Arrive AI Inc.: Form 10-Q for the period ended Jun 30, 2026

The following discussion and analysis is intended as a review of significant factors affecting our financial condition and results of operations for the periods indicated. The discussion should be read in conjunction with our unaudited financial statements and the notes presented herein included in this Form 10-Q and the audited financial statements and the other information set forth in our Annual Report on Form 10-K for the year ended December 31, 2025. Please also see the note entitled “Cautionary Note Regarding Forward-Looking Statements” elsewhere in this Quarterly Report on Form 10-Q.

Company Overview

Arrive AI pioneered the smart mailbox for drone deliveries, evolving into a leader in the Autonomous Last Mile (“ALM”). Today, we are transforming last-mile logistics by enabling secure, seamless exchanges between drones, robots, and people. Our mission is to connect these systems through a universal ALM network of Arrive Points™—smart lockers and mini-cross-docks—powered by an AI-driven ALM platform. This network unlocks exceptional efficiency, accelerating adoption in medical, retail, e-commerce, and beyond, making Arrive AI the intelligent choice for the final inch of automated delivery.

Our patented Arrive Points™ deliver a smart, secure, and seamless solution for automated last-mile delivery. These innovative docks streamline exchanges by eliminating manual intervention and technical barriers, ensuring efficient data validation and synchronization. With robust security, precise tracking, and support for diverse goods—including temperature-controlled options for food and medicine—Arrive Points enhance chain of custody and product integrity. By bridging physical and digital interfaces, they are paving the way for scalable, fully autonomous delivery networks.

We expect to have three primary revenue streams:

1. The Company is currently generating revenue through subscription services for Arrive Points, along with installation, support, and infrastructure agreements with customers. We intend to provide our ALM access points to both businesses and consumers through monthly and annual subscription fees. This turnkey service includes hardware, software, support, maintenance, installation/uninstallation, and financing for long-term deployed assets. Our third-generation Arrive Points (“AP3” units), began revenue operation in 2025

2. Data monetization via models and insights generated by machine learning and artificial intelligence (“ML” and “AI”). Machine learning facilitates our systems’ ability to learn and improve from experience using data patterns, while artificial intelligence encompasses broader capabilities and models to simulate human intelligence and decision-making. We plan to use both technologies distinctly:

a. Machine learning: Primarily expected to be deployed in our fourth and fifth-generation Arrive Points (“AP4” and “AP5” units) for local IoT (Internet of Things) data processing, edge computing (inferencing) for environment and transactional models, and interactions models for drones and robots.

b. Artificial intelligence: Used more broadly to analyze and derive insights from our network’s transactional and environmental data through complex AI models, but we will also leverage foundational AI models like ChatGPT or LLaMa for device-based human interactions.

3. Arrive Point Exchange. Our network of Arrive Points, the supporting software and AI plus ML, collectively create a platform that is intended to provide valuable services and insights to all stakeholders in the ALM ecosystem. For example, our automated delivery marketplace (“ADM”) will use a Google-AdSense-like market to help prioritize and optimize high-demand access schedules and space availability for our access point network. This platform will provide a broad array of critical functions for the ALM ecosystem including arrival/departure scheduling, space optimization, smart delivery notifications, micro weather conditions, local restrictions, transactional status updates, and automation issues/obstacles. These advanced capabilities will be introduced in our AP5 development and pilot program currently in development.

We differentiate ourselves through a comprehensive, integrated solution:

• Universal Compatibility: Our multi-generational Arrive Points (AP3, AP4, AP5) are being developed for universal support of all drone and robotic delivery systems, overcoming a major hurdle for widespread ALM adoption.
• End-to-End Solution: We will combine advanced hardware with a powerful software platform and AI/ML capabilities, offering a complete ecosystem for automated exchange.
• Early Market Penetration: We have already secured pilot programs with significant customers, including a regional hospital and a specialty pharmaceutical delivery company, demonstrating early validation and learning opportunities for sustainable economics.

