Unless otherwise stated or the context requires otherwise, references herein to the “Company,” “FFIE,” “FFAI,” “Faraday”, “FF”, “we,” “us,” and “our” mean Faraday Future Intelligent Electric Inc. and its wholly-owned subsidiaries, and controlled and managed entities.

The Company has three operating segments—AI Electric Vehicle (“AIEV”), digital assets (“AIXC”), and Robotics — and each segment meets the criteria for a reportable segment under ASC 280 for the three months ended March 31, 2026. (For further information, see Note 17, Segments).

The Company designs and engineers next-generation intelligent electric vehicles, develops embodied AI robotics products and related commercialization initiatives, conducts digital asset and related emerging technology initiatives through AIXC, manufactures its vehicles at its production facility in Hanford, California, known as “FF aiFactory California,” and maintains additional engineering, sales, and operational capabilities in China and the United Arab Emirates (“U.A.E.”) to support its global expansion and regional market strategy. The Company has created innovations in technology, products, and a user-centered business model that are being incorporated into its planned electric vehicle and robotics platforms.

The Unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and include the accounts of the Company, its wholly owned subsidiaries, and all other entities in which the Company has a controlling financial interest. This includes any variable interest entities (“VIEs”) for which the Company is the primary beneficiary, in accordance with Accounting Standards Codification (“ASC”) 810, Consolidation. All intercompany transactions and balances have been eliminated in consolidation.

These Unaudited Condensed Consolidated Financial Statements do not include all disclosures required by GAAP for complete annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the year ended December 31, 2025, included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 31, 2026, (the “Form 10-K”). Accordingly, the Unaudited Condensed Consolidated Balance Sheet as of March 31, 2026, has been derived from the Company’s audited consolidated financial statements as of December 31, 2025 but does not contain all of the footnote disclosures from the annual financial statements. The Company believes that the disclosures included in this Quarterly Report on Form 10-Q (this “Form 10-Q”) are adequate to make the information presented not misleading.

In the opinion of management, the Unaudited Condensed Consolidated Financial Statements contain all adjustments, consisting of only normal recurring adjustments, necessary to fairly state the Company’s financial position, results of operations, and cash flows for the periods presented. The accounting policies used in the preparation of these Unaudited Condensed Consolidated Financial Statements are the same as those disclosed in the audited consolidated financial statements for the year ended December 31, 2025, included in the Form 10-K, except as described below.

The preparation of the Company’s Unaudited Condensed Consolidated Financial Statements in conformity with GAAP and in accordance with the rules and regulations of the SEC requires management to make estimates and assumptions that affect the reported amounts included in the Unaudited Condensed Consolidated Financial Statements.

lived asset impairment assessments. Such estimates often require the selection of appropriate valuation methodologies and financial models and may involve significant judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ from those estimates under different assumptions, financial inputs, or circumstances.

Given the global economic climate, estimates are subject to additional volatility. As of the date of filing this Quarterly Report on Form 10-Q, the Company is not aware of any specific event or circumstance that would require updating its estimates or judgments or revising the carrying value of its assets or liabilities. However, these estimates and judgments may change as new events occur and additional information is obtained, which may result in changes being recognized in the Company’s Unaudited Condensed Consolidated Financial Statements in future periods. Actual results could differ from those estimates and any such differences may have a material impact on the Company’s Unaudited Condensed Consolidated Financial Statements.

In accordance with ASC Topic 810, Consolidation (“ASC 810”), the Company assesses whether it has a variable interest in legal entities in which it has a financial relationship and, if so, whether those entities are variable interest entities (“VIEs”). For those entities that qualify as VIEs, ASC 810 requires the Company to determine if the Company is the primary beneficiary of the VIE, and if so, to consolidate the VIE.

On September 29, 2025, the Company entered into a lead investor subscription agreement with AIxCrypto Holdings, Inc. (“AIXC”) (then known as Qualigen Therapeutics, Inc.). Under the agreement, the Company acquired common and preferred equity interests in AIXC. The Company determined that AIXC was a variable interest entity (“VIE”) and that the Company was the primary beneficiary based on its rights over governance and operating decisions, including the appointment of certain members of AIXC management and discretion over digital-asset and cash management decisions. Accordingly, the Company began consolidating AIXC on September 29, 2025 pursuant to ASC 810.

