Annual Report for Fiscal Year Ending 12-31, 2025 (Form 10-K)

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

The following discussion should be read in conjunction with our consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report. This discussion contains forward-looking statements that reflect our plans, estimates, beliefs and expectations that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those discussed in Item 1 (Business) and Item 1A (Risk Factors) of Part I of this Annual Report.

Overview

We are a diversified, power-backed hardware technology company focused on the development, integration, and deployment of electrified and energy-intensive systems across multiple end markets. Our operating and development initiatives are organized around a common foundation of power management, electrification, and integrated hardware know-how, with current focus areas including commercial EVs, electric drone platforms, and medical supplies.

For the years ended December 31, 2025 and 2024, respectively, we generated sales revenue of approximately $5.9 million and $1.9 million, respectively, and our net losses were $39.1 million and $8.8 million, respectively. The 2025 loss includes approximately $26.4 million of certain non-cash expenses of which $10.1 million is related to a goodwill impairment charge, $3.3 million is related to impairment of intangibles, $6.0 million is related to inventory write-downs and $7.0 million is related to write-offs of inventory deposits.

Recent Developments

Maddox Acquisition

On October 30, 2024, we entered into a Membership Interest Purchase Agreement (the "MIPA") with Maddox Industries and Jason Maddox, the sole member of Maddox Industries (the "Seller"), pursuant to which, subject to the terms and conditions of the MIPA, we purchased from the Seller all of the issued and outstanding membership interests (the "Purchased Interests") in Maddox Industries (the "Maddox Acquisition"). In connection with the Maddox Acquisition, our Board also appointed Jason Maddox as our President in October 2024.

As consideration for the Purchased Interests, at the closing of the Maddox Acquisition, we issued 3,100,000 shares of our common stock (the "Stock Consideration") to the Seller. In addition, during the six-month period following the closing (the "Earnout Period"), the Seller was eligible to receive up to six monthly cash payments in an aggregate amount of up to $1 million (each such monthly payment, an "Earnout Payment"), with the Earnout Payment for each calendar month being equal to the aggregate amount of gross revenue received by Maddox Industries in respect of any closing receivable, as specified in the MIPA, during such calendar month, subject to an aggregate limit of $1 million with respect to all Earnout Payments payable under the MIPA. On October 20, 2025, the MIPA was amended to extend the Earnout Period to June 17, 2026. In 2025, Earnout Payments totaling $770,000 were paid out to the Seller in conjunction with these earnout provisions.

On December 18, 2024, we consummated the Maddox Acquisition. This strategic acquisition was intended to enhance our capabilities in U.S. manufacturing and logistics, delivering a multimillion-dollar revenue stream from government contracts over the next three years while creating U.S. based manufacturing jobs.

One Big, Beautiful Bill Act (the "OBBBA")

The demand for our vehicles may be affected adversely by the OBBBA due to significant reductions in EV credits made available to consumers. This may affect our future profitability.

Import Tariffs

Tariffs imposed by the current presidential administration may significantly affect demand for our EVs or reduce our gross profits if we are unable to pass such tariffs to our customers. We are currently assessing the impact and will take appropriate action to minimize the impact of such tariffs on our EV strategy.

Nasdaq Deficiency Notices

On March 6, 2025, we received a letter from the Nasdaq Listing Qualifications Department, notifying us that, based upon the closing bid price of our common stock for the 30 consecutive business days from January 21, 2025 to March 5, 2025, we no longer meet the requirement to maintain a minimum bid price of $1 per share, as set forth in Nasdaq Listing Rule 5550(a)(2) (the "Minimum Bid Price Requirement").

On August 6, 2025, we filed a certificate of amendment to the Company's Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a reverse stock split of our common stock at a ratio of 1-for-10 (the "Reverse Stock Split"). Our common stock began trading on a post-split basis on the Nasdaq Capital Market as of the open of trading on August 8, 2025 (the "Split Effective Time"). Pursuant to the Reverse Stock Split, every 10 shares of our common stock issued and outstanding immediately prior to the Split Effective Time were automatically combined into one issued and outstanding share of our common stock without any change in the par value per share or the total number of authorized shares. Proportional adjustments were made to the exercise price and number of shares of our common stock issuable upon exercise of outstanding stock options and warrants to purchase shares of our common stock and the shares reserved for issuance under our 2017 Equity Incentive Plan (the "2017 Plan").

