Birchtech Corp. 10-K

Item 8. Financial Statements and Supplementary Data BIRCHTECH CORP. AND SUBSIDIARIES Index to Financial Information Years Ended December 31, 2025 and 2024 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-2 Consolidated Statements of Operations F-3 Consolidated Statements of Stockholders’ Deficit F-4 Consolidated Statements of Cash Flows F-5 Notes to Consolidated Financial Statements F-6 42 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, 2025 and 2024, and the related statements of operations, stockholders’ deficit, and cash flows for each of the years in the two-year period ended December 31, 2025, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. 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 audit 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 provide a reasonable basis for our opinion. 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, 2025, The Company recorded a profit share liability of $6.85 million. As discussed in Note 7 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 profit share liability shall only be paid from the receipt of litigation proceeds relating to certain claims the Company has made on its intellectual property. 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. How we Addressed the Critical Audit Matter in Our Audit To test the profit share liability as of December 31, 2025, we performed the following procedures among others: · Evaluated the assumption related to the estimated 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 calculations. /s/ Rosenberg Rich Baker Berman, P.A. We have served as the Company’s auditor since 2023. Somerset, New Jersey March 31, 2026 F-1 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS December 31, December 31, 2025 2024 ASSETS Current assets Cash $ 2,245,426 $ 3,456,082 Accounts receivable 2,099,641 1,823,232 Inventory 448,086 621,813 Prepaid expenses and other assets 210,408 198,185 Total current assets 5,003,561 6,099,312 Security deposits 6,615 6,615 Deferred offering costs 481,250 - Property and equipment, net 2,192,443 2,350,688 Right of use asset - operating lease 258,986 305,142 Intellectual property, net 1,294,863 1,499,463 Total assets $ 9,237,718 $ 10,261,220 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Accounts payable and accrued expenses (related party $ 37,500 and $ 37,500 at December 31, 2025 and December 31, 2024, respectively) $ 3,610,053 $ 1,702,998 Income tax payable 32,190 - Current portion of operating lease liability 51,158 42,733 Customer credits 167,000 167,000 Accrued salaries 31,961 39,280 Profit share liability – related party 6,847,932 6,853,858 Total current liabilities 10,740,294 8,805,869 Operating lease liability, net of current portion 212,332 263,490 Total liabilities 10,952,626 9,069,359 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, 19,455,966 and 19,235,824 shares issued and outstanding as of December 31, 2025 and December 31, 2024 respectively. 19,456 19,236 Additional paid-in capital 74,044,879 73,925,861 Accumulated deficit ( 75,779,243 ) ( 72,753,236 ) Total stockholders’ equity (deficit) ( 1,714,908 ) 1,191,861 Total liabilities and stockholders’ equity (deficit) $ 9,237,718 $ 10,261,220 See accompanying notes to these consolidated financial statements. F-2 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS For the For the Year Year Ended Ended December 31, December 31, 2025 2024 Product revenue $ 14,233,056 $ 14,481,784 License revenue 3,159,375 2,808,125 Other revenue 233,935 116,276 Revenues $ 17,626,366 $ 17,406,185 Cost of sales ( 10,224,779 ) ( 10,305,076 ) Gross profit 7,401,587 7,101,109 Operating expenses: Impairment loss ( 50,000 ) ( 43,000 ) Research and development expenses ( 1,805,198 ) - Selling, general and administrative expenses (related party of $450,000 and $1,116,064) ( 8,576,702 ) ( 14,216,377 ) Total operating expenses ( 10,431,900 ) ( 14,259,377 ) Operating loss ( 3,030,313 ) ( 7,158,268 ) Other income (expense) Interest expense (related party of $nil and $245,724) ( 13,673 ) ( 267,458 ) Loss on change in fair value of profit share and unsecured note 5,926 ( 3,959,065 ) Interest income 82,103 293,524 Total other (expense) income 74,356 ( 3,932,999 ) Loss before provision for income taxes ( 2,955,957 ) ( 11,091,267 ) Income tax benefit (expense) ( 70,050 ) 289,156 Net loss $ ( 3,026,007 ) $ ( 10,802,111 ) Basic & Diluted loss per share: Basic and diluted net loss per share $ ( 0.16 ) $ ( 0.57 ) Weighted average common shares outstanding: Basic 19,315,295 19,058,110 Diluted 19,315,295 19,058,110 See accompanying notes to these consolidated financial statements. F-3 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT Year Ended December 31, 2024 Common Stock Additional Par Paid-in Accumulated Shares Value Capital (Deficit) Total Balance - January 1, 2025 19,235,824 $ 19,236 $ 73,925,861 $ ( 72,753,236 ) $ 1,191,861 Stock issued for delivery of RSUs 10,000 10 ( 10 ) - - Stock issued for cashless exercise of options 210,142 210 ( 210 ) - - Share based payments - - 119,238 - 119,238 Net loss - - - ( 3,026,007 ) ( 3,026,007 ) Balance – December 31, 2025 19,455,966 $ 19,456 $ 74,044,879 $ ( 75,779,243 ) $ ( 1,714,908 ) Year Ended December 31, 2024 Common Stock Additional Par Paid-in Accumulated Shares Value Capital Deficit Total Balance - January 1, 2024 18,872,215 $ 18,872 $ 61,992,607 $ ( 61,951,125 ) $ 60,354 Stock issued for cashless exercise of options 341,239 341 ( 341 ) - - Stock issued for exercise of warrants 5,000 5 17,495 - 17,500 Stock issued for cashless exercise of warrants 17,370 18 ( 18 ) - - 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 19,235,824 $ 19,236 $ 73,925,861 $ ( 72,753,236 ) $ 1,191,861 See accompanying notes to these consolidated financial statements. F-4 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the year For the year Ended Ended December 31, December 31, 2025 2024 Cash flows from operating activities Net loss $ ( 3,026,007 ) $ ( 10,802,111 ) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation 119,238 1,088,923 Amortization of discount of notes payable - 241,444 Amortization of right to use assets 46,156 31,782 Amortization of patent rights 204,600 204,600 Depreciation expense 137,541 11,702 Impairment loss 50,000 43,000 Non-cash interest revenue ( 33,006 ) ( 57,191 ) Loss on change in fair value of profit share ( 5,926 ) 3,959,065 Changes in operating assets and liabilities Accounts receivable ( 243,403 ) 1,310,421 Inventory 173,727 173,351 Prepaid expenses and other assets ( 12,223 ) ( 16,004 ) Accrued salaries ( 7,319 ) 30,344 Accounts payable and accrued liabilities 1,907,055 144,547 Income tax payable 32,190 ( 437,821 ) Operating lease liability ( 42,733 ) ( 31,219 ) Net cash used in operating activities ( 700,110 ) ( 4,105,167 ) Cash flows used in investing activities Purchase of property and equipment ( 29,296 ) ( 809,432 ) Net cash used in investing activities ( 29,296 ) ( 809,432 ) Cash flows from financing activities Deferred offering costs ( 481,250 ) - Proceeds from exercise of stock options - 17,500 Repayment of secured notes payable - ( 271,686 ) Repayment of unsecured notes payable - ( 12,314,895 ) Net cash used in financing activities ( 481,250 ) ( 12,569,081 ) Net decrease in cash and cash equivalents ( 1,210,656 ) ( 17,483,680 ) Cash and cash equivalents - beginning of period 3,456,082 20,939,762 Cash and cash equivalents - end of period $ 2,245,426 $ 3,456,082 SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid during the period for: Interest $ - $ 4,023 Income taxes $ 52,820 $ 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-5 Table of Contents BIRCHTECH CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2025 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 primarily 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 – Liquidity 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 $ 3.0 million and cash used in operating activities of approximately $ 0.7 million for the year ended December 31, 2025; had cash of approximately $ 2.2 million at December 31, 2025; and an accumulated deficit of approximately $ 75.8 million at December 31, 2025. The Company’s working capital deficiency at December 31, 2025 was approximately $ 5.7 million. The aforementioned factors raised 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 included receiving additional cash inflows from the final judgment issued by the Court in favor of the Company on December 29, 2025 in the total amount of $ 78,397,157 in connection with the jury verdict awarded to the Company in March 2024. If successful, the Company may generate additional licensing revenues and product sales from the other patent litigation recently commenced, as well as revenues from the Company’s entry into the water treatment business, and additional financing opportunities. Subsequent to December 31, 2025, on February 27, 2026, the Company completed an underwritten public offering of its common stock and received gross proceeds of $ 16.4 million, before deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. See “Note 15 – Subsequent Events”. Management believes that the proceeds from this offering, together with the Company’s existing cash, anticipated revenues and additional cash inflows from its current operations and future operating plans, will provide sufficient liquidity to fund the Company’s operations and meet its obligations for at least twelve months from the date these financial statements are issued. F-6 Table of Contents Accordingly, management believes that the conditions that raised substantial doubt about the Company’s ability to continue as a going concern have been alleviated. Note 3 - 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. Stock Split On December 26, 2025, the Company effected a 1-for-5 reverse stock split of its issued and outstanding shares of common stock. The stock split did not affect the number of authorized shares. All share and per share information, including share-based compensation, throughout the financial statements has been retroactively adjusted to reflect the stock split. The shares of common stock retain a par value of $0.001 per share. Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from capital in excess of par value to common stock. 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, 2025 and 2024, the Company had no valuation allowance. Deferred offering costs The Company deferred direct incremental costs associated with the public offering described in Note 15. The Company capitalized $ 481,250 and $Nil during the years ended December 31, 2025 and 2024, respectively. Deferred offering costs consist of primarily legal, advisory, and consulting fees incurred in connection with the public offering. After the completion of the public offering, total deferred offering costs will be recorded as a reduction to additional paid-in capital generated as a result of the offering. 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. F-7 Table of Contents 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 when events or changes in circumstances indicate the carrying amount of an asset or asset group may not be recoverable. 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. 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, 2025 and 2024, the Company recorded an impairment expense related to property and equipment of $ 50,000 (2024 - $ 43,000 ) which is included in Impairment loss in the Company’s consolidated statements of operations and comprehensive 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. The Company accounts for stock option forfeitures as they occur. 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. F-8 Table of Contents 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, 2025 and December 31, 2024. The profit share liability is considered to be Level 3 measurements. Financial instruments include cash, accounts receivable, accounts payable, income tax payable, and short-term debt. The carrying amounts of these financial instruments approximated fair value at December 31, 2025 and December 31, 2024 due to their short-term maturities. At December 31, 2025 and 2024, the fair value of the profit share liability is calculated using a discounted cash flow model based on estimated future cash payments. 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. 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, 2025 Total Level 1 Level 2 Level 3 Liabilities: Profit share liability – related party (1) $ 6,847,932 $ - $ - $ 6,847,932 Total Liabilities $ 6,847,932 $ - $ - $ 6,847,932 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 (1) See Note 7 - 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, 2025 Total Level 1 Level 2 Level 3 Assets: Property and equipment (Construction in progress) $ 1,495,000 $ - $ - $ 1,495,000 Total Assets $ 1,495,000 $ - $ - $ 1,495,000 F-9 Table of Contents 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 The following table presents the changes in balances of assets for the years ended December 31, 2025 and 2024 classified as Level 3: Years ended December 31, 2025 2024 Balance – beginning of period $ 1,545,000 $ 1,588,000 Change in fair value ( 50,000 ) ( 43,000 ) Balance – end of period $ 1,495,000 $ 1,545,000 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. 