Capitalization and Dilution

As of June 30, 2026, we had 51,859,347 shares outstanding. On a fully diluted basis, including outstanding warrants (exercisable for 28,252 shares), options (exercisable for 607,068 shares), and restricted stock units (4,730,248 shares) our total share count is 57,224,915. Additionally, under the Streeterville Purchase Agreement (the “Purchase Agreement”), approximately 16,090,884 shares may be issuable at a discount to the market price upon conversion of the outstanding principal and interest as of June 30, 2026. The Purchase Agreement also specifies the re-purchase of 2,937,500 outstanding pre-delivery shares at par value upon expiration or termination of the agreement.

The table below illustrates potential dilution under different conversion scenarios (unaudited):

Scenario

(1) Amount assumes conversion of outstanding principal and interest as of June 30, 2026, using the conversion price calculated from the minimum ten-day volume-weighted average price on June 30, 2026.

The share amounts shown above represent the period-end shares on a fully diluted basis. These potential issuances could materially dilute existing stockholders, particularly if conversion occurs at depressed share prices.

Recent Developments

Standstill Agreement

On May 14, 2026, we entered into a Standstill Agreement (the “Standstill Agreement”) with Streeterville Capital, LLC, a Utah limited liability company (the “Investor”). The Standstill Agreement was entered into in connection with that certain Securities Purchase Agreement, dated March 21, 2025, by and between us and the Investor (the “Purchase Agreement” and, together with all other documents entered into in connection therewith, the “Transaction Documents”), pursuant to which we previously sold and issued to the Investor a series of Pre-Paid Purchases.

Pursuant to the Standstill Agreement, the Investor has agreed, subject to certain conditions, to refrain from delivering Purchase Notices to us under any outstanding Pre-Paid Purchases for the period beginning on May 14, 2026 and ending on December 31, 2026 (the “Standstill Period”). Notwithstanding the foregoing, the Investor may submit purchase notices during the Standstill Period on any trading day on which our shares of common stock trade at a price that is at least fifteen percent (15%) greater than the Nasdaq Minimum Price (as defined under Nasdaq Rule 5635(d)) for such trading day.

Except as set forth in the Standstill Agreement, each outstanding pre-paid purchase remains in full force and effect in accordance with its terms. The Standstill Agreement will terminate upon the occurrence of any material breach of the Standstill Agreement by us or any event of default under any Transaction Document, at which time the Investor shall have the right to submit Purchase Notices in accordance with the applicable outstanding Pre-Paid Purchases. No additional cash or other property consideration was exchanged in connection with the Standstill Agreement.

The foregoing description of the Standstill Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Standstill Agreement, a copy of which was filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 18, 2026, and is incorporated herein by reference.

Equity Distribution Agreement

On June 11, 2026, the Company entered into an Equity Distribution Agreement (the “Sales Agreement”) with Maxim Group LLC (“Maxim”), to sell shares of its common stock, par value $0.0002 per share (the “Shares”), having an aggregate offering price of up to $14,967,247, from time to time, through an “at the market offering” program under which Maxim, acting as sales agent, will offer and sell the Shares. The Company will pay Maxim a commission rate equal to 2.5% of the gross sales price from each sale of Shares. The Sales Agreement contains customary representations and warranties and conditions to the sale of the Shares.

The Company is not obligated to sell any of the Shares under the Sales Agreement and may at any time suspend sales thereunder. The Sales Agreement may be terminated by the Company with five days’ notice following six months from the date of the Sales Agreement, or by Maxim with five days’ notice at any time, or earlier under certain circumstances.

The Shares will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-296392) filed by the Company with the SEC and declared effective by the SEC on June 11, 2026 (the “Registration Statement”). The Company filed a prospectus supplement (the “Prospectus Supplement”), dated June 12, 2026, to the Registration Statement with the SEC in connection with the offer and sale of the Shares.

The foregoing description of the Sales Agreement is not complete and is qualified in its entirety by reference to the full text of such agreement, a copy of which is filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on June 12, 2026, and is incorporated herein by reference.

Departure of Chief Financial Officer and Director

On July 27, 2026, Todd Pepmeier, Chief Financial Officer of the Company, notified the Company of his resignation from his position as Chief Financial Officer, effective August 10, 2026.

On July 29, 2026, Laurie Tucker resigned from her position as a director of the Company. Ms. Tucker’s resignation was not the result of any disagreement with the Company on any matter relating to the Company’s operations, policies or practices.