On August 25, 2025, we received a letter from the Nasdaq Listing Qualifications Department confirming that we had regained compliance with the Minimum Bid Price Requirement.

Due to the resignation of one of our directors effective as of our 2025 Annual Meeting of Stockholders, we no longer satisfy the requirements to maintain a majority of independent directors on our Board as required by Nasdaq Listing Rule 5605(b)(1) or to maintain an Audit Committee comprised of three independent directors meeting the additional requirements under Nasdaq Listing Rule 5605(c)(2)(A). We are relying on the cure period to regain compliance with these requirements provided in Nasdaq Listing Rules 5605(a)(1)(A) and 5605(c)(4). We are in the process of identifying a new independent director to appoint to the Board to fill the vacancy created by this resignation, and we anticipate appointing such replacement director within the applicable cure period. However, there can be no assurance that we will do so.

Debenture Financing

On March 6, 2026, we entered into a securities purchase agreement (the "SPA") with YA II PN, Ltd. (the "Investor"), pursuant to which we agreed to issue and sell to the Investor, and the Investor agreed to purchase, debentures (the "Debentures") in the aggregate principal amount of $11,000,000 (the "Subscription Amount") in two tranches with the purchase price of the Debentures in each tranche being equal to 96% of the Subscription Amount to be purchased. The closing of the initial tranche of Debentures occurred on March 6, 2026 (the "First Closing"), in which we issued Debentures in the aggregate principal amount of $4,000,000 (the "First Closing Debentures") to the Investor. Pursuant to the SPA, we and the Investor have agreed that the closing of the second tranche of the remaining $7,000,000 in aggregate principal amount of the Debentures (the "Second Closing" and such Debentures, the "Second Closing Debentures") will occur on or before the first business day after our filing of the registration statement with SEC registering the resale of the shares of our common stock issuable upon exercise of the Warrants (as defined below) and no less than 10,000,000 shares of our common stock issuable pursuant to the A&R SEPA(such registration statement, the "Resale Registration Statement"), has been declared effective and subject to the satisfaction or waiver of customary closing conditions set forth in the SPA. The sale of the Debentures to the Investor is expected to result in gross proceeds to us of approximately $10.5 million, after deducting a one-time due diligence and structuring fee to the Investor of $25,000 but before deducting any other fees and expenses.

In addition, in connection with the First Closing, as a commitment fee for the transactions contemplated by the SPA, we issued to the Investor warrants to purchase up to 1,291,778 shares of our common stock at an exercise price of $0.01 per share (the "Warrants"). The Warrants are immediately exercisable and will expire 60 months from the date of issuance. The Warrants include customary adjustment provisions for stock splits, combinations and similar events.

The Debentures bear interest at a rate of 5.0% per annum, subject to a potential increase to 18.0% per annum upon the occurrence of certain events of default. The Debentures mature on March 6, 2027 (the "Maturity Date"). We will repay the outstanding principal of the Debentures in monthly installments of (i) $363,636 for the First Closing Debentures and (ii) $636,364 for the Second Closing Debentures, in each case, plus accrued and unpaid interest, in cash, beginning on the earlier of the 30th calendar day following the effectiveness of the Resale Registration Statement or June 6, 2026, with all remaining outstanding principal plus accrued and unpaid interest due in full on the Maturity Date. Any outstanding principal amount of, and accrued and unpaid interest on, the Debentures as of the Maturity Date will be due and payable on the Maturity Date.

The Debentures provide us with an optional redemption right pursuant to which we, at any time, may redeem in cash, in whole or in part, all amounts outstanding under the Debentures prior to the Maturity Date. The redemption amount shall be equal to the outstanding principal balance of the Debentures being redeemed by us, plus all accrued and unpaid interest thereon as of such redemption date.

Going Concern and Management's Plan

The consolidated financial statements included elsewhere herein were prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. We sustained significant losses and negative cash flows from our operations and are dependent on debt and equity financing to fund our operations. We incurred a net loss of approximately $39.1 million and $8.8 million for the years ended December 31, 2025 and 2024, respectively. Cash used in operating activities was approximately $5.6 million and $3.5 million for the years ended December 31, 2025 and 2024, respectively. Accumulated deficit was approximately $112.6 million and $73.5 million as of December 31, 2025 and 2024, respectively

These conditions raise substantial doubt about our ability to continue as a going concern within one year after the filing of this Annual Report. The consolidated financial statements included elsewhere herein do not include any adjustments that might be necessary if we were unable to continue as a going concern.