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, 2025 and 2024 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. F-10 Table of Contents 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, 2025 the Company recognized $ 3,125,000 (2024 - $ 2,773,750 ) of revenue for licenses for which revenue was recognized at a point in time and $ 34,375 (2024 - $ 34,375 ) 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, 2025 and 2024. All sales were in the United States. December 31, December 31, 2025 2024 Product revenue $ 14,233,056 $ 14,481,784 License revenue 3,159,375 2,808,125 Demonstrations & Consulting revenue 93,185 36,000 Equipment revenue 140,750 80,276 $ 17,626,366 $ 17,406,185 Accounts receivable and allowance for credit losses Accounts receivable are presented net of an allowance for credit losses. This value incorporates an allowance for credit losses to reflect any loss anticipated on accounts receivable balances. The Company applies the current expected credit loss (CECL) model, which requires immediate recognition of expected credit losses over the contractual life of receivables and records the appropriate allowance for credit losses as a charge to operating expenses. The allowance for credit losses is based on a combination of the individual customer circumstances, credit conditions, and historical write-offs and collections. The recovery of accounts receivable previously written off is recorded as a reduction to the allowance for credit losses charged to operating expense. 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, 2025. The Company historically has not experienced significant uncollectible accounts receivable. As of December 31, 2025 and December 31, 2024, the Company’s allowance for credit losses was $ 0 , and the Company recorded $ 3,520 of credit losses for the year ended December 31, 2025, and $ 0 of credit losses for the year ended December 31, 2024. Research and Development Costs Research and development costs are expensed as incurred. Research and development costs consist of costs incurred to discover, research and develop products, and include personnel expenses, facility-related and depreciation expenses, and external costs of outside suppliers. F-11 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, 2025 and 2024. 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 2021. 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. Effective January 1, 2025, the Company adopted ASU 2023-09, Improvements to Income Tax Disclosures, which expanded income tax disclosure requirements, including disaggregation of pretax income (loss) and income tax expense (benefit) by jurisdiction and disclosure of income taxes paid (net of refunds received). The Company adopted the standard on January 1, 2025 on a retrospective basis. Accordingly, the tax rate reconciliation and income taxes paid disclosures for the year ended December 31, 2024 has been recast to conform to the current year’s presentation. The adoption affected disclosures only and did not impact the Company’s financial position, results of operations, or cash flows. Basic and Diluted Loss Per Common Share 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, 2025, because the Company incurred a net loss and basic and diluted losses per common share are the same. Total common stock equivalents excluded from dilutive loss per share are as follows: December 31, December 31, 2025 2024 Stock Options 1,070,000 1,860,000 Total common stock equivalents excluded from dilutive loss per share 1,070,000 1,860,000 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, 2025 and December 31, 2024 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, 2025, the Company had $ 1,745,426 (2024 - $ 2,956,082 ) in excess of FDIC limits. F-12 Table of Contents Customer and Supplier Concentration For the year ended December 31, 2025, three customers represented 29 %, 11 %, and 9 % of the Company’s revenues, and for the year ended December 31, 2024, three customers represented 32 %, 13 %, and 10 % of the Company’s revenues. The loss of any one of these customers could have an adverse effect on the Company’s operations. At December 31, 2025, two customers represented 51 %, and 14 % of the Company’s accounts receivable, and at December 31, 2024, three customers represented 32 %, 26 % and 9 % of the Company’s accounts receivable. For the year ended December 31, 2025, two suppliers represented 55 % and 36 % of the Company’s purchases. For the year ended December 31, 2024, two suppliers represented 51 % and 35 % of the Company’s purchases. At December 31, 2025 and 2024, 63 % 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 and the adverse effect of losing one of these suppliers would be short-term. 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 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 adopted ASU 2023-09 effective for its Annual Report on Form 10-K for the year ended December 31, 2025 and subsequent interim periods. Since ASU 2023-09 addresses only disclosures, the adoption of ASU 2023-09 did not have a significant impact on its consolidated financial statements. F-13 Table of Contents 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. The Company does not expect the application of this standard will have a material impact on its financial statements and related disclosures. On July 30, 2025, the FASB issued ASU 2025‑05, Measurement of Credit Losses for Accounts Receivable and Contract Assets (“ASU 2025‑05”), which provides a practical expedient that assumes current conditions as of the balance sheet date remain unchanged when developing forecasts for estimating expected credit losses. Under ASU 2025‑05, an entity is required to disclose that it has elected to use the practical expedient and the election should be applied prospectively. ASU 2025‑05 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2025, with early adoption permitted. The Company does not expect the application of this standard will have a material impact on its financial statements and related disclosures. Note 4 - Inventory Inventory was comprised of the following at December 31, 2025 and December 31, 2024: December 31, December 31, 2025 2024 Raw Materials $ 308,613 $ 169,527 Finished Goods 139,473 452,286 $ 448,086 $ 621,813 Note 5 - Property and Equipment, Net Property and equipment at December 31, 2025 and December 31, 2024 are as follows: December 31, December 31, 2025 2024 Equipment & installation $ 1,096,979 $ 1,096,979 Leasehold improvements 117,512 117,512 Trucking equipment 911,377 911,377 Lab equipment 753,370 725,626 Office equipment, computer equipment and software 3,426 1,874 Total equipment 2,882,664 2,853,368 Less: accumulated depreciation ( 2,185,221 ) ( 2,047,680 ) Construction in process 1,495,000 1,545,000 