Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth in "Part I - Item 1A. Risk Factors."

Business Overview

We were incorporated in Nevada on August 18, 2006, as a pioneering financial technology and telecommunications company with one clear mission: to enhance connectivity and financial access in the places people live, shop, and work.

Our Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless provide mobile broadband (internet connectivity) to consumers nationwide. Our Comprehensive Platform Services provides ACH banking relationships and a fintech transactions platform that processes thousands of transactions a day with independently owned convenience stores.

Please see the description in Item 1 of this Annual Report for a description of our Mobile Virtual Network Operators and Comprehensive Platform Services.

COMPARISON OF YEAR ENDED DECEMBER 31, 2025 AND 2024

We measure our performance on a consolidated basis as well as the performance of each segment.

We report our financial performance based on the following segments: Mobile Virtual Network Operators (MVNO), and Point-of-Sale and Prepaid Services (Top-up). The MVNO segment includes subsidized (Lifeline) and non-subsidized components (LinkUp Mobile). The subsidized component or Lifeline is the result of the mobile broadband (phone and internet) services provided by Torch Wireless to eligible consumers. The Point-of-Sale and Prepaid Services segment is comprised of Surge Fintech and ECS as previously shown.

The segment amounts included in MD&A are presented on a basis consistent with our internal management reporting. Additional information on our reportable segments is contained in Note 10 - Segment Information and Geographic Data of the Notes to Financial Statements.

Revenues and expenses during the years ended December 31, 2025, and 2024, consisted of the following:

		2025				2024
Revenue		$	56,962,920			$	60,881,173
Cost of revenue (exclusive of depreciation and amortization)			(67,551,811	)			(75,205,372	)
General and administrative			(20,071,121	)			(27,458,152	)
Impairment loss - note receivable			176,851				-
Impairment loss - CenterCom			-				498,273
Impairment loss - internal use software development costs			-				316,594
Impairment loss - goodwill			3,300,000				866,782
Income (Loss) from operations		$	(34,136,863	)		$	(43,464,000	)

Revenue decreased overall by $3,918,253 (6.4%) from the year ended December 31, 2024, to year ended December 31, 2025. Segment revenues were as follows:

		For the Years Ended December 31,
		2025				2024
Revenues:
Mobile Virtual Network Operator		$	13,453,150			$	43,450,244
Point-of-Sale and Prepaid Services			43,509,771				17,419,088
Other Corporate Overhead			-				11,841
Total		$	56,962,920			$	60,881,173

Mobile Virtual Network Operators consisting of SurgePhone Wireless and Torch Wireless revenues (as detailed in Notes 2 and 10 of the financial statements) decreased by $29,997,094 or (69.0%). Due to a lack of additional funding from Congress, April 2024 was the last month ACP households received the full ACP discount, as they had received in prior months, and effective June 1, 2024, households no longer receive an ACP discount.

As a transition strategy, we decided to keep the existing base of subscribers from the former ACP enrolled in our network with a built-in subscriber base of 250,000. We chose to keep our subscribers active, absorbing the wholesale costs (averaging around $7-10 per subscriber per month), and put our strong balance sheet to work to replace the cash inflow we lost once ACP funding ran out. We transitioned over 80,000 subscribers to the Lifeline program during 2024, and continued to add new users to Lifeline in 2025 as we scaled that portion of the business.

The Company signed a Master Services Agreement (MSA) with TerraCom, Inc. ("TerraCom"), a wireless service provider and licensed Lifeline provider, effective October 3, 2024, in order to execute the strategy of offering Lifeline to our existing ACP subscriber base. This agreement allows us to offer a government-subsidized program to our previous 250,000 ACP wireless subscribers. We transitioned over 80,000 subscribers to the Lifeline program during 2024. Equally important, this allows us to reignite our sales channels to acquire new Lifeline subscribers who lost their ACP service when their carrier chose to shut them off.

Point-of-Sale and Prepaid Services revenues increased by $26,090,683 from December 31, 2024 to December 31, 2025, as a result of increasing our sales force and hiring of a new Director of Sales.

