, the Company entered into agreement with another one of the utilities named as a defendant in the Arizona Action (see “Note 10 – Commitments and Contingencies”). Such agreement provides such party and its affiliates with a non-exclusive license to certain Company patents related to the Company’s two-part Sorbent Enhancement Additive (SEA®) process for use in connection with a certain designated coal-fired power plant operated by such utility. The agreement includes a one-time license fee which has been received by the Company, and provides the Company with the right to be included in such party’s bidding process for certain product supply for mercury emissions capture at such party’s designated power plant. On January 9, 2025, the Company granted a nonqualified stock option under the 2017 Plan to a new director, who was elected to the Board on December 30, 2024, to acquire 100,000 shares of the Company’s common stock at an exercise price of $ 0.56 per share, representing the fair market value of the common stock on the date of grant as determined under the 2017 Plan. The option is fully vested and exercisable as of the grant date and will expire five years thereafter. On January 15, 2025, the Company issued 50,000 shares of common stock to a director due to the vesting on such date of 50,000 restricted share units (“RSUs”) which had previously been granted on January 15, 2024 pursuant to the 2017 Plan and had a one-year vesting period. F-31 Table of Contents In January 2025, the Company commenced another patent infringement lawsuit against four defendants in the U.S. District Court for the Western District of Missouri. Such lawsuit claims infringement of the Company’s patent rights related to the Company’s mercury emissions reduction technologies. Named as defendants in the action are Evergy, Inc., Evergy Metro Inc., Evergy Missouri West, Inc. and Evergy Kansas Central, Inc. In the lawsuit, the Company requests a trial by jury against the defendants and seek damages, costs, and legal expenses, along with a finding of willful infringement by the defendants, and an injunction prohibiting the defendants from further acts of infringement. In February 2025, such lawsuit was consolidated with and transferred to the Southern District of Iowa pursuant to the Transfer Order (see “Note 10 – Commitments and Contingencies”). In January and February 2025, certain of the defendants in the patent infringement lawsuits which have been consolidated and centralized in the Southern District of Iowa filed petitions for Inter Partes Review with the United States Patent and Trademark Office, seeking to invalidate certain claims to the patents which are subject to the litigation. On March 19, 2025, the Company announced that its Board of Directors authorized a share repurchase program under which the Company may purchase up to $ 5.0 million of its common stock. Purchases under the share repurchase program may be made from time to time, in such amounts as management deems appropriate, through a variety of methods, which may include open market purchases, privately negotiated transactions, block trades, accelerated share repurchase transactions, purchases through 10b5-1 trading plans, or by any combination of such methods. The timing and amount of any repurchases pursuant to the share repurchase program will be determined based upon a variety of factors, including general market conditions, share price, corporate and regulatory requirements and limitations, corporate liquidity requirements and priorities, and other factors. The Company anticipates that any repurchases will not occur before the second half of 2025. The share repurchase program does not have an expiration date, does not require the Company to repurchase any specific number of shares of its common stock, if any, and may be modified, suspended or terminated at any time