Floor Price Trigger

On August 6, 2026, our VWAP fell below the Floor Price of $0.25 per share for at least five Trading Days within a seven consecutive Trading Day period, constituting a Floor Price Trigger under the SPA. As a result of this triggering event, we became obligated to make mandatory monthly cash repayments totaling $962,500, plus accrued and unpaid interest, beginning three Trading Days after the trigger date. These mandatory repayments consist of $550,000 under Pre-paid Purchase Agreement 2 and $412,500 under Pre-paid Purchase Agreement 3. These mandatory repayment obligations will continue until such time as our VWAP exceeds 120% of the Floor Price (i.e., $0.30 per share) for five consecutive Trading Days. There can be no assurance that this cure condition will occur.

The Company is currently in discussions with Streeterville regarding potential remediation of the obligations arising from the Floor Price Trigger. There can be no assurance that the Company and Streeterville will reach any agreement with respect thereto.

Appointment of Chief Financial Officer

On August 10, 2026, our Board of Directors appointed Piyush Phadke as our Chief Financial Officer, with his duties and responsibilities as Chief Financial Officer commencing as of August 17, 2026. Mr. Phadke brings more than 20 years of capital markets and investment banking experience, including senior roles at Bank of America, BTIG, and Jefferies. For a more complete description of Mr. Phadke’s appointment, please refer to our Current Report on Form 8-K filed on August 12, 2026, which is incorporated herein by reference.

Outlook And Challenges Facing Our Business

Dependence on Streeterville Financing

Our recent financings with Streeterville Capital involve pre-paid purchase agreements that permit the investor to acquire our common shares at a discount to market price. These arrangements may cause significant shareholder dilution and could exert downward pressure on our stock price. Certain triggers, including sustained declines in our share price, could accelerate cash repayment obligations, which we may not be able to meet.

Nasdaq Listing Compliance

On March 31, 2026, we received two separate notification letters from The Nasdaq Stock Market LLC (“Nasdaq”) indicating that we were not in compliance with certain continued listing requirements of The Nasdaq Global Market.

The first notification letter advised that we were not in compliance with Nasdaq Listing Rule 5450(b)(2)(C), which requires a minimum Market Value of Publicly Held Shares (“MVPHS Requirement”) of $15,000,000 for continued listing on The Nasdaq Global Market, as we failed to meet the MVPHS requirement for a period of 30 consecutive business days from February 11, 2026 to March 31, 2026. The second notification letter advised that we were not in compliance with Nasdaq Listing Rule 5450(b)(2)(A), which requires a minimum Market Value of Listed Securities (“MVLS Requirement”) of $50,000,000 for continued listing on The Nasdaq Global Market, as we failed to meet the MVLS requirement for a period of 30 consecutive business days from February 10, 2026 to March 30, 2026.

Both notification letters afforded us 180 calendar days, or until September 28, 2026, to regain compliance. The notification letters were previously described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed with the SEC on April 15, 2026.

Both deficiencies were outstanding as of March 31, 2026. Subsequent to March 31, 2026, we regained compliance with the MVPHS Requirement. On April 24, 2026, Nasdaq notified us that we had regained compliance with Nasdaq Listing Rule 5450(b)(2)(C), and that this matter is now closed. We disclosed this development in a Current Report on Form 8-K filed with the SEC on April 28, 2026.

The MVLS deficiency remains outstanding as of the date of this filing. We continue to monitor our MVLS and intend to regain compliance prior to the September 28, 2026 deadline, though there can be no assurance that we will be able to do so. If we do not regain compliance by September 28, 2026, Nasdaq may initiate delisting proceedings, and our common stock could be subject to suspension and delisting from The Nasdaq Global Market. Our common stock continues to trade on Nasdaq under the symbol “ARAI,” and the outstanding MVLS deficiency notice has no immediate effect on the listing or trading of our common stock.

On June 2, 2026, we received an additional deficiency letter from Nasdaq notifying us that, based upon the closing bid price of our common stock for the last 30 consecutive business days, we are not in compliance with the minimum bid price requirement of $1.00 per share for continued listing on The Nasdaq Global Market, as set forth in Nasdaq Listing Rule 5450(a)(1) (the “Minimum Bid Price Requirement”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A), we have 180 calendar days, or until November 30, 2026, to regain compliance. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days prior to November 30, 2026.