Effective December 31, 2024, the Company's management elected to abandon its lead generation segment operations as part of a strategic reassessment of its business lines. This decision followed a review by the Chief Operating Decision Maker ("CODM", which is our Chief Executive Officer), who had been regularly evaluating the segment's financial performance and determined that its continued operation was no longer aligned with the Company's long-term strategic objectives. Lead generation segment revenue was therefore $0 in the years ended December 31, 2025 and 2024. Comparison numbers for lead generation segment expenses are shown in the respective Other Corporate Overhead lines below.

Cost of Revenue, Gross Profit and Gross Margin

For the year 2025, cost of revenue for services primarily consisted of data plan expenses ($7,708,012), prepaid retail expenses ($45,209,470), devices ($975,276), marketing ($7,006,084), advertising ($1,332,189), and other expenses such as royalties and call-center expenses ($5,320,781). For the year 2024, cost of revenue for services primarily consisted of data plan expenses ($21,684,451), prepaid retail expenses ($16,779,312), devices ($5,685,656), marketing ($15,632,078), advertising ($4,808,305), and other expenses such as royalties and call-center expenses ($4,233,099).

We expect that our cost of revenue will increase or decrease to the extent that our revenue increases and decreases.

		For the Years Ended December 31,
		2025				2024
Cost of Revenue (exclusive of depreciation and amortization):
Mobile Virtual Network Operator		$	22,242,341			$	58,410,842
Point-of-Sale and Prepaid Services			45,209,470				16,779,312
Other Corporate Overhead			100,000				15,218
Total		$	67,551,811			$	75,205,372

Gross profit margin is calculated as revenue less cost of revenue. Gross profit margin is gross profit expressed as a percentage of revenue. Our gross profit in future periods will depend on a variety of factors, including market conditions that may impact our pricing, sales mix among devices, sales mix changes among consumables, excess and obsolete inventories, and the cost of our products from manufacturers. Our gross profit (loss) in future periods will vary based upon our revenue stream mix and may increase or decrease based upon our distribution channels.

		For the Years Ended December 31,
		2025				2024
Gross Profit (Loss) (exclusive of depreciation and amortization):
Mobile Virtual Network Operator		$	(8,789,192	)		$	(14,960,598	)
Point-of-Sale and Prepaid Services			(1,699,699	)			639,776
Other Corporate Overhead			(100,000	)			(3,377	)
Total		$	(10,588,891	)		$	(14,324,199	)

The Company expects to focus on the improvement of gross margin in the Point-of-Sale and Prepaid Services segment during 2026. Most of the costs to prepare Clearline ready for launch have already been incurred, and we expect gross margin to begin moving towards positive in 2026 for this revenue channel. As we continue to expand both subsidized (Lifeline) and non-subsidized products (LinkUp Mobile) in the MNVO segment in 2026, we also anticipate gross margins in the MVNO segment will increase with an aim to return to positive results in late 2026.

		For the Years Ended December 31,
		2025				2024
Gross Margin:
Mobile Virtual Network Operator		%	(65.3	)		%	(34.4	)%
Point-of-Sale and Prepaid Services			(3.9	)			3.7
Other Corporate Overhead			N/A				(28.5	)
Total		%	(18.6	)		%	(23.5	)

General and administrative during the years ended December 31, 2025, and 2024, consisted of the following:

		2025				2024
Depreciation and amortization		$	859,974			$	1,165,279
Selling, general and administration			19,211,147				26,292,873
Total		$	20,071,121			$	27,458,152

Selling, general and administrative expenses during the years ended December 31, 2025, and 2024, consisted of the following:

		2025				2024
Contractors and consultants		$	3,692,780			$	4,303,580
Professional services			1,453,907				2,110,510
Compensation			8,700,110				14,605,283
Computer and internet			1,020,185				959,222
Advertising and marketing			268,671				109,004
Insurance			983,093				1,096,027
Other			3,092,401				3,109,247
Total		$	19,211,147			$	26,292,873

Selling, general and administrative costs (S, G & A) decreased by $7,081,726 (26.9%). The changes are discussed below:

●	Contractors and consultants expense decreased by $610,800 or 14.2% from $4,303,580 in 2024 to $3,692,780 in 2025. The Company decreased these expenses during the year ended December 31, 2025, due to the reduction in advisory services specifically in the area of investment relations.
●	Professional services decreased by 656,603 or 31.1% in 2025 primarily due to a decrease in legal fees of $480,561.
●	Compensation decreased from $14,605,283 in 2024 to $8,700,110 in 2025 largely as a result of as a result of change in one-time non-cash component for stock compensation for the CEO and CFO. There was a non-cash component for $1,701,735 related to the implementation of a stock option plan for all employees.
●	Computer and internet costs increased to $1,020,185 in 2025 from $959,222 in 2024. The increase was primarily the result of increased for the one-time cost of a tax compliance software installation.
●	Advertising and marketing costs increased to $268,671 in 2025 from $109,004 in 2024 primarily due to additional marketing of the Clearline platform.
●	Insurance expense decreased to $983,093 in 2025 from $1,096,027 in 2024 primarily as a result of improved premium rates for the renewal of coverage in 2025.
●	Other costs decreased slightly to $3,092,401 in 2025 from $3,109,247 in 2024 primarily due to the resolution of various taxes associated with the ACP.

Other (expense) income during the years ended December 31, 2025, and 2024, consisted of the following:

		2025				2024
Interest, net		$	(2,003,935	)		$	(554,200	)
Gain (loss) on equity investment in Centercom			-				33,864
Realized gains - investments			-				13,613
Dividends, interest, and other income - investments			-				355,549
Loss on lease termination - net			-				(194,863	)
Interest income			63,950				105,395
Other income			7,140				636,868
Total other (expense) income		$	(1,932,845	)		$	(1,285,423	)

Interest expense increased to $2,003,935 in 2025 from $554,200 in 2024 primarily due to additional notes entered into during the 2025 fiscal year.

In connection with the issuance of a $6,999,999 convertible promissory note, the Company issued warrants to purchase 700,000 shares of common stock. The Company allocated a portion of the proceeds to the warrants based on their relative fair value, determined using the Black-Scholes option pricing model. The fair value of the warrants was estimated to be $207,640, which was recorded as a component of the total debt discount and is being amortized to interest expense over the term of the note.

The equity investment in Centercom changed by $0 in the year ended December 31, 2025 compared to an increase of $33,864 in the year ended December 31, 2024. As of December 31, 2024, The Company determined that it would no longer utilize the Business Process Outsourcing (BPO) services of CenterCom.

The Company invested excess cash in various instruments during 2024, resulting in interest, dividends, and gains resulting in an aggregate increase of $355,549, compared to $0 in 2023.

Equity Transactions for the Year Ended December 31, 2025

Stock Issued for Cash - At the Market Offering ("ATM")

In August 2025, the Company entered into an At the Market Offering Agreement (the "ATM Agreement") with Titan Partners Group LLC, a division of American Capital Partners, LLC ("Titan"), pursuant to which the Company may, from time to time, offer and sell shares of its common stock, $0.001 par value per share, to or through Titan, acting as sales agent and/or principal, in transactions deemed to be "at-the-market offerings" under Rule 415(a)(4) of the Securities Act of 1933, as amended. Under the Prospectus Supplement, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $15,000,000, which is within the Company's current "baby shelf" limitations under General Instruction I.B.6. of Form S-3. The Company will pay Titan a commission of 3.0% of the gross proceeds from each sale. The Company intends to utilize the ATM Agreement, when appropriate, to fund working capital needs on an ongoing basis.

The Company issued 697,691 shares of common stock for gross proceeds of $1,774,636 ($2.12 - $2.98/share).

In connection with the capital raise, the Company paid cash as direct offering costs (including professional fees) totaling $123,197, resulting in net proceeds of $1,651,439.

Stock Issued for Services

The Company issued 324,000 shares of common stock for services rendered, having a fair value of $641,430 ($1.70 - $2.87/share), based upon the quoted closing trading price.

Stock Issued to Settle Accounts Payable

The Company issued 22,807 shares of common stock to settle outstanding vendor payables, having a fair value of $65,456 ($2.87/share), based upon the quoted closing trading price.