Following stockholder approval on November 12, 2025 for the conversion of AIXC’s Series B Convertible Preferred Stock into additional voting common shares of AIXC, the Company reconsidered its VIE conclusion and determined that AIXC continued to be a VIE and that the Company remained its primary beneficiary. As of March 31, 2026, there have been no material changes in the facts and circumstances supporting that conclusion, and the Company continues to consolidate AIXC under ASC 810.

Additional information regarding the initial measurement and accounting for the consolidation of AIXC, including the recognition of acquired intangible assets and the noncontrolling interest, is presented in Note 3, Goodwill Associated with Business Acquisition. Summarized financial information of AIXC included in the Company’s Unaudited Condensed Consolidated Financial Statements as of March 31, 2026 and for the three months then ended is presented below.


AIXC
Condensed Balance Sheet (Unaudited)
March 31, 2026
(in thousands)
Cash and cash equivalents .	$	6,201
Digital assets .	6,197
Other current assets	11,037
Total current assets .	23,435
Intangible assets and other assets .	467
Total assets	$	23,902

Accounts payable and accrued liabilities	$	1,959
Warrant liabilities and convertible debt	72
Total liabilities	2,031

Total stockholders’ equity	21,871
Total liabilities and stockholders’ equity	$	23,902

On March 31, 2025, the Company transferred 6,000 shares, representing 60% of the issued share capital of GXHK (then known as FXHK), to Xiao Ma, the Chief Executive Officer of Faraday X and an employee of the Company. The Company continues to hold the remaining 40% of the issued shares of GXHK.

The Company consolidates GXHK pursuant to the VIE provisions of ASC 810. GXHK was established with nominal capital and is dependent on the Company to support its activities. The Company is the primary beneficiary of GXHK because it has the power to direct the activities that most significantly impact GXHK's economic performance. Through various agreements executed with Mr. Ma, along with Mr. Ma's status as an employee of the Company, the Company is able to exercise sole control over stockholder decisions and maintains the unilateral right to remove Mr. Ma from his position as the majority stockholder.

The assets and liabilities of GXHK are carried at historical cost in the Company's Unaudited Condensed Consolidated Balance Sheets because the Company has controlled GXHK since inception. The assets of GXHK may only be used to settle obligations of GXHK, and the liabilities of GXHK do not have recourse to the general credit of the Company, except to the extent the Company has explicitly provided support. The amounts attributable to GXHK in the accompanying Unaudited Condensed Consolidated Balance Sheets, Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, and Unaudited Condensed Consolidated Statements of Cash Flows were insignificant to the Company’s Unaudited Condensed Consolidated Financial Statements for all periods presented.

On October 9, 2024, Mr. YT Jia donated 15 million shares of Grow Fandor common stock to FF. As a result of the donation, FF has a 10% ownership interest in Grow Fandor. On October 29, 2024, the Company entered into a Trademark License Agreement (the “License Agreement”) with Grow Fandor. This agreement grants Grow Fandor the right to use the Company’s trademarks.

The equity interest and the License Agreement held by the Company represent variable interests. Grow Fandor is a VIE, as it lacks sufficient equity to finance its activities. However, the Company does not have the power to direct the activities of Grow Fandor. Accordingly, the Company is not the primary beneficiary of Grow Fandor and does not consolidate Grow Fandor. As a result, Grow Fandor’s assets, liabilities, and results of operations are not included in the Company’s Unaudited Condensed Consolidated Financial Statements. Significant transactions between the Company and Grow Fandor are disclosed in Note 9, Related Party Transactions.

The Company has three operating segments—AI Electric Vehicle (“AIEV”), Robotics and digital assets — each of which meets the criteria for separate reporting under ASC 280. The Company’s Global Chief Executive Officer (“CEO”), serves as the Chief Operating Decision Makers (“CODM”), and regularly evaluated the Company’s financial performance using consolidated financial information at the total-company level including consolidated loss from operations, cash flows, liquidity, and strategic initiatives.