If we do not regain compliance by November 30, 2026, we may be eligible for a second 180-day compliance period. However, such eligibility requires that we apply to transfer our listing from The Nasdaq Global Market to The Nasdaq Capital Market and that we meet all applicable initial listing standards for The Nasdaq Capital Market, other than the minimum bid price requirement, at the time of any such application. There can be no assurance that we would meet those standards or that Nasdaq would approve any such transfer. If we do not regain compliance within the first 180-day period and are not eligible for or do not obtain a second compliance period, Nasdaq will provide notice that our common stock will be subject to delisting, and we would be entitled to appeal that determination to a Nasdaq hearings panel.

The Minimum Bid Price deficiency notice has no immediate effect on the listing or trading of our common stock, which continues to trade on Nasdaq under the symbol “ARAI.” We intend to actively monitor our common stock bid price and evaluate available options to regain compliance, including the potential use of a reverse stock split, though there can be no assurance that we will be able to do so within the allotted compliance period.

Subsequent to June 30, 2026, on July 21, 2026, we received a new notification letter from Nasdaq advising that we were again not in compliance with the MVPHS Requirement under Nasdaq Listing Rule 5450(b)(2)(C), as we failed to meet the $15,000,000 minimum Market Value of Publicly Held Shares for 32 consecutive business days from June 3, 2026 to July 20, 2026. This is a renewed deficiency under the same rule for which we previously regained compliance, as described above. We have 180 calendar days, or until January 19, 2027, to regain compliance, which requires the MVPHS to equal or exceed $15,000,000 for a minimum of 10 consecutive business days prior to that date. If we do not regain compliance by that date, we may consider applying to transfer our listing to The Nasdaq Capital Market, subject to meeting that market’s initial listing standards. The notification letter has no immediate effect on the listing or trading of our common stock, which continues to trade on Nasdaq under the symbol “ARAI.”

As of the date of this Quarterly Report, we therefore have three separate outstanding Nasdaq continued listing deficiencies: the MVLS deficiency (cure deadline September 28, 2026), the Minimum Bid Price deficiency (cure deadline November 30, 2026), and the renewed MVPHS deficiency (cure deadline January 19, 2027).

Controlled Company Status

The Company ceased to be a “controlled company” within the meaning of the listing rules of The Nasdaq Stock Market LLC on or around April 9, 2026, and is permitted to continue to rely on exemptions from certain Nasdaq corporate governance requirements within a year following such date, including the requirement that a majority of the Board consist of independent directors and the requirement that the compensation and nominating committees be composed entirely of independent directors. The Company currently relies on these exemptions.

Notwithstanding these exemptions, the Company maintains an Audit and Finance Committee composed entirely of independent directors in accordance with applicable Nasdaq and SEC requirements.

Customer Concentration

Our revenues to date have been derived from a limited number of customers. In the six months ended June 30, 2026, more than 90% of our total revenue came from a single customer. If we are unable to expand our customer base and generate recurring subscription revenue, our results of operations will remain highly volatile.

Intellectual Property

We rely on patented and non-patented proprietary information relating to product development, manufacturing capabilities, and other core competencies of our business. Protection of intellectual property is critical. Therefore, steps such as additional patent applications, confidentiality, and non-disclosure agreements, as well as other security measures are important. While we believe we have a strong patent portfolio and there is no actual or, to our knowledge, threatened litigation against us for patent-related matters, litigation or threatened litigation is a common method to effectively enforce or protect intellectual property rights. Such action may be initiated by or against us and would require significant management time and expenses.

Supply Chain Constraints

We cannot be sure whether global supply chain shortages will impact our future plans. In order to mitigate supply chain risks, we may need to incur higher costs to secure available inventory and place non-cancelable purchase commitments with our suppliers, which could introduce inventory risk if our forecasts and assumptions prove inaccurate. Higher costs of components would impact our cash runway and delays in the manufacturing of our Arrive Points would push out our revenue forecasts.

Governmental and Regulatory Conditions

Our potential for growth depends on continued permission and acceptance by local governments and municipalities of autonomous robot and drone deliveries. Changes in regulations such as restrictions on autonomous vehicle operation or technical requirements such as size and weight restrictions or limitations on autonomy within a certain geographic area could reduce or limit our ability to generate revenues and/or impact our unit economics in those markets.

