Share-Based Compensation

12 Months Ended

Dec. 31, 2025

Share-Based Compensation [Abstarct]

SHARE-BASED COMPENSATION

16. 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 16). 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.

	February 26, 2025
Stock price	$	3.70
Expected volatility (%)		46.25	%
Risk-free interest rate		3.69	%
Expected terms (in years)		3
Expected dividends (%)		0	%

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 year ended December 31, 2025, the Company recognized expenses of $36,000 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.

For the year ended December 31, 2025, the Company recognized share-based compensation expenses of $13,668,497 in the account of “general and administrative expenses” in consolidated statements of operations and comprehensive income.

The details were as the following:

Recipients	Granted and issued shares		Outstanding shares		Share compensation expenses recognized in the year ended December 31, 2025
Restricted shares issued to management:
Management (a)		810,000		-	$	4,568,400
Independent directors (b)		24,000		24,000		135,360
		834,000		24,000	$	4,703,760
Restricted shares issued to non-employees:
Three consultants (c)		1,380,000		1,380,000	$	7,783,200
One consultant (d)		110,000		-		420,380
Employees of Abalance Corporation (e)		126,957		-	$	761,157
		1,616,957		1,380,000		8,964,737
		2,450,957		1,404,000	$	13,668,497

(a) The Company granted 810,000 restricted shares to management, which were vested on January 1, 2026 subject to service conditions. The Company recognized share-based compensation expenses in straight-line method over the service period from August 29, 2025 through December 31, 2025. As of December 31, 2025, there were no unrecognized share-based compensation expenses. Since the restricted shares were not vested until January 1, 2026, the 810,000 restricted shares were not outstanding as of December 31, 2025.

(b) The Company granted 24,000 restricted shares to three independent directors as award for past services. The restricted shares were immediately vested and the Company recognized share-based compensation expenses on grant date.

(c) The Company granted an aggregated 1,380,000 restricted shares to three consultants as awards for full operation of the Company’s manufacturing facilities in Texas and Ethiopia. The performance conditions were met in the year ended December 31, 2025 and the Company fully recognized share-based compensation expenses in the year ended December 31, 2025.

(d) The Company also granted and issued 110,000 restricted shares to another consultant which was subject to a six-month service condition. The Company recognized share-based compensation expenses in straight-line method over the service period from August 29, 2025 through February 28, 2026. As of December 31, 2025, the 110,000 restricted shares were not outstanding. As of December 31, 2025, the Company had unrecognized share-based compensation expenses of $220,020.

(e) The Company granted an aggregated 126,957 restricted shares to certain employees of the Company’s ultimate shareholders, which provided service in the Company’s Business Combination with BWAQ. These shares were awarded for their past services and were not released until January 1, 2026. The Company recognized share-based compensation expenses on grant date. As of December 31, 2025, there were no unrecognized share-based compensation expenses. Since the restricted shares were not released until January 1, 2026, the 126,957 restricted shares were not outstanding as of December 31, 2025.

 For the year ended December 31, 2025, the transaction activities of restricted shares were as below:

	Number of Restricted Shares			Weighted Average Grant-date Fair Value
Unvested restricted shares as of December 31, 2024		—		$	—
Granted		2,450,957		$	5.64
Vested		(1,404,000	)	$	5.64
Unvested restricted shares as of December 31, 2025		1,046,957		$	5.64

As of December 31, 2025, unrecognized share-based compensation expenses were $154,900.