As more fully described above under "Debenture Financing," we closed the initial tranche of Debentures in the First Closing on March 6, 2026, resulting in gross proceeds of approximately $3.8 million. Subject to the Resale Registration Statement being declared effective, we will close the second tranche of Debentures in the second closing for gross proceeds of approximately $6.7 million. The Company also plans to grow and expand its operations and seek additional sources of capital through either an additional debt or equity financial and to pursue acquisitions of cash flow generating assets or businesses. Although the Company has been successful in raising funds in the past, and expects to do so in the future, there are no guarantees that it will be able to raise funds as anticipated. In addition, there is no assurance that any such acquisition will be successful or that we will realize the anticipated benefits for such acquisition following the closing.

Factors Affecting Our Performance

We believe that the growth and future success of our business depend on various opportunities, challenges and other factors, including the following:

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Availability of government subsidies, rebates and economic incentives. We believe that the availability of government subsidies, rebates, and economic incentives is currently a critical factor considered by our customers when purchasing our zero-emission vehicles, and that our growth depends in large part on the availability and amounts of these subsidies and economic incentives.

•

New Customers. We are competing with other companies and technologies to help fleet managers and their districts/companies more efficiently and cost-effectively manage their fleet operations. Once these fleet managers have decided they want to buy from us, we still face challenges helping them obtain financing options to reduce the cost barriers to purchasing. We may also encounter customers with inadequate electrical services at their facilities that may delay their ability to purchase from us.

•

Dependence on external sources of financing of our operations. We have historically depended on external sources for capital to finance our operations. Accordingly, our future performance will depend in part upon our ability to achieve independence from external sources for the financing of our operations.

•

Investment in Growth. We plan to continue to invest for long-term growth. We anticipate that our operating expenses will increase in the foreseeable future as we invest in research and development to enhance our zero-emission EVs; design, develop and manufacture our commercial fleet vehicles and their components; increase our sales and marketing to acquire new customers; and increase our general and administrative functions to support our growing operations. We believe that these investments will contribute to our long-term growth, although they will adversely affect our results of operations in the near term. In addition, the timing of these investments can result in fluctuations in our annual and quarterly operating results.

•

Zero-emission electric experience. Our performance will depend on having a robust dealer and service network, which will require appropriately trained technicians to be successful. Because vehicles that utilize our technology are based on a different technology platform than traditional internal combustion engines, individuals with sufficient training in zero-emission EVs may not be available to hire, and we may need to expend significant time and expense training the employees we do hire. If we are not able to attract, assimilate, train or retain additional highly qualified personnel in the future, or do so cost-effectively, our performance would be significantly and adversely affected.

•

Market Growth. We believe the market for all-electric solutions for alternative fuel technology, specifically all-electric vehicles, will continue to grow as more purchases of new zero-emission EVs and as more conversions of existing fleet vehicles to zero-emission EVs are made. However, unless the costs to produce such vehicles decrease dramatically, purchases of our products will continue to depend in large part on financing subsidies from government agencies. We cannot be assured of the continued availability, the amounts of such assistance to our customers, or our ability to access such funds.

•

Sales revenue growth from additional products. We seek to add to our product offerings additional zero-emission EVs of all sizes to be marketed, sold, warrantied and serviced through our developing distribution and service network, as well as add other ancillary products discussed elsewhere in this report.

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Third-party contractors, suppliers and manufacturers. We rely upon third parties to supply us with raw materials, parts, components and services in adequate quantity in a timely manner and at reasonable prices, quality levels, and volumes acceptable to us.

Components of Results of Operations

Sales

Sales in our electric vehicles segment are recognized from the sales of new, purpose-built zero-emission electric vehicles and from providing vehicle maintenance and safety inspection services. Sales are recognized in accordance with Accounting Standards Codification ("ASC") Topic 606, as discussed in Note 2 to our consolidated financial statements included in this Annual Report. Sales of our gowns in the medical supplies segment are also recognized in accordance with ASC Topic 606.