Management has identified Loss from operations, as presented in the Company's Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss, as the primary measure used by the CODM to evaluate the performance of the business and allocate resources. Loss from operations is the measure of segment profit or loss that is most consistent with the measurement principles used in measuring the corresponding amounts in the Company’s unaudited condensed consolidated financial statements. This measure reflects the Company’s focus on managing operating performance, cash outflows, and liquidity, particularly given that the timing of cash inflows is influenced by external financing activities. The Company defines “significant segment expense” as controllable operating costs that are regularly provided to and reviewed by management. Refer to Note 17,Segment Information for further detail on the components of “loss from operations” and the additional Robotics gross profit measure reviewed by the CODM.

Management closely tracks its expenditure on these key expense categories through regular reviews of cash balances, near‑term cash flow projections, monthly management reports, and project management reports. The CODM, works in close collaboration with the Company’s business leaders to establish critical operational targets, set project timelines, and adjust spending plans. These leaders are responsible for implementing the Company’s strategic plans and revising targets and deadlines based on continuous internal communications and review meetings, thereby ensuring that any deviations from target spending or project timelines are promptly addressed.

While loss from operations is the primary measure used to evaluate overall Company performance and to allocate resources across segments, management also evaluates the Robotics segment using gross profit as an additional performance measure, as this segment is in the early stages of commercialization and focuses on product-level profitability. Gross profit is defined as revenue less cost of revenues. At this time, general and administrative, research and development, and sales and marketing expenses are not allocated to the Robotics segment. Gross profit is not used as the primary measure of segment profit or loss for AIEV or digital assets.

This oversight supports the Company’s strategic objectives to prioritize the commercialization of the FX Series vehicles and Robotics products, while continuing to support production, sales, and leasing activities for its FF 91 vehicles, the planned FF 92 upgrade program, and the development of the Company’s planned digital asset, blockchain-based platform, and related crypto service initiatives through AIXC.

In December 2023, FASB issued ASU 2023-08, Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60): Accounting for and Disclosure of Crypto Assets. ASU 2023-08 requires crypto assets within the scope of ASC 350-60 to be measured at fair value each reporting period, with changes in fair value recognized in net income. The guidance also requires crypto assets measured at fair value to be presented separately from other intangible assets in the balance sheet, and changes from the remeasurement of crypto assets to be presented separately from changes in the carrying amounts of other intangible assets in the statement of operations.

The Company determines the fair value of its digital assets based on quoted prices in active markets for identical assets in accordance with ASC 820, Fair Value Measurement. Accordingly, the Company classifies its digital assets within Level 1 of the fair value hierarchy under ASC 820. The Company utilizes observable market prices from active trading exchanges and evaluates the principal market for each digital asset in determining fair value. The Company measures digital assets at fair value as of UTC+0:00 on the final day of each reporting period. The Company does not currently recognize revenue from contracts with customers related to digital assets. Cash flows arising from purchases and sales of digital assets are presented as investing activities in the Company’s Unaudited Condensed Consolidated Statements of Cash Flows.


Digital Assets	Units Held	Cost Basis		Fair Value
Cardano ADA (ADA)	214,323	$	134	$	52
Native BNB (BSC)	1,308	1,356		807
Bitcoin (BTC)	46	4,943		3,150

Ethereum (ETH)	616	2,307		1,296
ChainLink (LINK)	19,404	339		170
Solana (SOL)	6,659	1,188		553
Tron (TRX)	531,334	164		167
USD Tether (USDT)	2,087	2		2
Ripple (XRP)	1	—		—
		$	10,433	$	6,197

Short-term notes receivable are measured in accordance with ASC 326-20 (Current Expected Credit Losses, “CECL”), which requires recognition of expected credit losses over the life of the receivable based on historical experience, current conditions, and reasonable and supportable forecasts.

The Company, through its acquisition of AIXC, holds short-term notes receivable from Marizyme, Inc. (“Marizyme”) arising from cash advances made by AIXC to Marizyme prior to the Company’s acquisition of AIXC. These notes bear interest at 18% per annum, are payable on demand, and may be prepaid at any time without penalty. Because AIXC has limited loss history for similar exposures, expected credit losses are estimated using a probability-weighted model that considers multiple settlement scenarios, including potential recovery through acquisition, liquidation, or other realizations of the debtor’s assets. The resulting allowance for expected credit losses reflects an assessment of Marizyme’s financial condition, estimated recoverable amounts, and the likelihood of each outcome. The allowance is reassessed each reporting period and updated as new information becomes available.

