NOTE 4. STOCK OPTIONS

As of December 31, 2025 and December 31, 2024, there were 1,414,286 and 966,072 options outstanding, respectively. The Company adopted an option plan in December 2025 and can issue up to 500,000 non-qualified stock options to purchase common stock. All options outstanding as of December 31, 2025 were issued prior to the plan being adopted hence are non-plan grants.

We have granted non-qualified stock options to employees and contractors. All non-qualified options are generally issued with an exercise price no less than the fair value of the common stock on the date of the grant as determined by our Board of Directors. Options typically may be exercised up to ten years following the date of the grant, with vesting schedules determined by us upon grant. Vesting schedules vary by grant, with some fully vesting immediately upon grant to others that ratably vest over a period of time up to five years. Standard vested options may be exercised up to three months following date of termination of the relationship unless alternate terms are specified at grant. The fair values of options are determined using the Black-Scholes option-pricing model. Forfeitures are accounted for as they occur. The estimated fair value of options is recognized as expense on the straight-line basis over the options’ vesting periods. At December 31, 2025, we had approximately $5.4 million unrecognized stock-based compensation related to stock options expected to be recognized over the next 2.0 years on a weighted average.

Stock option transactions during the year ended December 31, 2025 were as follows:

SCHEDULE OF STOCK OPTION TRANSACTIONS

On August 26, 2025, the Company repriced 700,000 outstanding stock options originally granted in prior periods from a weighted-average exercise price of $ 140.00 to $ 4.50 per share. The modification was accounted for in accordance with ASC 718. The incremental fair value of the modified awards, measured on the modification date, was approximately $1,518,000, of which $318,000 related to vested awards was recognized immediately and the remainder will be recognized prospectively over the remaining vesting periods.

No options were exercised during the period ended December 31, 2025.

We recognized stock compensation of $2,189,000 and $1,144,182 related to stock options for the years ended December 31, 2025 and 2024, respectively.

The Black-Scholes option pricing model, used to estimate fair value of the option awards, requires the use of the following assumptions:

● Fair value of common stock. The fair value of the common stock is the Company’s closing price per share on the OTC listing at the grant date.

● Expected Term. The expected term of options granted represents the period of time that the options are expected to be outstanding. Due to the lack of historical exercise history, the expected term of the Company’s stock options has been determined by calculating the midpoint of the contractual term of the options and the weighted-average vesting period.

● Expected Volatility. The expected stock price volatility assumption was determined by examining the historical volatilities for industry peers, as the Company did not have any trading history for the common stock. The Company will continue to analyze the historical stock price volatility and expected term assumption as more historical data for the common stock becomes available.

● Risk-Free Interest Rate. The risk-free interest rate assumption is based on the U.S. Treasury instrument whose term was consistent with the expected term of the Company’s stock options.

● Dividends. The Company has not paid any cash dividends on common stock since inception and does not anticipate paying any dividends in the foreseeable future. Consequently, an expected dividend yield of zero was used.

The fair value of options granted was estimated using the Black-Scholes valuation model using the following assumptions for the years ended December 31, 2025 and 2024, respectively:

SCHEDULE OF FAIR VALUE OF VALUATION ASSUMPTIONS

The fair value of options granted was estimated using the Black-Scholes valuation model using the following assumptions for the years ended December 31, 2025 and 2024, respectively:

Aggregate intrinsic value represents the difference between the fair value of the underlying common stock and the exercise price. The intrinsic value of options outstanding at December 31, 2024 was $1.0 million. The intrinsic value of options outstanding and vested or expected to vest and exercisable at December 31, 2025 was $8.5 million and $3.2 million, respectively. The weighted-average grant date fair value of options granted for the years ended December 31, 2025 and 2024, was $2.72 and $6.88, respectively. No options were exercised during the years ended December 31, 2025 and 2024.