Cost of Sales

Cost of sales in our electric vehicles segment includes those costs related to the development, manufacture, and distribution of our products. Specifically, we include in cost of sales each of the following: material costs (including commodity costs); freight costs; labor and other costs related to the development and manufacture of our products; and other associated costs. Cost of sales also includes costs related to the valuation of inventory due to impairment, obsolescence, or shrinkage. Cost of sales in our medical supplies segment primarily includes costs of labor.

General and Administrative Expenses

General and administrative expenses include all corporate and administrative functions that support our company, including personnel-related expense and stock-based compensation costs; costs related to investor relations activities; warranty costs, including product recall and customer satisfaction program costs; consulting costs; marketing-related expenses; and other expenses that cannot be included in cost of sales.

Consulting and Research and Development Costs

These expenses are substantially related to our external consulting and research and development activity.

Goodwill Impairment

In accordance with ASC 350-20 "Intangibles-Goodwill and Other - Goodwill", an impairment test is required at least annually or when a triggering event occurs. An impairment is recorded when our fair value is less than the carrying value of our net assets.

Other Income/Expenses, Net

Other income/expenses, net include non-operating income and expenses, including unrealized loss on financial instruments at fair value, interest income and expense.

Provision for Income Taxes

We account for income taxes in accordance with Financial Accounting Standards Board ("FASB") ASC 740 "Income Taxes," which requires the recognition of deferred income tax assets and liabilities for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under ASC 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that we will not realize tax assets through future operations. Because we have incurred only losses to this point, no provision for income taxes has been made in 2025 and 2024.

Results of Operations

The following discussion compares operating data for the year ended December 31, 2025 to the data for the year ended December 31, 2024:

Sales

		Year Ended December 31,
		2025				2024				$ Change				% Change
Sales		$	5,939,008			$	1,870,060			$	4,068,948				218	%

Sales were approximately $5.9 million for the year ended December 31, 2025, compared to $1.9 million for the year ended December 31, 2024. Sales for the year ended December 31, 2025 for our EV segment, totaled approximately $349,000 and consisted primarily of 2 logistics cargo vans and two cab and chassis trucks. The remaining $5.6 million of sales occurred in our medical supplies segment. Sales for the year ended December 31, 2024, consisted primarily of 13 logistics cargo vans, three cab and chassis trucks, one passenger van, two zippers, one sweeper and one forklift, all of which occurred in our EV segment. The decrease in sales in our electric vehicles segment was primarily due to unfavorable market and geopolitical conditions under the new presidential administration and a shift in our strategy to other industries.

Cost of Goods Sold

		Year Ended December 31,
		2025				2024				$ Change				% Change
Cost of goods sold		$	19,137,380			$	1,381,257			$	17,756,123				1286	%

Cost of sales related to the sales revenue described above was approximately $19.1 million for the year ended December 31, 2025, which resulted in negative gross profit of $13.2 million and a negative gross margin percentage of 222%, compared to approximately $1.4 million for the year ended December 31, 2024, which resulted in gross profit of approximately $489,000 and a gross margin percentage of 26%. The decrease in gross margin percentage was primarily due to a $6.0 million write-down of inventory and $7.0 million of inventory deposits write-offs as a result of unfavorable market and geopolitical conditions under the new presidential administration.

Operating Expenses

		Year Ended December 31,
		2025				2024				$ Change				% Change
General and administrative		$	11,281,889			$	8,146,275			$	3,135,614				38	%
Consulting			65,261				70,000				(4,739	)			-7	%
Research and Development			731,808				192,885				538,923				279	%
Goodwill impairment charge			10,103,048				-				10,103,048				100	%
Impairment of intangible assets			3,300,801				-				3,300,801				100	%
Total operating expenses, net		$	25,482,807			$	8,409,160			$	17,073,647				203	%

Stock-based compensation expense (included as part of "General and administrative" in the table above) is as follows:

		Year Ended December 31,
		2025				2024				$ Change				% Change
Stock-based compensation expense		$	639,815			$	1,889,353			$	(1,249,538	)			(66	)%

General and Administrative Expenses

General and administrative expenses for the year ended December 31, 2025 were $11.3 million, compared to $8.1 million for general and administrative expenses for the year ended December 31, 2024. General and administrative expenses increased by $3.1 million primarily due to an increase of $0.9 million in legal fees as a result of additional filings and the SEC subpoena described under Item 3, Part II of this Annual Report, and increase of $1.3 million in accounting and other professional fees as a result of additional consultants needed within finance and operations, additional amortization of $0.7 million related to our intangible assets recorded from the Maddox Acquisition, additional bad debts of $0.8 million as a result of unfavorable market conditions, additional tax and licenses of $0.5 million and an increase in other expenses of $0.1 million, partially offset by a decrease in stock-based compensation of $1.2 million.