Components of Results of Operations

Revenue. Revenue consists of consulting services, installation services and subscription fees. Consulting services, and installation fees are typically project-based and non-recurring in nature. Subscription services are recurring and paid either up-front or monthly for an annual term. We anticipate these revenue streams to continue in future quarters while we develop new revenue models for the autonomous delivery marketplace and AI data insight monetization.

General and Administrative Expenses. General and administrative expenses primarily consist of personnel-related costs, legal and professional services, rent, information technology expenses, insurance, general corporate expenses as well as depreciation on property and equipment as well as amortization of right of use assets.

Research and Development Expenses. Costs incurred in the research and development of the Company’s products are expensed as incurred. Research and development costs include product design, hardware and software costs.

Sales and Marketing Expenses. Sales and marketing expenses include advertising, marketing, trade shows and travel.

Interest Expense. Interest expense consists of interest on notes payable, finance and leasing instruments, and amortization of debt issuance costs.

Other Income, Net. Other income includes payroll tax refunds earned under the federal research and development (“R&D”) tax credit program, state tax refunds from Indiana EDGE tax credits, funds from grants, and dividend and interest income.

Change in Fair Value of Derivative Liabilities. Change in fair value of derivative liabilities consists of non-cash gains and losses arising from the remeasurement of bifurcated derivative liabilities associated with the Company’s convertible notes at each reporting date and conversion date using a Monte Carlo simulation model.

Accretion of Debt Discount. Accretion of debt discount consists of the non-cash accretion of the combined discount on the host convertible note instruments, comprising original issue discount, the fair value of each bifurcated derivative at issuance, and allocable debt issuance costs, recognized using the effective interest method over the estimated term of the notes.

Loss on Conversion of Convertible Notes Payable. Loss on conversion of convertible notes payable consists of losses recognized upon the conversion of convertible notes principal into common stock, representing the difference between the net carrying value of the debt retired less consideration transferred.

Realized Gain (Loss) on Investments. Realized gain (loss) on investments consists of net gains and losses recognized upon the sale or settlement of exchange-traded equity securities and options held as part of the Company’s strategy to generate short-term returns on excess cash.

Unrealized Gain (Loss) on Investment. Unrealized gain (loss) on investments consists of net gains and losses on exchange-traded equity securities and options that have not yet been sold or settled as of period end. These are held as part of the Company’s strategy to generate short-term returns on excess cash.

Results of Operations

Comparison of the Three Months Ended June 30, 2026, and June 30, 2025

Financial Overview

For the three months ended June 30, 2026 and 2025, we generated revenues of $14,700 and $90,725, respectively, and reported net loss of $14,076,388 and $3,689,071, respectively. During the three months ended June 30, 2026, operating expenses reflect growing investment in the size of our team for product development, engineering and marketing activities. During the three months ended June 30, 2026, other expenses reflect the activities associated with our convertible notes payable facility.

Revenues

During the three months ended June 30, 2026, we recognized total revenues of $14,700 for monthly subscriptions to the Arrive Point network.

During the three months ended June 30, 2025, we recognized total revenues of $90,725. Of this $89,000 was for design and consulting services, $1,500 for installation fees, and $225 for monthly subscriptions.

Operating Expenses

General and administrative expenses were $4,048,851 for the three months ended June 30, 2026, an increase of $574,792, as compared to the three months ended June 30, 2025. Primary components of general and administrative expenses were:

• Salaries and benefits in total decreased by $144,794 from the prior year. Bonus expense decreased by $1,865,131 from the same period in the prior year due to a large one-time bonus paid in the 2025 period related to the direct listing. Base salaries for the three months ended June 30, 2026 were $1,665,023, an increase of $1,497,896 from the same period in the prior year due to new hiring in product development, engineering, and sales and marketing. As of June 30, 2026, the Company had 50 full-time salaried employees, compared to six as of June 30, 2025. Stock-based compensation for the three months ended June 30, 2026 was $802,289, an increase of $120,720 from the same period in the prior year due to option and stock award plans granted to employees and directors. Benefits and payroll taxes increased $101,721 due to the increase in employees.
• Legal and professional service fees were $842,167 for the three months ended June 30, 2026, an increase of $330,728 from the same period in the prior year due to higher general corporate legal fees of $306,861, offset by a decrease in legal expenses related to patents of $15,335, and lower legal fees related to being a public company of $72,730. Audit, accounting, and related fees increased by $218,290, and other professional fees decreased by $106,338.
• Insurance expense was $70,687, an increase of $16,193 from the same period in the prior year, due to higher directors and officers insurance premiums.
• Rent increased $158,887 from the same period in the prior year, as a result of entering into a new office building that will accommodate the increase in employees and growth and the leasing of delivery robots.
• Information technology and subscriptions expense was $110,148, an increase of $75,006 from the same period in the prior year, due to onboarding a new service provider as well as the increase in employees.
• Depreciation expense increased by $55,247 from the same period in the prior year due to a higher capital expenditures in the last twelve months.
• The remaining increase of $83,528 from the same period in the prior year is made up of immaterial individual increases.

Research and Development expenses were $346,541 for the three months ended June 30, 2026, an increase of $53,073 as compared to the same period in the prior year. This is primarily due to the increase of engineering projects resulting in an increase in expense of $163,466, offset by lower independent contractor spend of $110,394.

Sales and marketing expenses were $72,064 for the three months ended June 30, 2026, an increase of $22,462 from the same period in the prior year. The increase is due to increased advertising expenses of $23,204, increase in trade show expense of $398, offset by a decrease in travel and meals and entertainment expense of $1,140.

Other Income/Expenses

Interest expense of $153,476 for the three months ended June 30, 2026 was comprised primarily of stated interest on the convertible note of $133,074, and amortization of debt issuance costs of the convertible notes payable of $14,908. Other miscellaneous interest expense and bank fees were $5,492 during the three months ended June 30, 2026. Interest expense and bank fees for the three months ended June 30, 2025 were $2,212.

Other Income of $150,879 for the three months ended June 30, 2026 was primarily recognized from R&D Tax Credits of $94,589 and dividend and interest income of $56,290. Other income of $43,151 for the three months ended June 30, 2025 was recognized from the Indiana EDGE tax credits.

Change in fair value of derivative liabilities resulted in a non-cash gain of $93,053 for the three months ended June 30, 2026, a decrease of $96,947 compared to the same period gain of $190,000 in 2025. The embedded conversion feature of each convertible note was bifurcated as a derivative liability at issuance under ASC 815 due to the path-dependent lookback formula used to determine the conversion price. Each derivative is remeasured at fair value using a Monte Carlo simulation model at each reporting and conversion date, with changes recognized in earnings. The gain reflects the decline in the Company’s stock price from each issuance date to June 30, 2026, which reduced the expected value of the noteholder’s conversion optionality.

Accretion of debt discount resulted in a non-cash charge of $128,946 in 2026, an increase of $101,208 compared to the same period in 2025, representing EIM accretion of the combined discount on the host convertible note instruments, consisting of original issue discount, the fair value of each bifurcated derivative at issuance, and allocable debt issuance costs, over the estimated three-year expected term of the notes.

Loss on conversion of convertible notes payable of $9,696,797 for the three months ended June 30, 2026 resulted from the issuance of common stock for the conversion of convertible notes payable, an increase of $9,696,797 compared to the same period in 2025. Under ASC 470-50, each conversion was treated as a debt conversion, and the loss represents the difference between the net carrying value converted and the fair value of common stock issued.

Realized losses on investments were $123,506, and unrealized gains were $241,136 for the three months ended June 30, 2026. During the quarter, the Company engaged in short-term investment activities, primarily options, resulting in a realized gain of $504,112 and unrealized loss of $26,500. The Company’s short-term investments, primarily in marketable securities, contributed a realized loss of $627,618 and an unrealized gain of $267,636 for the quarter. These activities are part of the Company’s strategy to generate short-term returns on excess cash.

Loss on disposal of fixed assets was $5,974 and was the result of a partially depreciated Arrive Point taken out of service.

