Note 8 – Stockholder’ Equity

The Company is authorized to issue 50,000,000 preferred stock shares and 1,000,000,000 common stock shares both with a par value of $0.0001.

Preferred Stock

On October 30, 2020, the Company designated 1,000,000 shares of preferred stock as Series D Convertible Preferred Stock with a par value of $0.0001.

As of December 31, 2025 and 2024, there were no shares of preferred stock issued and outstanding. 

Common Stock

The holders of common stock are entitled to one vote per share on all matters submitted to a vote of shareholders, including the directors’ election. There is no right to cumulative voting in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the board of directors out of funds legally available for payment of dividends, subject to the prior rights of holders of preferred stock and any contractual restrictions the Company has against the payment of dividends on common stock. In the event of liquidation or dissolution of the Company, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no pre-emptive rights and have no right to convert their common stock into any other securities. At December 31, 2025, there were 17,143,771 shares of common stock issued and outstanding.

Common Stock Issued for Cash

On June 6, 2025, the Company entered into an at-the-market issuance sales agreement (the "Prior 2025 Sales Agreement") with Lake Street Capital Markets, LLC (“Lake Street”) as sales agent, pursuant to which the Company could offer and sell, from time to time, shares of the Company's common stock having an aggregate offering price of up to $15.1 million . The Prior 2025 Sales Agreement replaces the prior sales agreement entered into between the Company and Jefferies LLC dated as of December 21, 2022 (the “2022 Sales Agreement”).

On December 23, 2025, the Company entered into a new at-the-market issuance sales agreement (the “2025 Sales Agreement”) with Lake Street as sales agent, pursuant to which the Company could offer and sell, from time to time, shares of the Company’s common stock having an aggregate offering price of up to $50 million. The 2025 Sales Agreement replaces the Prior 2025 Sales Agreement, and sales under the Prior 2025 Sales Agreement have terminated.

Sales of common stock under the 2025 Sales Agreement, if any, will be made at market prices by any method permitted by law deemed to be an “at-the-market” (“ATM”) offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company has no obligation to sell any shares of common stock under the open market sale agreement and may at any time suspend offers under the 2025 Sales Agreement, in whole or in part, or terminate the 2025 Sales Agreement.

As of the date of this Annual Report, the aggregate market value of our outstanding common stock held by non-affiliates, or the public float, was approximately $39,144,000, which was calculated based on 11,184,116 outstanding shares of the Company’s common stock held by non-affiliates at a price of $3.50 per share , the closing price of our common stock on March 25, 2026, as reported on Nasdaq. Pursuant to General Instruction I.B.6 of Form S-3, or the “baby shelf” rules, in no event will we sell securities registered on our Form S-3 registration statement, including under our at-the-market equity offering, with a value of more than one-third of the aggregate market value of shares of our common stock held by non-affiliates in any 12-month period, so long as the aggregate market value of shares of our common stock held by non-affiliates is less than $75 million. After giving effect to the approximate $13,000,000 offering limit imposed by General Instruction I.B.6 of Form S-3 and deducting the shares sold within the preceding 12 months, as of the date of filing this Annual Report, approximately $3,700,000 shares of common stock remain available at this time for sale under our Form S-3, including through our at-the-market equity offering.

During the year ended December 31, 2025, no shares were sold under the 2025 Sales Agreement and a total of 2,279,180 shares of common stock were sold pursuant to the Prior 2025 Sales Agreement offering resulting in gross proceeds of approximately $9,313,000 and net proceeds of approximately $8,909,000 after equity issuance costs of approximately $404,000 for accounting, legal, commissions and sale agent fees.

During the year ended December 31, 2024, a total of 5,051 shares of common stock were sold pursuant to the 2022 Sales Agreement resulting in gross proceeds of approximately $63,100, and net issuance costs of $3,100 after equity issuance costs of $65,500 for accounting, legal, commissions and fees which exceeded the gross proceeds received under the 2022 Sales Agreement.