Debt Discount - Common Stock

In connection with the issuance of various convertible notes payable, the Company issued 103,000 shares of common stock, having a fair value of $271,880 ($1.90 - $2.86/share), based upon the quoted closing trading price on each respective grant date. This amount has been recorded as a debt discount. See Note 6 for discussion of the various common stock issuances related to convertible note offerings.

Debt Discount - Warrants

In connection with the issuance of various convertible notes payable and a note payable, the Company issued warrants to purchase shares of common stock, having an aggregate fair value of $1,133,345, comprised of $1,084,927 related to convertible notes payable and $48,418 related to the note payable. The fair value of each warrant was determined using the Black-Scholes pricing model on each respective grant date. These amounts have been recorded as a debt discount. See Note 6 for discussion of the assumptions and inputs used in these fair value calculations.

Treasury Stock

The Company repurchased 333,333 shares of its common stock from a convertible note payable holder for $999,999 ($3/share). In connection with the transaction, the principal balance of the related convertible note was increased by $999,999. See Note 6.

Shares - Related Parties

Chief Executive Officer

In 2024, the Company granted 500,000 shares of restricted common stock to its Chief Executive Officer (CEO), having a fair value of $3,800,000 ($7.60/share), based upon the quoted closing trading price on the grant date. The shares vested ratably over the period July 2024 through December 2024. All shares vested in accordance with the terms of the agreement. See Note 8 for additional information regarding the CEO employment agreement and future RSA grants.

Chief Financial Officer

In November 2023, the Company granted 600,000 shares of restricted common stock to its Chief Financial Officer (CFO), having a fair value of $3,114,000 ($5.19/share), based upon the quoted closing trading price on the grant date. The award was structured in two tranches, with 400,000 shares vesting ratably over the period July 2024 through December 2024 and 200,000 shares vesting on December 31, 2025. All shares vested in accordance with their original vesting schedules. See Note 8 for additional information regarding the CFO employment agreement.

Board of Directors

2025 Grant

In May 2025, the Company granted an aggregate of 150,000 shares of common stock to various members of its Board of Directors, having a fair value of $474,000 ($3.16/share), based upon the quoted closing trading price on the grant date. The shares vest upon the earliest of the following:

	●	The board member no longer serves in that capacity for any reason, except for cause;
	●	Occurrence of a change in control; and
	●	August 2028.

Effective December 31, 2025, a board member resigned their position. In accordance with the terms of their agreement, all unvested shares vested immediately upon resignation. As a result, 88,880 shares of common stock vested on December 31, 2025.

2024 Grant

In 2024, the Company granted an aggregate of 44,640 shares of common stock to various members of its Board of Directors, having a fair value of $149,990 ($3.36/share), based upon the quoted closing trading price on the grant date. The shares vest upon the earliest of the following:

	●	The board member no longer serves in that capacity for any reason, except for cause;
	●	Occurrence of a change in control; and
	●	The fourth anniversary of the effective date.

Director of Human Resources and Legal Services

In 2024, the Company granted 100,000 shares of common stock to its Director of Human Resources and Legal Services, having a fair value of $672,000 ($6.72/share), based upon the quoted closing trading price on the grant date. The shares vested ratably over the period July 2024 through December 2024. All shares vested in accordance with the terms of the agreement.

LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2025, and 2024, our current assets were $6,979,766 and $17,870,323, respectively, and our current liabilities were $18,190,236 and $6,059,476, respectively, which resulted in a working capital deficit of $(16,171,009) and a working capital surplus of $11,210,470, respectively. The decrease in current assets is primarily a result of decreased cash on hand.

Total assets at December 31, 2025, and 2024, amounted to $8,515,846 and $23,976,005, respectively, a decrease of $15,460,159 from 2024 to 2025. The decrease in total assets is a result of a decrease in available cash and an impairment of $3,300,000 of goodwill. At December 31, 2025, assets consisted of current assets of $6,979,766, net intangible assets of $819,153, and operating lease right of use asset of $313,410, and at December 31, 2024, assets consisted of current assets of $17,870,323, net property and equipment of $591,088, net intangible assets of $1,472,962, goodwill of $3,300,000, note receivable of $176,851, and operating lease right of use asset of $564,781.