Consulting

Consulting expenses were approximately $65,000 for the year ended December 31, 2025, as compared to $70,000 for the year ended December 31, 2024.

Research and Development

Research and development expenses were $731,808 and $192,885 for the year ended December 31, 2025 and December 31, 2024, respectively. R&D expenses increased as we incurred expenses primarily related to our drone segment in alignment with our venture into new business opportunities.

Goodwill Impairment

As a result of our declining stock price in 2025, we conducted a goodwill impairment test and we recorded a non-cash goodwill impairment of $10.1 million as of December 31, 2025.

Impairment of Intangible Assets

Due to a decline in our cash flow forecast related to our medical supplies segment, we conducted an impairment test in 2025 for our intangible assets and recorded a non-cash impairment charge of $3.3 million as of December 31, 2025.

Other Income (Expense)

		Year Ended December 31,
		2025				2024				$ Change				% Change
Interest income		$	33,320			$	7,669			$	25,651				334	%
Loss on conversions and changes in fair value of convertible notes		$	(461,019	)			(633,981	)			172,962				(27	)%
Other (expense) income, net			(18,108	)			(302,306	)			284,198				(94	)%
Total other (expense) income, net		$	(445,807	)		$	(928,618	)		$	482,811				(52	)%

Interest income, net consists primarily of interest earned on short-term investments. Interest income, net increased by $25,651 as a result of higher cash balances obtained from our issuance of convertible notes.

We recorded a non-cash loss on conversions and changes in fair value of convertible notes of $0.5 million and $0.6 million for the year ended December 31, 2025 and December 31, 2024, respectively, that we measured at fair value.

Other (expense) income, net consists of interest expense and other miscellaneous non-operating items. Interest expense increased due to higher debt levels on short-term borrowings. We also recorded commissions of approximately $0.2 million related to debt borrowings during the fourth quarter of 2024.

Liquidity and Capital Resources

As of December 31, 2025, we had cash and cash equivalents of $0.4 million and negative working capital of $9.8 million. To date, we have financed our operations primarily through capital raises from issuing common stock. We believe that our existing cash and cash equivalents may not be sufficient to allow us to operate for the next 12 months due to our current and potential liabilities. We may need to raise additional capital through equity or debt issuances. If we are unable to raise additional capital, we may be required to take additional measures to conserve liquidity, which could include, but not necessarily be limited to, curtailing operations and reducing overhead expenses. We cannot provide any assurance that any new financing will be available on commercially acceptable terms, if at all, or will be completed on a timely basis. These conditions raise substantial doubt about our ability to continue as a going concern.

The accompanying consolidated financial statements were prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we were unable to continue as a going concern.

In February 2022, we moved into an approximately 580,000 square foot facility in Osceola, Arkansas. We plan to close this facility in 2026.

On February 12, 2025, we announced the relocation of our corporate headquarters and the establishment of a new 86,000 square foot facility in Houston, Texas. We opened our new corporate headquarters and manufacturing facility in 2025. As a result of this relocation, we incurred additional capital expenditure and one-time relocation costs.

Cash Flows

The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2025 and 2024:

		Year Ended December 31,
		2025				2024
Cash flows used in operating activities		$	(5,587,517	)		$	(3,504,673	)
Cash flows used in investing activities			(176,828	)			(4,706,374	)
Cash flows provided by financing activities			4,182,130				9,695,509
Net change in cash, restricted cash and cash equivalents		$	(1,582,215	)		$	1,484,462

Operating Activities

Net cash used in operating activities for the year ended December 31, 2025 was $5.6 million, primarily due to a net loss of $39.1 million, partially offset by changes in operating assets and liabilities, net of $4.2 million and non-cash operating charges of $29.1 million, of which $6.0 million was related to inventory write-downs, $7.0 million was related to write-offs of inventory deposits, $10.1 million was related to goodwill impairment, $3.3 million was related to impairment of intangible assets, $0.6 million was related to non-cash stock-based compensation expense and $0.5 million was related to non-cash loss on conversions and changes in fair value of convertible notes and other non-cash charges of $1.9 million. The changes in operating assets and liabilities, net was due to a decrease in inventory of $0.4 million, a decrease in prepaid expenses of $0.9 million, a decrease in accounts receivable of $0.2 million, an increase in accounts payable of $2.1 million, an increase in other non-current liabilities of $0.3 million and an increase in accrued liabilities and deferred revenue of $3.4 million, partially offset by an increase in receivable from related party of $0.2 million, an increase in inventory deposits of $2.5 million and an increase in other non-current assets of $0.3 million.