Property and equipment, net $ 2,192,443 $ 2,350,688 The Company uses the straight-line method of depreciation over estimated useful lives of 2 to 5 years. During the year ended December 31, 2025 and 2024 depreciation expense was $ 137,541 and $ 11,702 , respectively. At December 31, 2025 and 2024, lab equipment included $ 0 and $ 725,626 of lab equipment not yet placed in service, respectively. At December 31, 2025 and 2024, 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 $ 50,000 (2024 - $ 43,000 ). F-14 Table of Contents Note 6 - Intellectual Property License and patent costs capitalized as of December 31, 2025 and December 31, 2024 are as follows: December 31, December 31, 2025 2024 Licenses and patents $ 3,068,995 $ 3,068,995 Less: Accumulated amortization ( 1,774,132 ) ( 1,569,532 ) Intellectual property, net $ 1,294,863 $ 1,499,463 Amortization expense for the year ended December 31, 2025 and 2024 was $ 204,600 and $ 204,600 , respectively. Estimated annual amortization for each of the next 5 years and thereafter is as follows: Annual amortization for the years ended: December 31, 2026 $ 204,600 December 31, 2027 204,600 December 31, 2028 204,600 December 31, 2029 204,600 December 31, 2030 204,600 Thereafter 271,863 Total $ 1,294,863 Note 7 - 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. 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, 2025 and December 31, 2024, total principal of $ 0 and $ 0 , respectively, was outstanding on this note. Interest expense for the years ended December 31, 2025 and 2024 was $ 0 and $ 4,279 , respectively. Amortized discount recorded as interest expense for the years ended December 31, 2025 and 2024 was $ 0 and $ 32,220 , respectively. As of December 31, 2025 and 2024, the unamortized balance of the discount was $ 0 and $ 0 , respectively. F-15 Table of Contents Unsecured Note Payable The Company has the following unsecured note payable - related party outstanding as of December 31, 2025 and 2024: December 31, December 31, 2025 2024 Unsecured note payable $ - $ 13,154,931 Repayments - ( 12,314,895 ) Less fair value adjustment on extinguishment, net of amortized discount of $0 and $1,965,984, respectively - ( 960,000 ) Plus fair value adjustment - 119,964 Total unsecured note payable - - Less current portion - - Unsecured note payable, net of current portion $ - $ - 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. 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. F-16 Table of Contents 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, 2025 and 2024 was $ 0 and $ 209,224 , respectively. As of December 31, 2025 and 2024, the unamortized balance of the discount was $ 0 and $ 0 , 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. 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, 2025 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 2026, and an annual market interest rate of 14.55 %. 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 profit share liability will be marked to market every quarter utilizing management’s estimates. F-17 Table of Contents The following are the changes in the profit share liability (the only Level 3 financial instrument) during the years ended December 31, 2025 and 2024: 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 Profit Share as of January 1, 2025 $ 6,853,858 Loss on change in fair value of profit share (5,926 ) Profit Share as of December 31, 2025 $ 6,847,932 Related Party Transactions Kaye Cooper Kay & Rosenberg, LLP provides certain legal services to the Company and was paid $ 450,000 and $ 431,444 for the years ended December 31, 2025 and 2024, 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, 2025 and December 31, 2024, $ 37,500 and $ 37,500 , 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, 2025 and 2024, Dakin incurred $ 0 and $ 112,500 license fees. At December 31, 2025 and 2024, $ 0 and $ 0 was owed to Dakin for license fees. Note 8 - 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 lease 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 . F-18 Table of Contents For the years ended December 31, 2025 and 2024, the Company recorded an operating lease right of use asset and liabilities as follows: December 31, December 31, 2025 2024 Right of use asset - operating lease $ 258,986 $ 305,142 Current portion of operating lease liability 51,158 42,733 Operating lease liability 263,490 306,233 Future remaining minimum lease payments under these non-cancelable leases are as follows: For the twelve months ended December 31, 2026 $ 85,224 2027 86,992 2028 88,692 2029 54,618 2030 33,880 Thereafter - Total 349,406 Less discount ( 85,916 ) Total lease liabilities 263,490 Less current portion ( 51,158 ) Operating lease obligation, net of current portion $ 212,332 The weighted average remaining lease term for operating leases is 4.2 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, 2025 and 2024, payments on lease obligations were $ 83,460 and $ 52,871 , respectively, and amortization on the right of use assets was $ 46,156 and $ 31,782 , respectively. For the years ended December 31, 2025 and 2024, 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, December 31, 2025 2024 Operating lease costs $ 86,883 $ 53,595 Note 9 – Accounts payable and accrued expenses Current accounts payable and accrued expenses are as follows: December 31, December 31, 2025 2024 Accounts payable Legal costs $ 676,799 $ 23,537 Consulting fees 572,331 114,376 Cost of goods sold 1,178,145 766,894 Other 193,903 221,596 Total accounts payable 2,621,178 1,126,403 Accrued expenses Legal costs $ 868,926 $ 478,047 Consulting fees 68,030 56,500 Other 51,919 42,048 Total accounts payable and accrued expenses $ 3,610,053 $ 1,702,998 F-19 Table of Contents Note 10 - Commitments and Contingencies Fixed Price Arrangements A substantial portion of the Company’s revenues is generated under contracts or blanket purchase orders with commercial customers that expire periodically or must be frequently renegotiated, extended, or replaced from time to time and that often contain fixed prices for product. These arrangements expose the Company to potential risks associated with rising material costs during the term of the applicable contract or blanket purchase order. Legal proceedings The Company has commenced multiple patent infringement lawsuits to enforce its proprietary two-part Sorbent Enhancement Additive (SEA ® ) process for mercury removal from coal-fired power plants. These actions, filed between 2019 and 2025, target various operators of coal-fired power plants and refined coal producers whom the Company alleges have willfully infringed its patent rights. The Company is seeking damages, injunctive