At December 31, 2025, our total liabilities were $23,918,665 compared to total liabilities of $8,714,392 at December 31, 2024. This $15,204,273 increase was related to an increase in accounts payable and notes payable.

At December 31, 2025, our total stockholders' deficit was $(15,402,819) as compared to $15,261,613 at December 31, 2024. The $(30,664,432) decrease was primarily due to the net loss for the year, as well as the above discussed decrease in assets and increase in liabilities.

The following table sets forth the major sources and uses of cash for the years ended December 31, 2025, and 2024.

		2025				2024
Net cash provided by or (used in) operating activities		$	(21,293,152	)		$	(21,310,603	)
Net cash used in investing activities			(18,590	)			(3,004,576	)
Net cash provided by financing activities			10,534,564				22,483,508
Net change in cash and cash equivalents		$	(10,777,178	)		$	(1,831,671	)

Net cash used in both 2024 and 2025 was primarily due to the net loss for the respective years.

Net cash used in investing activities in 2025 was due to the purchase of property and equipment. Net cash used in investing activities in 2024 was primarily due to the purchase and sale of investments, and the purchase of ClearLine assets in 2024

Net cash provided for financing activities is primarily due to the sale of stock for cash and the issuance of notes payable, partially offset by repayments of notes payable. Net cash provided for financing activities is primarily due to the equity offering in January 2024 and the exercise of warrants during the year ended December 31, 2024.

As a result of net negative cash provided by operating activities and investing activities in 2025, our overall cash decreased in 2025 by $10,777,178, compared to a decrease of $1,831,671 in 2024.

At December 31, 2025, the Company had the following material commitments and contingencies.

Cash requirements and capital expenditures - Due to the end of the ACP program in 2024 and the reduction in total revenues and margins, we may not have sufficient resources to continue to fund operations for the next twelve months without additional funding. We are currently exploring various strategic opportunities; however, we have no commitments at this time and no known timing as to when any transaction may occur. We will only pursue options that we believe are in the best interest of, and on the best terms for, the Company.

The Company kicked off several initiatives in April of 2025. We have begun the launch of LinkUp Mobile SIM (subscriber identity module) cards into the national retail market. LinkUp Mobile has also launched its phone in a box program. Thousands of phones have already been purchased by convenience stores, which we believe is a positive sign for our future capabilities. Torch Wireless, supported by the Lifeline program, is now actively expanding its subscriber base in the state of California. This development is noteworthy for the growth of the Torch offering, as California provides an additional revenue incentive for its subscribers and has a large potential subscriber base. The wholesale MVNE (Mobile Virtual Network Enabler) leveraging technology and industry expertise has allowed us to expand services as a Mobile Network Enabler. Leveraging our direct carrier relationship, we offer billing, provisioning, SIM cards, and services to wireless companies lacking direct carrier access. Two such companies have already embraced this offering, and we anticipate more to join in the near future. We believe the MVNE solution will continue to uniquely position us for additional rapid growth into the subscriber activation channel by enabling other wireless companies who lack a direct carrier relationship. Clear-line has launched a comprehensive code management campaign, providing services to over 1,600 convenience stores. In addition to this new business venture, Shortcode, the ability to dynamic content and features into posts, pages and widgets, has been provisioned with all carriers in preparation for a national campaign scheduled to launch in July.

Known trends and uncertainties - The Company may pursue strategic opportunities, including acquisitions or partnerships, that align with its core business and support long-term growth. There are no definitive agreements in place at this time.

Critical Accounting Policies and Estimates

Management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which were prepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenue, and expenses. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions, and any such differences may be material.

While our significant accounting policies are more fully described in Note 2-Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements included in Item 8, Financial Statements and Supplementary Data of this Annual Report on Form 10-K, we believe the following discussion addresses our most critical accounting policies, which are those that are most important to our financial condition and results of operations and which require our most difficult, subjective and complex judgments.

Use of Estimates

Preparing financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates, and those estimates may be material.