Net cash used in operating activities for the year ended December 31, 2024 was $3.5 million, primarily due to a net loss of $8.8 million, partially offset by changes in operating assets and liabilities, net of $2.6 million and non-cash operating charges of $2.7 million, of which $1.9 million was related to non-cash stock-based compensation expense and $0.6 million was related to non-cash loss on changes in fair value of convertible notes. The changes in operating assets and liabilities, net was due to a decrease in inventory of $0.4 million, a decrease in other current assets of $0.1 million, a decrease in other non-current assets of $0.4 million, an increase in accounts payable of $0.7 million, and an increase in accrued liabilities and deferred revenue of $4.7 million, partially offset by an increase in accounts receivable of $0.3 million, an increase in inventory deposits of $2.7 million, an increase in prepaid expenses of $0.5 million and a decrease in other non-current liabilities of $0.2 million.

We expect cash used in operating activities to fluctuate significantly in future periods as a result of a number of factors, some of which are outside of our control, including, among others: the success we achieve in generating revenue in our EV segment; the success we have in obtaining and executing on profitable contracts in our medical supplies segment and the success we have in generating business to achieve profitability in our drones segment.

Investing Activities

Net cash used in investing activities during the year ended December 31, 2025 was $0.2 million, primarily related to the purchase of property and equipment used in our current operations.

Net cash used in investing activities during the year ended December 31, 2024 was $4.7 million, primarily from the Maddox Acquisition and the purchase of property and equipment used in our current operations.

Financing Activities

Net cash provided by financing activities during the year ended December 31, 2025 was $4.2 million, primarily due to proceeds from the issuance of our common stock of $0.4 million, proceeds from the issuance of convertible notes of $4.8 million and proceeds from issuance of debt for $0.3 million, partially offset by an earn-out payment to Jason Maddox for $0.8 million related to the Maddox Acquisition and repayment of debt of $0.5 million.

Net cash provided by financing activities during the year ended December 31, 2024 was $9.7 million, primarily due to proceeds from our equity line of credit under the A&R SEPA of $2.6 million, proceeds from the issuance of our common stock of $1.8 million, proceeds from the issuance of a convertible note of $0.9 million, proceeds from the issuance of common stock for the Maddox Acquisition of $4.3 million and proceeds from issuance of debt for $0.6 million, partially offset by the repayment of debt of $0.6 million.

Amended and Restated Standby Equity Purchase Agreement

On October 31, 2024, we entered into an amended and restated standby equity purchase agreement (as supplemented and amended, the "A&R SEPA") with the Investor. The A&R SEPA amends and restates in its entirety the standby equity purchase agreement, dated September 23, 2024 (the "Original SEPA"), by and between the Company and the Investor.

Pursuant to the A&R SEPA, except for so long as there is a balance outstanding under the Promissory Notes (as defined below), we have the right, from time to time, until November 1, 2027, to require the Investor to purchase up to $25 million of shares of common stock, subject to certain limitations and conditions set forth in the A&R SEPA, by delivering written notice to the Investor. Pursuant to the A&R SEPA, the Investor advanced to the Company the principal amount of $3 million (the "Pre-Paid Advance") in exchange for the Company's issuance to the Investor of convertible promissory notes (the "Promissory Notes") in two tranches, resulting in net proceeds (net of discounts and fees) to the Company of $2,635,500. We received the first tranche of the Pre-Paid Advance in the principal amount of $2 million on October 31, 2024 in exchange for the Promissory Note dated October 31, 2024, and the second tranche of the Pre-Paid Advance in the principal amount of $1 million on December 17, 2024 in exchange for the Promissory Note dated December 17, 2024. The Promissory Notes will accrue interest on the outstanding principal balance at an annual rate equal to 0%, which will increase to an annual rate of 18% upon the occurrence of an Event of Default (as defined in the Promissory Notes) or a Registration Event (as defined in the Promissory Notes) for so long as such event remains uncured. The Promissory Notes will mature on November 13, 2025, which may be extended at the option of the Investor. The Promissory Notes are convertible at a conversion price equal to the lower of (i) $21.4800 per share or (ii) 93% of the lowest daily volume weighted average price of the Common Stock on Nasdaq as reported by Bloomberg L.P. during the five consecutive trading days immediately preceding the conversion date (but no lower than the "floor price" then in effect, which is $3.5800 per share, subject to adjustment from time to time in accordance with the terms contained in the Promissory Notes). Pursuant to the terms of the Original SEPA, we issued 6,410 shares of common stock to the Investor as a commitment fee.