On November 14, 2024, we entered into a Securities Purchase Agreement with certain investors, pursuant to which the Company agreed to issue and sell (i) an aggregate of 978,350 shares of common stock, and (ii) one and a half warrants to purchase up to an aggregate of 1,467,524 shares of common stock in a registered direct offering (the “Offering”). The purchase price for one share and the accompanying 1.5 warrants was $11.25. The warrants are immediately exercisable for a period of five years from the date of the Offering at $11.25, subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization, or similar transactions (“Share Combination Event”) and include anti-dilution protection provisions in the event subsequent sales or equity-linked financial instruments are issued at a price below the $11.25. See below for the impact of the Share Combination Event that resulted from the Reverse Stock Split resulting in a reduction in the warrant’s exercise price issued in the Offering.

The aggregate gross proceeds to the Company from the Offering, which closed on November 18, 2024, was approximately $12,229,000 with net proceeds of approximately $11,393,000, net of issuance costs of approximately $836,000 for accounting, legal, commissions and fees. The net proceeds were allocated between the common stock and warrants based on their relative fair values of approximately $8,118,000 and $3,275,000 with the net proceeds, respectively, presented in additional paid-in capital within stockholders’ equity. 

The Company’s Board of Directors and executive team participated in the Offering and invested a total of $696,000 and received shares of common stock totaling 55,680 and the accompanying warrants totaling 83,520.

The fair value of the warrants for purposes of the relative fair value allocation was estimated using a Black-scholes model and the following assumptions: expected term of 5 years, volatility of 24.8%, dividend rate of 0.00%, and risk-free rate of 4.28%.

The Offering was made pursuant to the Company’s registration statement on Form S-3 (File No. 333-268942), which was filed with the Securities and Exchange Commission (the “Commission”) on December 22, 2022 and declared effective by the Commission on December 30, 2022, and a prospectus supplement dated November 14, 2024 filed by the Company with the Commission.

Common Stock for Services

During the year ended December 31, 2025, we issued an aggregate of 82,985 of fully vested shares of restricted common stock to service providers and directors with an aggregate fair value of $290,872 based on the market price of our common stock on date of grant which is included in general and administrative expense on the consolidated statements of operations. 

During the year ended December 31, 2024, we issued an aggregate of 30,121 of fully vested shares of restricted common stock to service providers and directors with an aggregate fair value of $383,879 based on the market price of our common stock on date of grant which is included in general and administrative expense on the consolidated statements of operations. 

Common Stock for Stock Option Exercises

During the year ended December 31, 2025, we issued an aggregate of 131,176 shares of common stock for cash and cashless stock option exercises that resulted in cash proceeds of $24,000.

During the year ended December 31, 2024, we issued an aggregate of 149,965 shares of common stock for cash and cashless stock option exercises that resulted in cash proceeds of $60,000.

Common Stock Issued for Settlement of Accrued Expense

During the year ended December 31, 2025, we issued an aggregate of 22,105 shares of common stock to a service provider for the settlement of $105,000 accounts payable balance for certain milestones meet pursuant to contract terms. The fair value of the shares was estimated to be $105,000 based on the closing price of the Company’s stock at time the milestone was achieved; therefore, no gain or loss was recognized.

Stock-Based Compensation

2021 Plan

The Company has reserved 3,615,000 (increased from 2,400,000 as approved by the shareholders at the Company’s Annual Shareholder Meeting on June 11, 2025) shares of common stock or common stock equivalents to be issued under our 2021 Equity Incentive Plan (the “2021 Plan”) to the Company’s employees and non-employee services providers. Stock options granted under the 2021 Plan typically have a contractual term of ten years.

Stock-based compensation expense related to the stock options and restricted stock units expected to vest is presented as follows on the consolidated statements of operations:

See below for detailed disclosures of our issued and outstanding stock options and restricted stock units.

Stock Options

Stock option activity for the year ended December 31, 2025 is summarized as follows:

(i) As of December 31, 2025 and 2024, the options outstanding and exercisable include 327,500 and 617,500, respectively, options granted outside of the 2021 Plan.

Intrinsic value is based on the difference between the option exercise price and the quoted market price as of December 31, 2025 or the date of option exercise.

