14. SHARE-BASED COMPENSATION

Warrants issued to AUM Media Inc. (“AMI”)

On February 26, 2025, the Company issued warrants to AMI to purchase up to 50,000 ordinary shares at an exercise price of $5.50 per share for a period of three years till February 26, 2028 (the “AMI Warrants”). The issuance of warrants was to compensate portion of the consulting services provided by AMI for the year ended December 31, 2025.

AMI Warrants was classified as equity (Note 13). The fair value of AMI Warrants was determined using a binomial model. The following table summarizes the assumptions used in estimating the fair value of AMI Warrants on February 26, 2025.

On February 26, 2025, the fair value of AMI Warrants was $36,000. The Company recognized the expenses using the straight-line method. For the three months ended March 31, 2026 and 2025, the Company recognized expenses of $nil and $9,000 as “general and administrative expenses”, with a corresponding account charged to additional paid-in capital.

Restricted shares under TOYO ESOP

The Company has TOYO ESOP, under which the Company may grant share incentive awards, including options, restricted shares and restricted share units, to eligible service providers in order to attract, retain and motivate the talent for which the Company competes. The number of ordinary shares initially be approved for issuance under the TOYO ESOP (the “Share Limit”) is 4,440,500 shares. Subject to the authorized share capital as provided in the memorandum of association and articles of association of TOYO then in effect, the Share Limit will be increased automatically on January 1^st of each calendar year during the term of the TOYO ESOP commencing on January 1^st 2025 (each, an “Evergreen Date”), by an amount equal to one percent (1%) of the total number of outstanding shares of TOYO on the end of the calendar year immediately preceding the applicable Evergreen Date. The shares that TOYO issues under the TOYO ESOP may be newly issued shares, treasury shares or shares purchased on the open market. If an award is terminated, forfeited, expires or lapses for any reason, any shares subject to such award may be used again for new grants under the TOYO ESOP. Unless otherwise expressly provided in the TOYO ESOP, by applicable laws and by the notice of grant, an award is non-transferable and will not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance, or charge.

On August 29, 2025, the Company granted an aggregated 2,450,957 restricted shares, under TOYO ESOP, to management, consultants and certain employees of Abalance Corporation, the Company’s ultimate shareholder. The grant-date fair value of these restricted shares were $5.64 by reference to closing market price prevailing on the grant date. In September 2025, the Company issued the shares in an escrow account, which released the restricted shares to recipients upon vesting schedule.

As of March 31, 2026 and December 31, 2025, the Company had 2,450,957 and 1,404,000 restricted shares outstanding. For the three months ended March 31, 2026 and 2025, the Company recognized share-based compensation expenses of $154,900 and $nil in the account of “general and administrative expenses” in unaudited condensed consolidated statements of operations and comprehensive income.

The details were as the following:

For the three months ended March 31, 2026, the transaction activities of restricted shares were as below:

As of March 31, 2026, the Company had no unrecognized share-based compensation expenses.