During the first quarter of 2025, the obligation under the EVTV-2 Promissory Note in the principal amount of $1 million was fully satisfied through the conversion of the EVTV-2 Promissory Note into shares of our common stock. As a result of this conversion, 174,348 shares of our common stock were issued at a weighted average price of $5.70. The principal balance of the EVTV-2 Promissory Note was zero on December 31, 2025.

During the first quarter of 2025, the obligation under the EVTV-1 Promissory Note in the principal amount of $2 million was partially satisfied through the conversion of the EVTV-1 Promissory Note into shares of our common stock. As a result of this conversion, 149,030 shares of our common stock were issued at a weighted average price of $4.10. During the second quarter of 2025, the obligation under the EVTV-1 Promissory Note was partially satisfied through the conversion of the EVTV-1 Promissory Note into shares of our common stock. As a result of this conversion, 56,144 shares of our common stock were issued at a weighted average price of $2.38. During the fourth quarter of 2025, the obligation under the EVTV-1 Promissory Note was partially satisfied through the conversion of the EVTV-1 Promissory Note into shares of our common stock. As a result of this conversion, 1,210,941 shares of our common stock were issued at a weighted average price of $0.52. The remaining principal balance of the EVTV-1 Promissory Note on December 31, 2025, was $285,000. During the first quarter of 2026, the remaining obligation under the EVTV-1 Promissory Note was fully satisfied through the conversion of the EVTV-1 Promissory Note into shares of our common stock, resulting in 1,266,907 shares of our common stock being issued at a weighted average price of $0.71.

Supplemental Agreement to A&R SEPA

On February 24, 2025, we entered into a supplemental agreement, dated February 24, 2025 (the "Supplemental Agreement"), with the Investor, which amends and supplements the A&R SEPA to: (i) provide for the advancement by the Investor to us, subject to the satisfaction of certain conditions as set forth in the Supplemental Agreement, of $5 million under the A&R SEPA (the "Additional Pre-Paid Advance"), to be evidenced by convertible promissory notes (the "Additional Promissory Notes") in two tranches, (ii) amend the maturity date for the EVTV-1 Promissory Note to March 9, 2026, and (iii) amend the floor price for the EVTV-1 Promissory Note to $0.7130 per share.

The Additional Promissory Notes accrue interest on the outstanding principal balance at an annual rate equal to 5%, which will increase to an annual rate of 18% upon the occurrence of an Event of Default (as defined in the Additional Promissory Notes) or a Registration Event (as defined in the Additional Promissory Notes) for so long as such event remains uncured. The Additional Promissory Notes will mature on March 9, 2026, which may be extended at the option of the Investor. The Additional Promissory Notes are convertible at a conversion price equal to the lower of (i) $10.00 per share or (ii) 93% of the lowest daily VWAP during the five consecutive trading days immediately preceding the conversion date (but no lower than the "floor price" then in effect, which is $0.7130 per share, subject to adjustment from time to time in accordance with the terms contained in the Additional Promissory Notes).

The first tranche of the Additional Pre-Paid Advance was disbursed on February 25, 2025 in the principal amount of $3 million (with net proceeds to us of approximately $2.7 million after deducting discounts and fees) as evidenced by an Additional Promissory Note issued by us to the Investor on February 24, 2025 (the "EVTV-3 Additional Promissory Note"). During 2025, the obligation under the EVTV-3 Additional Promissory Note in the principal amount of $3 million was partially satisfied through the conversion of the EVTV-3 Additional Promissory Note into shares of our common stock. As a result of this conversion, 2,134,613 shares of our common stock were issued at a weighted average price of $1.51. The remaining principal balance of the EVTV-3 Additional Promissory Note on December 31, 2025, was $50,000. During the first quarter of 2026, the remaining obligation under the EVTV-3 Additional Promissory Note was fully satisfied through the conversion of the EVTV-3 Additional Promissory Note into shares of our common stock, resulting in 189,093 shares of our common stock being issued at a weighted average price of $0.55.