relief, and other remedies in each of these proceedings. Delaware District Court Action In July 2019, the Company initiated patent litigation against various defendants in the U.S. District Court for the District of Delaware which included (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 operated or were involved in operations of coal facilities in the United States. Between July 2020 and January 2021, the Company entered into agreements with each of the four major utility defendants which included certain monetary arrangements and pursuant to which the Company dismissed all claims brought against each of them and their affiliates. In November 2023, the Company entered into a confidential binding term sheet with Arthur J. Gallagher & Co., and various of its affiliated entities, and DTE Energy Resources LLC and various of its affiliated entities, 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. In November 2023, Alistar Enterprises, LLC, one of the remaining CERT defendants, entered into a settlement agreement with the Company. In December 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) were not included within the scope of the license. F-20 Table of Contents The case proceeded to trial in February 2024 against the remaining CERT defendants. On March 1, 2024, a federal jury returned a $ 57.1 million verdict in favor of the Company against the remaining CERT defendants, finding willful infringement of the Company’s patented technologies and holding the defendants liable for inducing and contributory infringement. 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. Following the trial, the Court entered non-final judgments on the verdict against the CERT defendants and the parties submitted post-trial motions relating to the jury trial. The CERT defendants also asserted that the Company’s claims were barred due to their defense that they had an implied license to the asserted patents. A bench trial was held on such issue. On June 10, 2025, the Court ruled that the CERT defendants failed to prove that they had such an implied license and denied their motion to alter or amend the non-final judgment. On September 25, 2025, the Court issued a Memorandum Opinion and Order denying the CERT defendants’ post-trial motion that they should not be held liable as a matter of law for induced infringement, contributory infringement or willful infringement, and on November 20, 2025, the Court issued a Memorandum Opinion and Order denying the CERT defendants’ post-trial motion for a new trial on the issues of induced infringement, contributory infringement, willful infringement and damages. Thereafter, on December 17, 2025, the Court issued a memorandum order granting the Company’s request for pre- and post-judgment interest, and denying the Company’s request for enhanced damages. Following resolution of all post-trial motions, the Court issued the final judgment in favor of the Company on December 29, 2025 in the total amount of $78,397,157, which amount includes pre-judgment interest. The Company accounts for the judgement under ASC 450-30, Contingencies , which does not allow recognition until cash or claims to cash are realized or realizable. We did not recognize the judgement as of December 31, 2025 because there were inherent uncertainties associated with the realizability of the judgement. On January 28, 2026, the CERT defendants filed a notice of appeal of the judgment. Under applicable rules, the CERT defendants may seek a stay of execution of the judgment pending appeal by posting a bond or other security in an amount and form approved by the Court. As of the date the financial statements were issued, the CERT defendants have not obtained a bonded stay. Although the automatic stay of execution applicable following entry of judgment has expired, the appeal remains pending. Interest continues to accrue on the judgment amount during the pendency of the appeal. 2024‑2025 Patent Infringement Actions In July 2024, the Company commenced three additional patent infringement lawsuits in U.S. District Courts in Arizona, Iowa and Missouri against multiple utilities and related entities. These actions allege willful infringement of the Company’s patents related to mercury emissions control. Named as defendants in the action filed in the U.S. District Court for the District of Arizona were 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 were 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 were Ameren Corp. and Union Electric Co. In October 2024, the Company entered into an agreement with one of the utility defendants and an affiliated entity in the Arizona action, and in January 2025, the Company entered into an agreement with another utility named in the Arizona action. Such agreements provide 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 them. The agreements include one-time license fees which have been received by the Company. One agreement 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 and the other agreement 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 December 17, 2024, the U.S. Judicial Panel on Multidistrict Litigation ordered the consolidation of the three lawsuits in the U.S. District Court for the Southern District of Iowa for coordinated pretrial proceedings. In January 2025, the Company initiated an additional infringement suit in the Western District of Missouri against several Evergy-affiliated entities. Named as defendants in the action were Evergy, Inc., Evergy Metro Inc., Evergy Missouri West, Inc. and Evergy Kansas Central, Inc. One of such defendants was dismissed from the Western District of Missouri action and named as a defendant in a separate case commenced in the U.S. District Court for the District of Kansas. Such cases were transferred to the Iowa court pursuant to the existing transfer order. Between January and July 2025, certain defendants in the consolidated Iowa actions filed inter partes review (“IPR”) petitions with the U.S. Patent and Trademark Office seeking to invalidate various asserted claims. F-21 Table of Contents Effective as of August 5, 2025, the Company entered into separate agreements with two utilities, which are affiliated with each other, and named as defendants in the Southern District of Iowa action. In addition, as of September 9, 2025, the Company entered into an agreement with a utility and its affiliated entities, named as defendants in the Western District of Missouri and District of Kansas actions. Such agreements provide such parties and their affiliates with a non-exclusive license to certain Company patents related to the Company’s two-part SEA® process for use in connection with certain designated coal-fired power