During the year ended December 31, 2025, the options granted were primarily to our interim Chief Executive Officer (“CEO”), Chief Financial Officer (“CFO”), Chief Technology Officer (“CTO”) and other non-executive key employees. The weighted average grant-date fair value of the granted options was $4.38. Stock options typically vest over a service period of approximately 4 years. During the year ended December 31, 2024, the options granted were primarily to executives, key employees and a legal settlement discussed. The average grant-date fair value of the granted options was $4.60.

Of the total options outstanding as of December 31, 2025, 146,809 of the options include performance conditions. The performance-based options vest as follows: 50% vest upon the achievement of operating profit, as defined in the employment agreements, and 50% upon the achievement of a revenue target of $100 million by the end of fiscal year 2028. The performance-based options with the revenue target begin vesting once the Company achieves $15 million in revenue for a fiscal year. Vesting will occur on January 31 of each year through January 31, 2029. The number of options that vest is based on the proportionate percentage of each fiscal year’s revenue to the $100 million target. For example, if our annual revenue for fiscal year 2026 is $20 million, 20% of the restricted stock units with the revenue performance condition will vest on January 31, 2027. During the year ended December 31, 2025, 299,778 performance-based options were forfeited with the separation of our CEO and in-house counsel in October 2025 (see Note 10).  

During the years ended December 31, 2025 and 2024, we recognized stock-based compensation of $1,834,648 and $907,225, respectively.  As of December 31, 2025, total unrecognized compensation expense for service based and performance-based options was $2,637,204 and $585,303, respectively. The unrecognized service-based expense will be recognized over a weighted-average period of 1.51 years. The unrecognized expense associated with the performance-based options will be expensed when it becomes probable that the performance obligations will be met.

The fair value of these options granted were estimated on the date of grant, using the Black-Scholes option-pricing model with the following assumptions:

Restricted Stock Units

During the year ended December 31, 2025, the Company granted an aggregate of 1,193,076 unvested restricted stock units under the 2021 Plan pursuant to employment agreements with our CFO and CTO, our board of directors and other non-executive key employees of the Company.  RSUs granted to our CFO , CTO and other executives include both time-based and performance-based vesting. All other granted RSUs vest based over a specified service period that ranges from 1-4 years.

The unvested restricted stock units granted to our CFO and CTO on January 15, 2025 and April 30, 2025, pursuant to employment agreements, consist of an aggregate of 106,622 units with time-based vesting provisions over four years and 106,622 units with performance-based vesting provisions. The performance-based units vest as follows: 50% vest upon the achievement of Operating Profit, as defined in the employment agreements, and 50% upon the achievement of revenue targets between $15 and $100 million by the end of fiscal year 2028. The restricted stock units with the revenue target begin vesting once the Company achieves $15.0 million in revenue for a fiscal year. Vesting will occur on January 31 of each year through January 31, 2029. The number of restricted stock units that vest is based on the proportionate percentage of each fiscal year’s revenue to the $100 million target. For example, if our annual revenue for fiscal year 2026 is $20 million, 20% of the restricted stock units with the revenue performance condition will vest on January 31, 2027. At December 31, 2025, total unvested outstanding restricted stock units granted to our executive team with these performance conditions totaled 146,809. During the year ended December 31, 2025, 149,778 and 64,583 performance based and timed-based RSUs were forfeited with the separation of our CEO and in-house counsel in October 2025 (see Note 10).  

On January 15, 2025, 176,500 unvested RSUs were granted to non-executive key employees.  The RSUs vest as follows: 50% on the one-year grant-date anniversary with the remaining vesting ratably over a period of thirty-six months. At December 31, 2025, 169,500 of these RSUs remain outstanding as 7,000 RSUs were forfeited during the year ended December 31, 2025.

On August 28, 2025, an aggregate of 287,500 time-based RSUs and 287,500 performance-based RSUs were granted to our executive team. The time-based RSUs vest over a service period of thirty-six months with a commencement date of March 31, 2025.  At December 31, 2025, 694,444 of these time-based RSUs had vested. During the year ended December 31, 2025, 162,500 of the performance-based RSUs and 100,694 time-based RSUs were forfeited with the separation of our CEO and in-house counsel in October 2025 (see Note 10).  