As of March 31, 2026, the estimate for expected credit losses on the Marizyme Notes is $4.7 million. Given the inherently uncertain nature of the debtor’s financial condition and future outcomes, actual credit losses may differ materially from this estimate. The Company will continue to monitor relevant events and conditions and update its assumptions and allowance as necessary.

Inventory is stated at the lower of cost or net realizable value and consists of raw materials, work in progress, and finished goods. The Company primarily computes cost using standard cost, which approximates cost on the first-in, first-out basis. Net realizable value is the estimated selling price of inventory in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The Company assesses the valuation of inventory and periodically

The Company accounts for business combinations in accordance with ASC 805, Business Combinations, which requires management to use significant judgment in determining the fair value of assets acquired and liabilities assumed and in evaluating whether an acquired set meets the definition of a business. See Note 3, Goodwill Associated with Business Acquisition to the Unaudited Condensed Consolidated Financial Statements for further information.

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired in a business combination. The Company tests goodwill for impairment at the reporting unit level at least annually, or more frequently if events or changes in circumstances indicate that the carrying amount of a reporting unit may exceed its fair value. The Company acquired goodwill in connection with its acquisition of AIXC and assigned all of the associated goodwill to its AIXC reporting unit. The Company tests goodwill for impairment annually as of October 1, or between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired.

During the three months ended March 31, 2026, based on the quantitative assessment, the Company concluded that the carrying amount of the AIXC reporting unit exceeded its estimated fair value. Accordingly, the Company recorded a goodwill impairment charge of $2.1 million of which $0.9 million was attributable to noncontrolling interest. The impairment charge is included in Impairment of goodwill on the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss to noncontrolling interest. The impairment charge is included in Impairment of intangible assets, including goodwill in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss. No goodwill impairment was recognized for the three months ended March 31, 2025, as the Company did not have a goodwill balance prior to the AIXC acquisition.

The Company’s in-process research and development (“IPR&D”) acquired in connection with the acquisition of AIXC was recorded at its acquisition-date fair value, which represents its initial cost basis. The Company will continue to carry this asset at that amount until completion or abandonment of the associated R&D project, at which time an appropriate useful life will be determined. During the each of three months ended March 31, 2026, and 2025, the Company recognized no impairment of IPR&D.

In accordance with ASC 350-40, the Company capitalizes qualifying costs incurred in connection with the development of the Company’s product offerings during the application development stage. Costs incurred during the preliminary project and post-implementation stages are expensed as incurred. Costs incurred in connection with maintenance activities, including training or bug fixes are also expensed as incurred. The Company stops capitalizing qualifying costs once development activities are completed and the project is ready for its intended use.

Capitalized software costs are amortized on a straight-line basis over a 36-month useful life beginning on the date when the product is ready for its intended use. Management tests the capitalized software costs for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with ASC 360. During the

Where our ownership interest is less than 100%, but greater than 50%, the noncontrolling ownership interest is reported on our Unaudited Condensed Consolidated Balance Sheets. Non-controlling interest represents the portion of the net assets of a subsidiary attributable to interests that are not owned by the Company. The non-controlling interest is presented in the Unaudited Condensed Consolidated Balance Sheets, separately from equity attributable to the shareholders of the Company. Non-controlling interest’s operating result is presented on the face of the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss as an allocation of the total income for the year between non-controlling shareholders and the shareholders of the Company.

The Company recognizes automotive sales revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers. Automotive sales revenue includes cash deliveries of new vehicles, and specific other features and services including home charger, charger installation, twenty-four-seven roadside assistance, over-the-air (“OTA”) software updates, internet connectivity and destination fees that meet the definition of a performance obligation under ASC 606.

As part of the first step in applying ASC 606, the Company assesses whether multiple contracts entered into with the same customer—such as a vehicle sale and a co-creation agreement—should be combined. When these contracts are negotiated together and are economically interdependent, they are accounted for as a single arrangement. This evaluation ensures that the revenue recognition reflects the substance of the transaction. Refer to the subsequent section of this note for a detailed discussion of the co-creation arrangements with customers and their impact on revenue recognition under ASC 606.