plants operated by them. Each agreement includes a one-time license fee. The agreements effective as of August 5, 2025 entered into with the two utilities, provide the Company with the right to be included in each utility’s bidding process for certain product supply for mercury emissions capture at such party’s operated power plants. Such two utilities have also agreed to withdraw from the IPR petitions. Effective as of September 30, 2025, the Company entered into an agreement with another utility not named as a defendant in the Company’s patent litigations, but a party to the IPR petitions filed with the U.S. Patent and Trademark Office. Such agreement provides such utility and its affiliates with a with a non-exclusive license to certain Company patents related to the Company’s two-part SEA® process for use in connection with a certain designated coal-fired power plant operated by them. Such agreement includes a one-time license fee 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. Such party has agreed to withdraw from IPR petitions. Effective as of October 15, 2025, the Company entered into an agreement with another utility named as a defendant in the Southern District of Iowa action. While the terms of the agreement are confidential, it includes a resolution of the disputes between the Company and that utility and its affiliates and provides for their withdrawal from related proceedings. As a result of the agreements described above, the Company and several defendants have resolved their respective claims, and those defendants have been dismissed from the applicable actions. There remain two utilities in the consolidated Iowa actions. As described above, between January and April 2025, certain defendants in the consolidated Iowa actions filed IPR petitions seeking to invalidate various asserted claims of the Company’s patents. In September and October 2025, the U.S. Patent Trial and Appeal Board (“PTAB”) granted the institution of review of certain of the Company’s asserted patents. The Company sought review of those institutional decisions by the PTO Director. The Director has since issued decisions granting reconsideration in part and denying it in part, and certain matters remain subject to further motions and proceedings before the PTAB. In connection with these proceedings, the Court in the consolidated Iowa actions has stayed the litigation pending completion of the IPR process. Between June and July 2025, certain other defendants in the consolidated Iowa actions filed IPR petitions seeking to invalidate various asserted claims of the Company’s patents. These petitions were denied institution by the PTO Director, and requests for reconsideration of those denials have also been denied. The Company cannot predict the ultimate outcome of the pending IPR proceedings or related matters. Other than the foregoing, there are no 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 the remaining claims. The Company expenses legal costs relating to patent litigation as incurred. Contingent Liability The Company is involved in a dispute with a third party related to invoices and other claimed charges in the amount of $ 184,079 pertaining to reimbursement for certain alleged costs and legal services. The Company disputes these invoices and charges on the basis that the third party was not entitled to reimbursement. As of December 31, 2025, the matter remains unresolved. The Company has evaluated the claim in accordance with ASC 450, Contingencies , and has determined that a loss is possible, but not probable. Accordingly, no liability has been recorded in the accompanying financial statements. While the Company intends to vigorously defend its position, an unfavorable outcome could result in a loss of up to approximately $ 184,079 . At this time, the Company is unable to determine the ultimate resolution of this matter. F-22 Table of Contents 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 consolidated financial statements over the requisite service 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, 2025 and 2024, stock-based compensation expense amounted to $ 119,238 and $ 1,088,923 , 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. 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 2,815,692 , 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 955,000 additional shares of common stock. (On July 3, 2023, there were 955,000 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. As of December 31, 2025, there were 1,518,261 shares remaining available for issuance under the 2017 Plan and no options available or outstanding under the 2014 Plan. Common Stock On November 8, 2022, the Company issued a total of 600,000 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, 2025 and 2024 was $ 0 and $ 402,666 , respectively. 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 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. During the year ended December 31, 2025, there were no repurchases made under the program. Stock Options On January 15, 2024, the Company granted nonqualified stock options to certain directors, executive officers and employees to acquire an aggregate of 200,000 shares of the Company’s common stock under the 2017 Plan. The options granted are exercisable at $ 4.40 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 . F-23 Table of Contents On February 27, 2024, the Company issued 1,857 shares of common stock to a former employee upon a cashless exercise of an option to purchase 3,750 shares of common stock covered by an option to purchase a total of 20,000 shares of common stock, with an exercise price of $ 1.35 per share. Such share issuance was based upon a VWAP of $ 4.62 per share as determined under the terms of the option. On June 24, 2024, the Company issued (i) 177,291 shares of common stock to the Company’s Chief Executive Officer upon a cashless exercise of an option to purchase 300,000 shares of common stock at an exercise price of $ 1.35 per share, and (ii) 134,573 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 320,000 shares of common stock at exercise prices ranging from $ 1.35 to $ 2.25 per share. Such share issuances were based upon a VWAP of $ 3.30 per share as determined under the terms of the options. On June 28, 2024, the Company issued (i) 9,282 shares of common stock to an employee upon a cashless exercise of options to purchase an aggregate of 60,000 shares of common stock at exercise prices ranging from $ 1.35 to $ 3.05 per share, (ii) 8,813 shares of common stock to an employee upon a cashless exercise of an option to purchase 15,000 shares of common stock covered by an option to purchase a total of 20,000 shares of common stock with an exercise price of $ 1.35 per share, and (iii) 3,000 shares of common stock to a former employee upon a cashless exercise of an option to purchase 5,106 shares of common stock covered by an option to purchase a total of 100,000 shares of common stock with an exercise price of $ 1.35 per share. Such share issuances were based upon a VWAP of $ 3.27 per share as determined under the terms of the options. On August 3, 2024, the Company issued 6,422 shares of common stock to a former consultant upon a cashless exercise of an option to purchase 12,500 shares of common stock, with an exercise price of $ 2.00 per share. Such share issuance was based upon a VWAP of $ 4.11 per share as determined under the terms of the option. 