The performance-based RSUs have a three-year vesting period contingent on the achievement of milestones tied to the commissioning and operation of five different AirSCWO units to promote the development of the Company’s waste destruction services strategy. The 287,500 RSUs represent the vesting target amount; however, each vesting tranche includes a target delivery date. More RSUs can be earned by the executive team for delivery dates met prior to the target date. Conversely, fewer or no RSUs will vest if delays occur and units are commissioned and operating after the tranche target date. The range of RSUs that can vest is 143,750 to 546,250. Each tranche earned requires the approval and certification of the compensation committee. The total RSUs earned will be aggregated and issued after the three-year vesting period. At December 31, 2025, total unvested outstanding restricted stock units granted to our executive team with these performance conditions totaled 125,000. At December 31, 2025, the probability of the performance-based RSUs vesting was not deemed probable; therefore, no compensation expense has been recognized on the performance-based RSUs.

On August 28, 2025, our board of directors was granted 228,332 RSUs that will fully vest on the one-year grant-date anniversary. Effective, December 15, 2025, one of our board of directors resigned from the Company and 61,697 RSUs granted to the director on August 28, 2025 became fully vested. During the year ended December 31, 2025, we recognized stock-based compensation of $438,160 in connection with these RSU grants to our board of directors which has been classified with general and administrative expenses on the consolidated statements of operations.

During the years ended December 31, 2025 and 2024, the grant-date fair value of the restricted stock units was determined using the market price of our common stock on the date of grant which ranged from $3.70 to $6.30 and $10.30 and $13.00, respectively.

 As of December 31, 2025, we have $1,419,744 of unrecognized stock-based compensation associated with the restricted stock units with a performance condition which will be recognized when the performance conditions are probable of being met. As of December 31, 2025, the Company had $2,227,374 of unrecognized stock-based compensation associated with the time vesting restricted stock units which will be recognized over a weighted-average period of approximately 2.33 years. During the years ended December 31, 2025 and 2024, we recognized an aggregate of $1,711,998 and $308,399, respectively, of stock-based compensation associated with the time-based restricted stock units. 

A summary of our outstanding nonvested restricted stock units is as follows:

Stock Warrants

At December 31, 2025, there were 877,524 common stock warrants outstanding which primarily relate to an Offering completed in November 2024, where investors were offered one and a half warrants for everyone one common share purchased in the Offering at an exercise price of $11.25 per share.

 A summary of warrant activity for the year ended December 31, 2025, is as follows:

*The weighted average exercise price reflects the reduction that occurred in December 2025 due to the Share Combination Event (see below).

The 10,000 warrants were granted in connection with a short-term secured promissory note executed during the year ended December 31, 2025 (see Note 7).

On July 18, 2025, the Company executed a warrant purchase agreement with the largest investor in the November 2024 offering of common stock and warrants.  The 600,000 warrants held by the investor were repurchased by the Company at a price of $1.08 for total cash consideration of $649,980. The repurchase amount has been reflected as a reduction of additional-paid in capital on the consolidated statements of stockholders’ equity.

In connection with the effective date of the Reverse Stock Split, a Share Combination Event was triggered on the warrants issued in the Offering.  Pursuant to the terms of the warrants, if a Share Combination Event occurred the warrant’s exercise price would be adjusted to the lowest volume weighted average price for the five trading days immediately following the Share Combination Event.  The Share Combination Event resulted in the warrant’s exercise price being reduced from $11.25 (post-split) to $1.9352. We determined the incremental value received by the warrant holders for the exercise price modification using a Black-scholes model pre and post modification and the following inputs:  expected term 3.90 years, volatility 107.10%, risk free rate of 3.62%, dividend rate of 0.00% and exercise price of $11.25 (pre modification) and $1.9352 (post modification).

We have reflected the incremental value from this exercise price reduction as a deemed dividend within stockholders’ equity which amounted to $573,928.