Revenue is recognized when control of the vehicle transfers upon delivery to the customer. Payments are typically received at the point control transfers or according to payment terms customary to the business as specified in the sales contract. Vehicle contracts do not contain a significant financing component. For obligations related to automotive sales, transaction prices are allocated among performance obligations based on relative standalone selling prices, determined using market prices, estimated internal costs, and comparable third-party offerings. The transaction price is allocated among the performance obligations in proportion to the standalone selling price of its performance obligations.

Other features and services as discussed above are provisioned upon transfer of control of the vehicle and are required to be recognized on a straight-line basis over the performance period, as the Company has a stand-ready obligation to deliver such services to the customer. However, due to immateriality, revenue from other features and services are combined with the vehicle performance obligation and recognized upon the transfer of the vehicle.

Operating Leasing Program: The Company offers a vehicle operating leasing program in the U.S., allowing qualifying customers to lease a vehicle directly from the Company for a lease term of up to 36 months. At the end of the lease term, customers are generally required to return the vehicle to the Company, at which point the Company may either sell or re-lease the returned vehicle. Leasing revenue from operating leases is recognized on a straight-line basis over the lease term, as long as collectability is probable in accordance with ASC 842. If collectability of lease payments is not probable at lease commencement, lease income is recognized on a cash basis, meaning payments received are recorded as revenue only when collected. Depreciation expense related to leased vehicles is recorded in cost of automotive leasing revenue on a straight-line basis over the lease term, reflecting the expected residual value of the vehicles at lease termination. Upfront payments related to lease agreements are deferred and recognized as revenue on a straight-line basis over the respective lease term. Taxes collected from customers in connection with automotive leasing transactions are excluded from the transaction price and reported separately in accordance with ASC 606.

As part of the revenue recognition process, the Company evaluates whether a lease contract should be combined with other agreements—such as co-creation arrangements—under ASC 606 when the contracts are negotiated together and are economically interdependent. Refer to the subsequent section of this note for a detailed discussion of the co-creation arrangements with customers and their impact on revenue recognition under ASC 606.

Sales-Type Leasing Program: The Company enters into sales-type lease arrangements in accordance with ASC 842, under which customers generally have the option to purchase the leased vehicle at the end of the lease term, which is typically 36 months. The lease is classified as a sales-type lease when the Company concludes that the customer is reasonably certain to exercise the purchase option and, as a result, the Company expects the customer to obtain title to the vehicle upon completion of all contractual payments. At lease commencement, if collectability of the lease payments is probable, the Company derecognizes the leased vehicle and recognizes:

If collectability is not deemed probable at lease commencement, revenue recognition is deferred, and lease payments received are recorded as a deposit liability. The leased vehicle remains on the Company’s balance sheet until collectability becomes probable, at which point revenue recognition is triggered.

The Company recognizes a net investment in sales-type leases, which includes both the lease receivable and the unguaranteed residual asset. The unguaranteed residual asset represents the estimated fair value of the leased vehicle at the end of the lease term that is not guaranteed by the lessee or any third party. As of March 31, 2026, the carrying amount of unguaranteed residual assets included in the net investment in sales-type leases, and presented within accounts receivable, was approximately $0.2 million. The estimate of unguaranteed residual value reflects management’s judgment, informed by historical residual value experience, current market conditions, and the anticipated future utility of the leased assets.

Robotic sales contracts may include the delivery of one or more robots. Each robot is capable of providing benefit to the customer on a standalone basis and is separately identifiable within the context of the contract, accordingly, each robot represents a separate performance obligation. The transaction price is allocated to each performance obligation based on the relative standalone selling prices of the individual robots, which are determined using observable market prices for those products. Revenue allocated to each robot is recognized at a point in time, when control of the respective robot transfers to the customer, which generally occurs upon delivery in accordance with the terms of the applicable sales contract. When robots are delivered at different times, revenue is recognized separately for each robot upon delivery.