Significant estimates during the years ended December 31, 2025 and 2024, respectively, include, allowance for doubtful accounts and other receivables, inventory reserves and classifications, valuation of loss contingencies, valuation of stock-based compensation, estimated useful lives related to intangible assets, capitalized internal-use software development costs, and property and equipment, implicit interest rate in right-of-use operating leases, uncertain tax positions, and the valuation allowance on deferred tax assets.

Fair Value of Financial Instruments

The Company accounts for financial instruments under Financial Accounting Standards Board ("FASB") ASC 820, Fair Value Measurements. ASC 820 provides a framework for measuring fair value and requires disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, based on the Company's principal or, in absence of a principal, most advantageous market for the specific asset or liability.

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires the Company to use observable inputs when available, and to minimize the use of unobservable inputs, when determining fair value.

The three tiers are defined as follows:

	●	Level 1 - Observable inputs that reflect quoted market prices (unadjusted) for identical assets or liabilities in active markets;
	●	Level 2 - Observable inputs other than quoted prices in active markets that are observable either directly or indirectly in the marketplace for identical or similar assets and liabilities; and
	●	Level 3 - Unobservable inputs that are supported by little or no market data, which require the Company to develop its own assumptions.

The determination of fair value and the assessment of a measurement's placement within the hierarchy requires judgment. Level 3 valuations often involve a higher degree of judgment and complexity. Level 3 valuations may require the use of various cost, market, or income valuation methodologies applied to unobservable management estimates and assumptions. Management's assumptions could vary depending on the asset or liability valued and the valuation method used. Such assumptions could include estimates of prices, earnings, costs, actions of market participants, market factors, or the weighting of various valuation methods. The Company may also engage external advisors to assist us in determining fair value, as appropriate.

Impairment of Long-lived Assets including Internal Use Capitalized Software Costs

Management evaluates the recoverability of the Company's identifiable intangible assets and other long-lived assets when events or circumstances indicate a potential impairment exists, in accordance with the provisions of ASC 360-10-35-15 "Impairment or Disposal of Long-Lived Assets." Events and circumstances considered by the Company in determining whether the carrying value of identifiable intangible assets and other long-lived assets may not be recoverable include but are not limited to significant changes in performance relative to expected operating results; significant changes in the use of the assets; significant negative industry or economic trends; and changes in the Company's business strategy. In determining if impairment exists, the Company estimates the undiscounted cash flows to be generated from the use and ultimate disposition of these assets.

If impairment is indicated based on a comparison of the assets' carrying values and the undiscounted cash flows, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Revenue from Contracts with Customers

We account for revenue earned from contracts with customers under ASC 606, Revenue from Contracts with Customers ("ASC 606"), and ASC 842, Leases ("ASC 842"). The core principle of ASC 606 is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:

	●	Step 1: Identify the contract with the 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 company satisfies a performance obligation.

Stock-Based Compensation

The Company accounts for our stock-based compensation under ASC 718 "Compensation - Stock Compensation" using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments.

The Company uses the fair value method for equity instruments granted to non-employees and use the Black-Scholes model for measuring the fair value of options.

The fair value of stock-based compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

Stock Warrants

In connection with certain financing (debt or equity), consulting and collaboration arrangements, the Company may issue warrants to purchase shares of its common stock. The outstanding warrants are standalone instruments that are not puttable or mandatorily redeemable by the holder and are classified as equity awards. The Company measures the fair value of warrants issued for compensation using the Black-Scholes option pricing model as of the measurement date. However, for warrants issued that meet the definition of a derivative liability, fair value is determined based upon the use of a binomial pricing model.

Warrants issued in conjunction with the issuance of common stock are initially recorded at fair value as a reduction in additional paid-in capital of the common stock issued. All other warrants (for services) are recorded at fair value and expensed over the requisite service period or at the date of issuance if there is not a service period.

Recent Accounting Pronouncements

In the normal course of business, we evaluate all new accounting pronouncements issued by the Financial Accounting Standards Board, SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Consolidated Financial Statements. Refer to Note 2 - Summary of Significant Accounting Policies of the Notes to Consolidated Financial Statements.