The second tranche of the Additional Pre-Paid Advance in the principal amount of $2 million (with net proceeds of approximately $1.8 million after deducting discounts and fees) was disbursed to us on May 7, 2025 (the "EVTV-4 Additional Promissory Note"). During 2025, the obligation under the EVTV-4 Additional Promissory Note in the principal amount of $2 million was fully satisfied through the conversion of the EVTV-4 Additional Promissory Note into shares of our common stock. As a result of this conversion, 1,163,731 shares of our common stock were issued at a weighted average price of $1.51. The principal balance of the EVTV-4 Additional Promissory Note was zero on December 31, 2025.

Debenture Financing

Debentures, in each case, plus accrued and unpaid interest, in cash, beginning on the earlier of the 30th calendar day following the effectiveness of the Resale Registration Statement or June 6, 2026, with all remaining outstanding principal plus accrued and unpaid interest due in full on the Maturity Date. Any outstanding principal amount of, and accrued and unpaid interest on, the Debentures as of the Maturity Date will be due and payable on the Maturity Date.

The Debentures provide us with an optional redemption right pursuant to which we, at any time, may redeem in cash, in whole or in part, all amounts outstanding under the Debentures prior to the Maturity Date. The redemption amount shall be equal to the outstanding principal balance of the Debentures being redeemed by us, plus all accrued and unpaid interest thereon as of such redemption date.

Capital Expenditures

We do not have any contractual obligations for ongoing capital expenditures at this time. We do, however, purchase equipment necessary to conduct our operations on an as needed basis and will continue increasing those expenditures as we transfer assembly and corporate functions to the Houston, Texas facility.

Contractual Obligations

Other than as disclosed in the consolidated financial statements in Item 8 of this Annual Report, we have no contractual obligations.

Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

Indemnification Agreements

As we have generated sales, we have provided customers with indemnification of varying scope against claims of intellectual property infringement by third parties arising from the use of our products. We do not estimate the costs related to these indemnification provisions to be significant and are unable to determine the maximum potential impact of these indemnification provisions on our future results of operations. In addition, we have directors and officers liability coverage to further mitigate our indemnification exposure. No demands have been made upon us to provide indemnification and there are no claims that we are aware of that could have a material effect on our consolidated balance sheet, consolidated statement of operations, or consolidated cash flows.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with GAAP. The preparation of our consolidated financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, costs and expenses, and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.

We define our critical accounting policies as those accounting principles generally accepted in the United States of America that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations as well as the specific manner in which we apply those principles. No critical accounting policies existed at December 31, 2025.

Smaller Reporting Company Status

We are a "smaller reporting company" as defined in Rule 12b-2 under the Exchange Act. We may continue to be a smaller reporting company if either (i) the market value of our shares held by non-affiliates is less than $250 million or (ii) our annual revenue is less than $100 million during the most recently completed fiscal year and the market value of our shares held by non-affiliates is less than $700 million as of the last business day of our most recently completed second fiscal quarter. We may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including reduced disclosure about our executive compensation arrangements.

Recent Accounting Pronouncements

For information with respect to new accounting pronouncements and the impact of these pronouncements on our consolidated financial statements, see Note 1 to our consolidated financial statements contained in Item 8, Part II of this Annual Report.

Recently Adopted Accounting Pronouncements

ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures"

In December 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("ASU 2023-09"), which requires public entities, on an annual basis, to provide disclosure of specific categories in the reconciliation of the effective tax rate, as well as disclosure of income taxes paid, disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU 2023-09 on a prospective basis. The adoption did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Pronouncements Not Yet Adopted

ASU No. 2024-03, "Income Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses"

In November 2024, the FASB issued ASU 2024-03, Income Statement (Subtopic 220-40): Disaggregation of Income Statement Expenses ("ASU 2024-03"), which requires additional information about certain expenses in the notes to the financial statements. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2024-03 and will adopt the guidance when it becomes effective on a prospective basis.