As part of applying ASC 606, the Company evaluates whether multiple contracts entered into with the same customer, such as a robot purchase agreement and a related co‑creation or consulting agreement, should be combined and accounted for as a single arrangement. When such contracts are negotiated together and are economically interdependent, they are combined for accounting purposes. Payments made by the Company to customers under co‑creation arrangements are evaluated to determine whether they represent consideration payable to a customer and, when applicable, are accounted for as a reduction of the

As part of the Company’s Futurist Product Officers (“FPO”) Co-Creation Delivery program, the Company has entered into co-creation agreements with certain customers. This arrangement leverages select sales and leasing customers to provide valuable data, insights, marketing, and brand awareness for the Company’s vehicles and robots. In exchange for these services, the Company compensates customers through a one-time consulting fee, consulting fees paid in installments or a discount on their lease payments.

The Company evaluates the economic substance of both the sale or lease contract and the co-creation agreement to determine whether they should be combined under the contract combination guidance in ASC 606. When the contracts are economically interdependent, the Company accounts for them as a single arrangement. Under this approach, the cash inflows from the customer and the cash outflows from the Company are netted and treated as a single transaction. The resulting net amount is recorded as marketing expense if the net amount is more than the sale price of the vehicle or robot. In situations where the net amount is less than the sale price or the contractual lease payment, the difference between the net amount and the sale price or lease payment is recognized as revenue.

For the three months ended March 31, 2026, and 2025, the Company recognized $0.2 million and $0.3 million, respectively, in co-creation fees recorded as reduction from revenues for the same periods. For the three months ended March 31, 2026, and 2025, the Company recognized $0.2 million and $0.1 million, respectively, in co-creation fees as marketing expenses for the same periods. All co-creation fees are presented in the Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss.

Business-to-business (“B2B”) reservations are made through pre-order deposit agreements and require fixed, non-refundable deposits that may be applied toward the purchase of a limited number of vehicles. These programs are designed to incentivize volume interest by allowing the deposits to be applied toward the purchase of a limited number of vehicles under future purchase agreements. Business-to-consumer (“B2C”) reservations are typically submitted on a one-to-one basis for a specific vehicle or robotics product, or upon other resolution of the reservations and involve refundable or promotional deposits.

When vehicle purchase agreements are executed, the consideration for the vehicle and any accompanying products and services must be paid in advance before the transfer of products or services by the Company. Unlike reservation deposits, which may be refundable or non-refundable and are generally received before execution of a purchase agreement, these advance payments relate to executed purchase agreements and are non-refundable. The Company recognizes revenue when control of the vehicle or related services transfers to the customer and defers revenue only when payments are received for undelivered products or services. Deferred revenue represents the total transaction price allocated to performance obligations that remain unsatisfied or partially unsatisfied as of the balance sheet date. As of March 31, 2026 and December 31, 2025 deferred revenue related to products and services were insignificant for both periods.

Cost of automotive sales revenue includes direct and indirect materials, labor costs, manufacturing overhead, including depreciation costs of tooling and machinery, shipping and logistic costs, vehicle connectivity costs, and reserves for estimated warranty expenses. Cost of automotive sales revenues also includes adjustments to warranty expense.

Cost of services and other revenue includes costs associated with providing non-warranty after-sales services, costs for retail merchandise, and costs to provide vehicle insurance. Cost of services and other revenue also includes direct parts and material. Cost of services and other revenue was insignificant for the three months ended March 31, 2026, and 2025.

The Company provides a manufacturer’s warranty on all vehicles sold. The warranty covers the rectification of reported defects via repair, replacement, or adjustment of faulty parts or components. The warranty does not cover any item that fails due to normal wear and tear. This assurance-type warranty does not create a performance obligation separate from the vehicle. Management tracks warranty claims by vehicle ID, owner, and date. As the Company continues to manufacture, assemble, and sell more vehicles it will reassess and evaluate its warranty claims for purposes of its warranty accrual.

The Company accounts for income taxes using the asset and liability method, under which deferred tax assets and liabilities are recognized for temporary differences between the financial reporting and income tax bases of assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years when those temporary differences are anticipated to reverse.