Comparison of the Six Months Ended June 30, 2026, and June 30, 2025

Financial Overview

For the six months ended June 30, 2026 and 2025, we generated revenues of $29,625 and $90,725, respectively, and reported net loss of $20,446,633 and $5,667,236, respectively. During the six months ended June 30, 2026, operating expenses reflect growing investment in the size of our team for product development, engineering and marketing activities. During the six months ended June 30, 2026, other expenses reflect the activities associated with our convertible notes payable facility.

Revenues

During the six months ended June 30, 2026, we recognized total revenues of $29,625 for monthly subscriptions to the Arrive Point network.

During the six months ended June 30, 2025, we recognized total revenues of $90,725. Of this $89,000 was for design and consulting services, $1,500 for installation fees, and $225 for monthly subscriptions.

Operating Expenses

General and administrative expenses were $8,258,917 for the six months ended June 30, 2026, an increase of $2,889,879, as compared to the six months ended June 30, 2025. Primary components of general and administrative expenses were:

• Salaries and benefits in total increased by $1,288,491 from the prior year. Base salaries for the six months ended June 30, 2026 were $3,210,990, an increase of $2,811,804 from the same period in the prior year due to new hiring in product development, engineering and sales and marketing. As of June 30, 2026, the Company had 50 full-time salaried employees, compared to six as of June 30, 2025. Benefits and payroll taxes increased $287,063 due to the increase in employees. Bonus expense decreased by $1,623,731 from the same period in the prior year due to a large one-time bonus paid in the 2025 period related to the direct listing of $1,866,532. Stock-based compensation for the six months ended June 30, 2026 was $1,846,078, a decrease of $186,645 from the same period in the prior year due to option and stock award plans granted to employees, directors, and consultants.
• Legal and professional service fees were $1,531,415 for the six months ended June 30, 2026, an increase of $819,774 from the same period in the prior year due to higher general corporate legal fees of $454,365, offset by a decrease in legal expenses related to patents of $24,515, and a decrease in legal expenses related to being a public company of $512. Audit, accounting, and related fees increased by $466,576, and other professional fees decreased $76,140.
• Insurance expense was $127,794, an increase of $53,162 from the same period in the prior year, due to higher directors and officers insurance premiums.
• Rent increased $319,275 from the same period in the prior year, as a result of entering into a new office building that will accommodate the increase in employees and growth and the leasing of delivery robots.
• Information technology and subscriptions expense was $210,099, an increase of $153,772 from the same period in the prior year, due to onboarding a new service provider as well as the increase in employees.
• Depreciation expense increased by $103,855 from the same period in the prior year due to a higher capital expenditures in the last twelve months.
• The remaining increase of $155,366 from the same period in the prior year is made up of immaterial individual increases.

Research and Development expenses were $703,614 for the six months ended June 30, 2026, an increase of $318,883 as compared to the same period in the prior year. This is primarily due to an increase in engineering projects resulting in an increase in expense of $359,670, offset by lower independent contractor spend of $40,787.

Sales and marketing expenses were $183,414 for the six months ended June 30, 2026, an increase of $126,152 from the same period in the prior year. The increase is due to increased advertising expenses of $49,976, travel and meals and entertainment expense increase of $60,401, and trade show expense increase of $15,776.

Other Income/Expenses

Interest expense of $515,346 for the six months ended June 30, 2026 was comprised primarily of the immediate expensing of the debt issuance costs associated with the bifurcated derivative of $92,400, stated interest on the convertible note of $372,940, and amortization of debt issuance costs of the convertible notes payable of $41,527. Other miscellaneous interest expense and bank fees were $8,479 during the six months ended June 30, 2026. Interest expense and bank fees for the six months ended June 30, 2025 was $169,257.

Other Income of $328,668 for the six months ended June 30, 2026 was recognized from disgorged short-swing profits from two executive officers of $129,701, R&D Tax Credits of $94,589, and dividend and interest income of $104,378. Other income of $60,066 for the six months ended June 30, 2025 was recognized from the Indiana EDGE tax credits.

Change in fair value of derivative liabilities resulted in a non-cash gain of $1,222,822 for the six months ended June 30, 2026, an increase of $1,032,822 compared to the same period gain of $190,000 in 2025. The embedded conversion feature of each convertible note was bifurcated as a derivative liability at issuance under ASC 815 due to the path-dependent lookback formula used to determine the conversion price. Each derivative is remeasured at fair value using a Monte Carlo simulation model at each reporting and conversion date, with changes recognized in earnings. The gain reflects the decline in the Company’s stock price from each issuance date to June 30, 2026, which reduced the expected value of the noteholder’s conversion optionality.