without notice. Note 16 – Restatement of Quarterly Financial Information (Unaudited) As described in Note 2—Restatement of Previously Issued Financial Statements, for the period ended December 31, 2024, management identified an error in the previously reported financial statements related to the recognition of revenue during the year ended December 31, 2022. The Company entered into a license agreement for which it should have recognized the entire proceeds receivable pursuant to the agreement as revenue during the year ended December 31, 2022. The Company should also have recognized the financing component of the licensing agreement during the fiscal years ended December 31, 2023 and 2024. As a result, the consolidated financial statements reflect the recognition of this additional revenue during the year ended December 31, 2022, removes the revenue recognized and records the financing component of the arrangement during annual and interim periods in the fiscal year ending December 31, 2023 and the interim periods in the fiscal year ending December 31, 2024. The following tables present the effect of the restatement on the Company's previously reported: · unaudited condensed consolidated balance sheets as of March 31, 2023, June 30, 2023, and September 30, 2023; · unaudited condensed consolidated balance sheets as of March 31, 2024, June 30, 2024, and September 30, 2024; · unaudited condensed consolidated statements of operations for the three months ended March 31, 2023, the three months and six months ended June 30, 2023, and the three months and nine months ended September 30, 2023; · unaudited condensed consolidated statements of operations for the three months ended March 31, 2024, the three months and six months ended June 30, 2024, and the three months and nine months ended September 30, 2024; · unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2023, the six months ended June 30, 2023, and the nine months ended September 30, 2023; and · unaudited condensed consolidated statements of cash flows for the three months ended March 31, 2024, the six months ended June 30, 2024, and the nine months ended September 30, 2024. F-32 Table of Contents The values as previously reported were derived from the previously filed Quarterly Reports on Form 10-Q for the periods ended March 31, 2023, June 30, 2023, September 30, 2023, March 31, 2024, June 30, 2024, and September 30, 2024. These restatements do not result in a reclassification between cash flows from operating activities, cash flows from investing activities, or cash flows from financing activities in the unaudited condensed consolidated statements of cash flows for the periods presented. The restatements only impact net loss in the unaudited condensed consolidated statements of changes in stockholders’ equity (deficit) in the periods presented. The following table presents the impact of the financial statement adjustments on the Company’s previous reported consolidated Balance Sheet as of March 31, 2023: CONSOLIDATED BALANCE SHEETS MARCH 31, 2023 As previously reported Adjustment As restated ASSETS AND STOCKHOLDERS’ EQUITY (DEFICIT) Accounts receivable $ 696,933 $ 788,408 $ 1,485,341 Total current assets 4,313,535 788,408 5,101,943 Total assets 8,051,939 788,408 8,840,347 Stockholders’ equity (deficit) Accumulated deficit ( 70,145,373 ) 788,408 ( 69,356,965 ) Total stockholders’ equity (deficit) ( 8,504,314 ) 788,408 ( 7,715,906 ) Total liabilities and stockholders’ equity (deficit) $ 8,051,939 $ 788,408 $ 8,840,347 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the three months ended March 31, 2023: CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2023 As previously reported Adjustment As restated Revenue $ 3,012,749 $ ( 315,000 ) $ 2,697,749 Interest income - 24,458 24,458 Total costs and expenses 4,439,945 ( 24,458 ) 4,415,487 Loss before provision for income taxes ( 1,427,196 ) ( 290,542 ) ( 1,717,738 ) Net loss $ ( 1,446,984 ) $ ( 290,542 ) $ ( 1,737,526 ) Net loss per common share - basic and diluted: $ ( 0.02 ) $ - $ ( 0.02 ) F-33 Table of Contents The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the three months ended March 31, 2023: CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2023 As previously reported Adjustment As restated Cash flows from operating activities Net income (loss) $ ( 1,446,984 ) $ ( 290,542 ) $ ( 1,737,526 ) Adjustments to reconcile net loss to net cash Non-cash interest income - ( 24,458 ) ( 24,458 ) Changes in operating assets and liabilities Accounts receivable 2,080,674 315,000 2,395,674 Net cash provided by operating activities $ 777,564 $ - $ 777,564 The following table presents the impact of the financial statement adjustments on the Company’s previous reported consolidated Balance Sheet as of June 30, 2023: CONSOLIDATED BALANCE SHEETS JUNE 30, 2023 As previously reported Adjustment As restated ASSETS AND STOCKHOLDERS’ EQUITY (DEFICIT) Accounts receivable $ 2,043,328 $ 806,281 $ 2,849,609 Total current assets 4,968,663 806,281 5,774,944 Total assets 8,645,146 806,281 9,451,427 Stockholders’ equity (deficit) Accumulated deficit ( 70,909,843 ) 806,281 ( 70,103,562 ) Total stockholders’ equity (deficit) ( 9,131,190 ) 806,281 ( 8,324,909 ) Total liabilities and stockholders’ equity (deficit) $ 8,645,146 $ 806,281 $ 9,451,427 F-34 Table of Contents The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the three and six months ended June 30, 2023: CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2023 FOR THE SIX MONTHS ENDED JUNE 30, 2023 As previously reported Adjustment As restated As previously reported Adjustment As restated Revenues $ 4,111,721 $ - $ 4,111,721 $ 7,124,469 $ ( 315,000 ) $ 6,809,469 Interest income - 17,873 17,873 - 42,331 42,331 Total costs and expenses 4,875,876 ( 17,873 ) 4,858,003 9,315,819 ( 42,331 ) 9,273,488 Net loss before provision for income taxes ( 764,155 ) 17,873 ( 746,282 ) ( 2,191,350 ) ( 272,669 ) ( 2,464,019 ) Net loss $ ( 764,470 ) $ 17,873 $ ( 746,597 ) $ ( 2,211,454 ) $ ( 272,669 ) $ ( 2,484,123 ) Net loss per common share - basic and diluted: $ ( 0.01 ) $ - $ ( 0.01 ) $ ( 0.02 ) $ ( 0.01 ) $ ( 0.03 ) The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the six months ended June 30, 2023: CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2023 As previously reported Adjustment As restated Cash flows from operating activities Net income (loss) $ ( 2,211,454 ) $ ( 272,669 ) $ ( 2,484,123 ) Adjustments to reconcile net loss to net cash Non-cash interest income - ( 42,331 ) ( 42,331 ) Changes in operating assets and liabilities Accounts receivable 734,279 315,000 1,049,279 Net cash provided by operating activities $ 232,492 $ - $ 232,492 F-35 Table of Contents The following table presents the impact of the financial statement adjustments on the Company’s previous reported consolidated Balance Sheet as of September 30, 2023: CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2023 As previously reported Adjustment As restated ASSETS AND STOCKHOLDERS’ EQUITY (DEFICIT) Accounts receivable $ 2,549,022 $ 824,559 $ 3,373,581 Total current assets 6,074,162 824,559 6,898,721 Total assets 9,681,503 824,559 10,506,062 Stockholders’ equity (deficit) Accumulated deficit ( 71,737,345 ) 824,559 ( 70,912,786 ) Total stockholders’ equity (deficit) ( 9,856,227 ) 824,559 ( 9,031,668 ) Total liabilities and stockholders’ equity (deficit) $ 9,681,503 $ 824,559 $ 10,506,062 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the three and nine months ended September 30, 2023: CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2023 FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 As previously reported Adjustment As restated As previously reported Adjustment As restated Revenues $ 6,747,256 $ - $ 6,747,256 $ 13,871,725 $ ( 315,000 ) $ 13,556,725 Interest income - 18,278 18,278 - 60,609 60,609 Total costs and expenses 7,574,758 ( 18,278 ) 7,556,480 16,910,681 ( 60,609 ) 16,850,072 Net loss before provision for income taxes ( 827,502 ) 18,278 ( 809,224 ) ( 3,038,956 ) ( 254,391 ) ( 3,293,347 ) Net loss $ ( 827,502 ) $ 18,278 $ ( 809,224 ) $ ( 3,038,956 ) $ ( 254,391 ) $ ( 3,293,347 ) Net loss per common share - basic and diluted: $ ( 0.01 ) $ - $ ( 0.01 ) $ ( 0.03 ) $ - $ ( 0.03 ) F-36 Table of Contents The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the nine months ended September 30, 2023: CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2023 As previously reported Adjustment As restated Cash flows from operating activities Net income (loss) $ ( 3,038,956 ) $ ( 254,391 ) $ ( 3,293,347 ) Adjustments to reconcile net loss to net cash Non-cash interest income - ( 60,609 ) ( 60,609 ) Changes in operating assets and liabilities Accounts receivable 228,585 315,000 543,585 Net cash provided by operating activities $ 786,144 $ - $ 786,144 The following table presents the impact of the financial statement adjustments on the Company’s previous reported consolidated Balance Sheet as of March 31, 2024: CONSOLIDATED BALANCE SHEETS MARCH 31, 2024 As previously reported Adjustment As restated ASSETS AND STOCKHOLDERS’ EQUITY (DEFICIT) Accounts receivable $ 1,667,856 $ 547,367 $ 2,215,223 Total current assets 13,670,201 547,367 14,217,568 Total assets 17,083,765 547,367 17,631,132 Stockholders’ equity (deficit) Accumulated deficit ( 65,353,367 ) 547,367 ( 64,806,000 ) Total stockholders’ equity (deficit) 8,255,523 547,367 8,802,890 Total liabilities and stockholders’ equity (deficit) $ 17,083,765 $ 547,367 $ 17,631,132 F-37 Table of Contents The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the three months ended March 31, 2024: CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2024 As previously reported Adjustment As restated Revenue $ 3,556,766 $ ( 315,000 ) $ 3,241,766 Gross profit 1,443,284 ( 315,000 ) 1,128,284 Operating loss ( 2,083,492 ) ( 315,000 ) ( 2,398,492 ) Other income 35,516 19,116 54,632 Total other income (expense) ( 475,499 ) 19,116 ( 456,383 ) Loss before provision for income taxes ( 2,558,991 ) ( 295,884 ) ( 2,854,875 ) Net loss $ ( 2,558,991 ) $ ( 295,884 ) ( 2,854,875 ) Net loss per common share - basic and diluted: $ ( 0.03 ) $ - $ ( 0.03 ) The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the three months ended March 31, 2024: CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2024 As previously reported Adjustment As restated Cash flows from operating activities Net income (loss) $ ( 2,558,991 ) $ ( 295,884 ) $ ( 2,854,875 ) Adjustments to reconcile net loss to net cash Non-cash interest income - ( 19,116 ) ( 19,116 ) Changes in operating assets and liabilities Accounts receivable 565,355 315,000 880,355 Net cash provided by operating activities $ ( 439,220 ) $ - $ ( 439,220 ) F-38 Table of Contents The following table presents the impact of the financial statement adjustments on the Company’s previous reported consolidated Balance Sheet as of June 30, 2024: CONSOLIDATED BALANCE SHEETS JUNE 30, 2024 As previously reported Adjustment As restated ASSETS AND STOCKHOLDERS’ EQUITY (DEFICIT) Accounts receivable $ 1,784,437 $ 559,775 $ 2,344,212 Total current assets 11,327,736 559,775 11,887,511 Total assets 14,749,740 559,775 15,309,515 Stockholders’ equity (deficit) Accumulated deficit ( 71,512,689 ) 559,775 ( 70,952,914 ) Total stockholders’ equity (deficit) 2,232,979 559,775 2,792,754 Total liabilities and stockholders’ equity (deficit) $ 14,749,740 $ 559,775 $ 15,309,515 The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the three and six months ended June 30, 2024: CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2024 FOR THE SIX MONTHS ENDED JUNE 30, 2024 As previously reported Adjustment As restated As previously reported Adjustment As restated Revenues $ 3,361,433 $ - $ 3,361,433 $ 6,918,199 $ ( 315,000 ) $ 6,603,199 Gross profit 1,060,600 - 1,060,600 2,503,884 ( 315,000 ) 2,188,884 Operating loss ( 3,573,510 ) - ( 3,573,510 ) ( 5,657,002 ) ( 315,000 ) ( 5,972,002 ) Interest income 109,787 12,408 122,195 145,303 31,524 176,827 Total other income (expense) ( 2,585,466 ) 12,408 ( 2,573,058 ) ( 3,060,965 ) 31,524 ( 3,029,441 ) Net loss before provision for income taxes ( 6,158,976 ) 12,408 ( 6,146,568 ) ( 8,717,967 ) ( 283,476 ) ( 9,001,443 ) Net loss $ ( 6,159,322 ) $ 12,408 $ ( 6,146,914 ) $ ( 8,718,313 ) $ ( 283,476 ) $ ( 9,001,789 ) Net loss per common share - basic and diluted: $ ( 0.07 ) $ - $ ( 0.07 ) $ ( 0.09 ) $ ( 0.01 ) $ ( 0.10 ) F-39 Table of Contents The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the six months ended June 30, 2024: CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2024 As previously reported Adjustment As restated Cash flows from operating activities Net income (loss) $ ( 8,718,313 ) $ ( 283,476 ) $ ( 9,001,789 ) Adjustments to reconcile net loss to net cash Non-cash interest income - ( 31,524 ) ( 31,524 ) Changes in operating assets and liabilities Accounts receivable 448,774 315,000 763,774 Net cash provided by operating activities $ ( 3,122,619 ) $ - $ ( 3,122,619 ) The following table presents the impact of the financial statement adjustments on the Company’s previous reported consolidated Balance Sheet as of September 30, 2024: CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 2024 As previously reported Adjustment As restated ASSETS AND STOCKHOLDERS’ EQUITY (DEFICIT) Accounts receivable $ 1,930,396 $ 572,465 $ 2,502,861 Total current assets 7,590,707 572,465 8,163,172 Total assets 11,654,860 572,465 12,227,325 Stockholders’ equity (deficit) Accumulated deficit ( 71,982,925 ) 572,465 ( 71,410,460 ) Total stockholders’ equity (deficit) 1,913,874 ) 572,465 2,486,339 Total liabilities and stockholders’ equity (deficit) $ 11,654,860 $ 572,465 $ 12,227,325 F-40 Table of Contents The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Operations for the three and nine months ended September 30, 2024: CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2024 FOR THE NINE MONTHS ENDED SEPTMEER 30, 2024 As previously reported Adjustment As restated As previously reported Adjustment As restated Revenues $ 5,236,990 $ - $ 5,236,990 $ 12,155,189 $ ( 315,000 ) $ 11,840,189 Gross profit 1,594,919 - 1,594,919 4,098,803 ( 315,000 ) 3,783,803 Operating loss ( 1,107,431 ) - ( 1,107,431 ) ( 6,764,433 ) ( 315,000 ) ( 7,079,433 ) Interest income 67,966 12,690 80,656 213,269 44,214 257,483 Total other income (expense) 342,992 12,690 355,682 ( 2,717,973 ) 44,214 ( 2,673,759 ) Net loss before provision for income taxes ( 764,439 ) 12,690 ( 751,749 ) ( 9,482,406 ) ( 270,786 ) ( 9,753,192 ) Net loss $ ( 470,236 ) $ 12,690 $ ( 457,546 ) $ ( 9,188,549 ) $ ( 270,786 ) $ ( 9,459,335 ) Net loss per common share - basic and diluted: $ ( 0.00 ) $ - $ ( 0.00 ) $ ( 0.10 ) $ - $ ( 0.10 ) The following table presents the impact of the financial statement adjustments on the Company’s previously reported Consolidated Statement of Cash Flows for the nine months ended September 30, 2024: CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2024 As previously reported Adjustment As restated Cash flows from operating activities Net income (loss) $ ( 9,188,549 ) $ ( 270,786 ) $ ( 9,459,335 ) Adjustments to reconcile net loss to net cash Non-cash interest income - ( 44,214 ) ( 44,214 ) Changes in operating assets and liabilities Accounts receivable 302,815 315,000 617,815 Net cash provided by operating activities $ ( 3,274,785 ) $ - $ ( 3,274,785 ) F-41 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.