A valuation allowance is established if it is more likely than not that some or all of the deferred tax assets will not be realized. The carrying value of deferred tax assets is adjusted to reflect the amount that is more likely than not to be realized. As of March 31, 2026 and December 31, 2025, the Company maintained a full valuation allowance against its net deferred tax assets, based on the conclusion that it is more likely than not the assets will not be realized.

The Company applies the guidance in ASC 740-10, Income Taxes, to account for uncertain tax positions. This guidance requires a two-step approach: (1) determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation; and (2) measure the tax benefit as the largest amount that is more likely than not to be realized upon settlement. The Company evaluates its tax positions based on a number of factors and may update its assessments as facts and circumstances change.

The Financial Accounting Standards Board (“FASB”) has issued accounting standards updates (“ASUs”) that are not yet adopted by the Company. As a December 31 year-end filer and a Smaller Reporting Company (“SRC”), the Company will adopt these ASUs in accordance with the effective dates applicable to the Company. The Company is currently evaluating the impact of these ASUs on the Company’s financial statements and related disclosures. The following is a summary of recently issued accounting pronouncements not yet adopted by the Company:

In December 2024, the FASB issued ASU 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments. This ASU clarifies when a settlement of a convertible debt instrument should be accounted for as an induced conversion rather than a debt extinguishment. Key provisions include (a) applying a pre-existing-contract approach to assess whether the form and amount of consideration are preserved; and (b) expanding the guidance to cover certain convertible debt instruments not previously convertible. This update is effective for the Company beginning January 1, 2026 (fiscal year and interim periods beginning after December 15, 2025) and will first apply to the Company’s December 31, 2026 Form 10-K. Early adoption is permitted, provided ASU 2020-06 has been adopted.

In December 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40). This ASU requires public business entities to disclose additional details about certain expenses in the notes to financial statements, such as inventory purchases, employee compensation, depreciation, and intangible asset amortization. This update is effective for the Company beginning January 1, 2027 (fiscal year and interim periods beginning after December 15, 2026) and will first apply to the Company’s December 31, 2027 Form 10-K (as a public business entity, including SRCs). Early adoption is permitted.

In May 2025, the FASB issued ASU 2025-04, Compensation—Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Clarifications to Share-Based Consideration Payable to a Customer. This ASU (a) revises the master-glossary definition of ‘performance condition’ to include customer-based targets; (b) eliminates the forfeiture-policy election for awards granted to customers unless exchanged for a distinct good or service; and (c) clarifies that the variable-consideration constraint in ASC 606 does not apply to share-based consideration payable to a customer. This update is effective for the Company beginning January 1, 2027 (fiscal year and interim periods beginning after December 15, 2026) and will first apply to the Company’s December 31, 2027 Form 10-K (as a public business entity, including SRCs). Early adoption is permitted.

In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40). The new Update removes all references to prescriptive and sequential software development stages and establishes new criteria for the capitalization of internal-use software costs. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted.

In September 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606). This Update addresses stakeholders’ concerns about (1) the application of derivative accounting to contracts with features based on the operations or activities of one of the parties to the contract and (2) the diversity in accounting for share-based noncash consideration from a customer that is consideration for the transfer of goods or services. The amendments are expected to (a) reduce the cost and complexity of evaluating whether contracts with features based on the operations or activities of one of the parties to the contract are derivatives, (b) better portray the economics of those contracts in the financial statements, and (c) reduce diversity in practice resulting from the broad application of the current guidance and changing business environment. The amendments also are expected to reduce diversity in practice by clarifying the applicability of Topic 606, Revenue from Contracts with Customers, to share-based noncash consideration from a customer for the transfer of goods or services. This update is effective for the Company beginning January 1, 2027 (fiscal year and interim periods beginning after December 15, 2026) and will first apply to the Company’s December 31, 2027 Form 10-K (as a public business entity, including SRCs). Early adoption is permitted.

In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270) to improve the navigability of the required interim disclosures and clarifying when that guidance is applicable. The amendments also provide additional guidance on what disclosures should be provided in interim reporting periods. This will result in a comprehensive list of interim disclosures that are required by GAAP. The amendments add to Topic 270 a principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The objective of the amendments is to provide clarity on the current interim reporting requirements. The amendments in this Update are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, for public business entities. This Update will first apply to the Company’s March 31, 2028 Form 10-Q.