Accretion of debt discount resulted in a non-cash charge of $379,915 for the six months ended June 30, 2026, an increase of $352,177 compared to the same period in 2025, representing EIM accretion of the combined discount on the host convertible note instruments, consisting of original issue discount, the fair value of each bifurcated derivative at issuance, and allocable debt issuance costs, over the estimated three-year expected term of the notes.

Loss on conversion of convertible notes payable of $12,042,410 for the six months ended June 30, 2026 resulted from the issuance of common stock for the conversion of convertible notes payable. This was an increase of $12,042,410 compared to the same period in 2025. Under ASC 470-50, each conversion was treated as a debt conversion, and the loss represents the difference between the net carrying value converted and the fair value of common stock issued.

Realized gains on investments were $322,818, and unrealized losses were $260,976 for the six months ended June 30, 2026. During the six months ended June 30, 2026, the Company engaged in short-term investment activities, primarily options, resulting in a realized gain of $1,081,082 and unrealized losses of $26,500. The Company’s short-term investments, primarily in marketable securities, contributed a realized loss of $758,264 and an unrealized loss of $234,476 for the six months ended June 30, 2026. These activities are part of the Company’s strategy to generate short-term returns on excess cash.

Loss on disposal of fixed assets was $5,974 and was the result of a partially depreciated Arrive Point taken out of service.

Liquidity and Capital Resources

Liquidity

As of June 30, 2026, the Company had cash and cash equivalents of approximately $2,976,535 and short-term investments of approximately $2,160,954.

As disclosed in Note 10 of the financial statements, the Company is party to a convertible note payable financing arrangement with Streeterville (the “Streeterville Facility”), which initially provided a maximum facility of up to $40,000,000 in gross borrowings, subject to the terms and conditions of the agreement. As of June 30, 2026, the remaining undrawn capacity under the facility is $19,000,000. The convertible note payable includes limitations that may restrict additional borrowings, including (i) a limitation on total outstanding indebtedness and (ii) a minimum market capitalization requirement of $100 million and (iii) a minimum book value of $4 million at the time of a draw. Availability under this facility is subject to the Company’s ability to satisfy these conditions, or the investor’s continued practice of extending funds, despite certain conditions not being met.

On June 11, 2026, the Company entered into an Equity Distribution Agreement with Maxim Group LLC providing for an at-the-market offering program under which the Company may sell shares of common stock with an aggregate offering price of up to $14,967,247. Sales under the ATM program are subject to market conditions, the trading price and volume of the Company’s common stock, and the continued effectiveness of the registration statement, and there can be no assurance as to the amount or timing of proceeds, if any.

Going Concern

The accompanying Financial Statements in Item 1 have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In accordance with ASC 205-40, Presentation of Financial Statements - Going Concern, management evaluated whether conditions or events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued.

The Company has incurred recurring operating losses and has experienced negative cash flows from operations since inception and expects to continue to do so as it invests in product development, commercialization, and infrastructure. These conditions, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans to address its liquidity needs include: (i) utilizing existing cash and cash equivalents of $2,976,535 as of June 30, 2026, (ii) Liquidating $2,160,954 of existing short-term investments, (iii) accessing additional capital under the Company’s shelf registration statement on Form S-3, where the Company may sell shares of common stock with an aggregate offering price of up to $14,967,247, and (iv) potentially drawing additional amounts under the Securities Purchase Agreement with Streeterville, which provides up to an additional $19.0 million in gross borrowings, subject to certain conditions including a limitation on total outstanding indebtedness, a minimum market capitalization of $100 million and a minimum book value of $4 million at the time of each draw. The Company’s ability to access these funds is dependent on satisfying these conditions or obtain a waiver from Streeterville, if granted.

The Company’s ability to continue as a going concern is dependent upon its ability to execute its operating plan and obtain additional financing, whether through additional borrowings under the Securities Purchase Agreement (“SPA”)or other debt or equity financings. There can be no assurance that the Company will be able to access funds under the SPA or obtain additional debt or equity financing. