We are involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. There is no current or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.

At December 31, 2025 and 2024, the Company has recorded $197,000 related to certain contractually provided benefits to a former executive officer pursuant to a severance agreement. The former executive officer disputes the amount of $197,000, claiming the amount is less than the amount to which he believes he is owed. Absent an agreement to settle the dispute, and in the event the former executive officer elects to initiate litigation regarding the dispute, including claims for interest and penalties to which the former executive officer believes he is entitled, the Company has reserved, and if necessary and appropriate will assert, all factual and legal defenses, counter-claims, rights, and remedies it may have in any such suit. The Company believes it has recorded an appropriate accrual for the matter.

Significant Agreement

In 2024, the Company entered into a Collaboration Agreement with VIPS Petroleum, LLC (“VIPS”) to collaborate with them in facilitating the deployment of our AOT technology and products to VIPS’ customers. On June 25, 2025, the Company entered into a Distributor Agreement with VIPS, providing for VIPS to serve as our exclusive distributor to promote, sell, and lease our AOT product in the territories of Malaysia, Ghana, and India, among other territories. To date, we have not received any purchase orders under the Distributor Agreement, nor has our AOT product been placed with, nor currently being used by, any of VIPS’ customers or anyone else.

The Distributor Agreement, as amended, provides that upon the Company’s receipt of payment for the purchase of two AOT Units, the Company shall issue VIPS/Stephen Bosco a stock purchase warrant exercisable into 25,000,000 restricted shares of the Company’s common stock, at a price of $0.07 cents per share (the “Exercise Price”). The warrant will vest on issuance and expire three years from the date of issuance. VIPS’ payment of the Exercise Price shall be rebate-based, meaning, for every AOT Unit sold by the Company to VIPS, the Company will process a post-sale rebate of 15% of the purchase price to VIPS. Post-sale rebates due VIPS, up to a maximum of $1,750,000, will be applied to, and be deemed payment of, the Exercise Price.

To date, we have not received any purchase orders, nor generated any revenue, under the Distributor Agreement, as amended, nor has our AOT product been placed with, nor is it currently being used by, any of VIPS’ customers or anyone else, and we can provide no assurances that our AOT product will be accepted or purchased by VIPS, or any of its customers, or anyone else.

Subsequent to year-end the Company, together with VIPS and stakeholders identified under the VIPS Distributor Agreement, advanced the India commercialization pathway as reflected in the non-binding Laksel LOI. (See Note 13, below.)