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 50,000 shares of the Company’s common stock at an exercise price of $ 2.55 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. Based on a Black-Scholes valuation model, these options were valued at $ 77,926 , 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 and the Company recorded $77,499 of expenses during the year ended December 31, 2025. The valuation assumptions included an expected duration of 3 years, volatility of 87 %, discount rate of 4.29 % and dividends of $ 0 . 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 20,000 shares of the Company’s common stock at an exercise price of $ 2.80 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. Based on a Black-Scholes valuation model, these options were valued at $ 40,071 , 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 92 %, discount rate of 4.46 % and dividends of $ 0 . On June 20, 2025, the Company issued (i) 63,796 shares of common stock to the Company’s Chief Executive Officer upon a cashless exercise of an option to purchase 100,000 shares of common stock at an exercise price of $ 0.95 per share, and (ii) 63,796 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 100,000 shares of common stock at an exercise price of $ 0.95 per share. Such share issuances were based upon a VWAP of $ 2.624 per share as determined under the terms of the options. On December 11, 2025, the Company issued 21,888 shares of common stock to the Company’s Senior Vice President and Chief Technology Officer upon a cashless exercise of an option to purchase 60,000 shares of common stock covered by an option to purchase a total of 100,000 shares of common stock at a then-existing exercise price of $ 2.90 per share. Such share issuance was based on a VWAP of $ 4.5655 per share as determined under the terms of the option. F-24 Table of Contents On December 12, 2025, the Company issued (i) 37,915 shares of common stock to the Company’s Chief Executive Officer upon a cashless exercise of an option to purchase 100,000 shares of common stock at a then-existing exercise price of $ 2.90 per share, (ii) 18,958 shares of common stock to a director upon a cashless exercise of an option to purchase 50,000 shares of common stock at a then-existing exercise price of $ 2.90 per share, and (iii) 3,792 shares of common stock to an employee upon a cashless exercise of an option to purchase 10,000 shares of common stock at a then-existing exercise price of $2.90 per share. Such share issuances were based upon a VWAP of $ 4.6710 per share as determined under the terms of the options. 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 January 1, 2025 1,860,000 $ 2.90 1.75 12,500 Grants 70,000 2.62 Expirations ( 440,000 ) 2.52 Exercised ( 420,000 ) 1.97 December 31, 2025 1,070,000 $ 3.43 1.58 769,500 Options exercisable at: December 31, 2025 1,057,500 3.44 1.58 754,500 The aggregate intrinsic value in the table above represents the total intrinsic value, based on the Company’s closing stock price of $ 3.75 as of December 31, 2025 (the last trading day of the month of December 2025), which would have been received by the option holders had all option holders exercised their options as of that date. Stock options exercised during the years ended December 31, 2025 and 2024 include none that were exercised for cash and 420,000 and 716,356 which were a cashless exercise, respectively. Restricted Share Units On January 15, 2024, the Company granted 10,000 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 years ended December 31, 2025 and 2024 was $ 1,668 and $ 41,832 , respectively. On January 15, 2025, the Company issued 10,000 shares of common stock to a director due to the vesting on such date of 10,000 RSUs which had previously been granted on January 15, 2024 pursuant to the 2017 Plan and had a one-year vesting period. At December 31, 2025, the Company had no outstanding RSUs. 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. F-25 Table of Contents No warrants were issued during the years ended December 31, 2025 and 2024. The following warrants were exercised during the years ended December 31, 2025 and 2024: On June 17, 2024, the Company issued an aggregate of 3,333 shares of common stock to certain warrant holders upon the cashless exercise of warrants to purchase an aggregate of 120,000 shares of common stock at an exercise price of $ 3.50 per share based upon a market value of $ 3.60 per share as determined under the terms of the warrants. On June 18, 2024, the Company issued 704 shares of common stock to a certain warrant holder upon the cashless exercise of a warrant to purchase 50,000 shares of common stock at an exercise price of $ 3.50 per share based upon a market value of $ 3.55 per share as determined under the terms of the warrant. On August 5, 2024, the Company issued 13,333 shares of common stock to a certain warrant holder upon the cashless exercise of a warrant to purchase 80,000 shares of common stock at an exercise price of $ 3.50 per share based upon a market value of $ 4.20 per share as determined under the terms of the warrant. On August 22, 2024, the Company issued 5,000 shares of common stock to a certain warrant holder upon a cash exercise of a warrant to purchase 5,000 shares of common stock at an exercise price of $ 3.50 per share or $ 17,500 in the aggregate. The following is a summary of the Company’s warrant activity for 2024: Weighted Weighted Average Average Remaining Aggregate Number of Exercise Contractual Intrinsic Shares Price Life (years) Value January 1, 2024 510,000 $ 3.50 0.60 $ - Grants - - - - Expirations ( 255,000 ) 3.50 - - Exercised ( 255,000 ) 3.50 - - December 31, 2024 and 2025 - $ - - $ - Warrants exercisable at: December 31, 2024 and 2025 - $ - - $ - The following table summarizes information about common stock warrants outstanding at December 31, 2025 and 2024: Outstanding and Exercisable Weighted Average Remaining Contractual Exercise Price Number Outstanding Life (years) Weighted Average Exercise Price $ - - - $ - F-26 Table of Contents Note 13 – Taxes ASU 2023-09 requires disaggregation of pretax income (loss), income tax expense (benefit), and income taxes paid by jurisdiction. The Company has no foreign operations; accordingly, all pretax income (loss) is domestic (United States). The following table shows the components of loss before income taxes and the related current tax expense / (benefit): 2025 2024 Loss before income taxes U.S. operations $ ( 2,955,957 ) $ ( 11,091,267 ) Current income tax expense / (benefit) U.S. federal - - State 70,050 ( 289,156 ) Total current income tax expense / (benefit) $ 70,050 $ ( 289,156 ) Income taxes paid (net of refunds received) related to continuing operations are presented on a cash basis and reconcile to cash paid for income taxes in the consolidated statement of cash flows. Income taxes paid (net of refunds received) were as follows: 2025 2024 Jurisdiction U.S. federal $ - $ - U.S. state and local: Texas 28,268 55,535 Louisiana 4,373 57,179 Arkansas 7,390 27,696 Illinois 12,036 Other states 753 2,859 Total income taxes paid (net of refunds received) $ 52,820 $ 143,269 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, 2025 For the Year Ended December 31, 2024 Pretax (Loss) ( 2,955,957 ) ( 11,091,267 ) U.S. federal statutory income tax ( 620,751 ) 21 .0 % ( 2,329,166 ) 21 .0 % State and local income taxes, net of federal benefit (a) 55,339 ( 1.9 )% ( 358,768 ) 3.2 % Foreign tax effects - 0.0 % - 0.0 % Effect of changes in tax laws or rates - 0.0 % - 0.0 % Tax credits - 0.0 % - 0.0 % Change in U.S. federal valuation allowance 499,340 ( 16.9 )% ( 10,473 ) 0.1 % Nontaxable or nondeductible items: Change in profit share liability ( 1,244 ) 0.0 % 1,006,057 ( 9.1 )% Meals and entertainment 3,179 ( 0.1 )% 3,466 ( 0.0 )% Penalties and fines 2,859 ( 0.1 )% - 0.0 % Nondeductible officers’ compensation 1,077 0.0 % - 0.0 % Discount on note payable - 0.0 % 50,703 ( 0.5 )% Changes in unrecognized tax benefits - 0.0 % - 0.0 % Other adjustments: Deferred tax adjustments 130,251 ( 4.4 )% 1,349,025 ( 12.1 )% Income tax expense / (benefit) 70,050 ( 2.4 )% ( 289,156 ) 2.6 % (a) Taxes in Texas, Illinois, Arkansas, and Louisiana make up the majority of the effect of the state and local tax category. F-27 Table of Contents 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: 2025 2024 Deferred tax assets: Net operating loss carryforwards $ 4,423,000 $ 3,595,000 Stock based compensation 570,000 799,000 Intangible assets 85,000 99,000 Fixed assets 60,000 53,000 Total deferred tax assets 5,138,000 4,546,000 Deferred tax liability: IRC Section 481(a) adjustment - ( 125,000 ) Valuation Allowance ( 5,138,000 ) ( 4,421,000 ) Net deferred tax asset $ - $ - As of December 31, 2025, the Company has U.S. federal net operating loss carryovers (“NOLs”) of approximately $ 19,747,000 available to offset taxable net income in a given year of which $ 3,209,000 expires from 2035 through 2037 and $ 16,538,000 does not expire. The Company also has state NOL carryforwards of approximately $ 7,241,000 which begin to expire in 2026 . 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 year ended December 31, 2025, the valuation allowance increased by $ 716,714 , related to the U.S. federal and state jurisdictions in the amounts of $ 499,340 and $ 217,374 , respectively. For the year ended December 31, 2024, the valuation allowance (decreased) by $( 33,000 ), related to the U.S. federal and state jurisdictions in the amounts of $( 10,473 ) and $( 22,572 ), respectively. The Company files income tax returns in the U.S. federal and various state jurisdictions. For U.S. federal and certain state income tax purposes, the Company's 2021 through 2025 tax years remain open for examination by the tax authorities under the normal statute of limitations. 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, 2025. The Company is no longer subject to tax examinations by tax authorities for years prior to 2021. 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, 2025 and 2024, respectively. As of December 31, 2025 and 2024, 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 F-28 Table of Contents 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, 2025 and 2024, had one operating segment, which entails the provision of specialty activated carbon technologies for air and water purification 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 3, “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. 2025 2024 Material sales $ 14,233,056 $ 14,481,784 License fees 3,159,375 2,808,125 Other revenues 233,935 116,276 Total revenues 17,626,366 17,406,185 Material costs ( 7,689,298 ) ( 7,686,447 ) Blending and milling ( 360,680 ) ( 377,598 ) Shipping ( 1,092,297 ) ( 1,081,781 ) Other cost of goods sold ( 632,438 ) ( 700,279 ) Compensation and benefits ( 4,901,122 ) ( 6,148,100 ) Stock-based compensation ( 119,238 ) ( 1,088,922 ) Amortization and depreciation ( 388,297 ) ( 248,084 ) Consulting fees ( 1,362,900 ) ( 879,800 ) Professional fees ( 2,760,998 ) ( 4,722,313 ) General and administrative ( 1,058,436 ) ( 1,588,129 ) Change in fair value of profit share 5,926 ( 3,959,065 ) Interest expense ( 13,673 ) ( 267,458 ) Impairment loss ( 50,000 ) ( 43,000 ) Tax benefit (expense) ( 96,963 ) 289,156 Research & development ( 210,542 ) - Bad debt expense ( 3,520 ) - Interest income 82,103 293,524 Segment net (loss) income ( 3,026,007 ) ( 10,802,111 ) Reconciliation of profit or loss Adjustments and reconciling items - - Consolidated net (loss) income $ ( 3,026,007 ) $ ( 10,802,111 ) 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 February 27, 2026, the Company completed a public offering of 6,250,000 shares of its common stock, at a price of $ 2.40 per share, generating gross proceeds of $ 15,000,000 . In connection with the offering, the Company granted the underwriters a 30-day option to purchase up to an additional 937,500 shares of common stock at the offering price of $ 2.40 per share (the “Over-Allotment Option”). On March 17, 2026, the Company sold to the underwriters pursuant to their partial exercise of their Over-Allotment Option an additional 600,000 shares of common stock resulting in additional gross proceeds of $ 1,440,000 . After giving effect to the partial exercise of the Over-Allotment Option, gross proceeds from the offering were $ 16,440,000 , before deducting underwriting discounts and commissions and other estimated offering expenses payable by the Company. At December 31, 2025, the Company had deferred $ 481,250 of offering costs incurred prior to December 31, 2025. F-29 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.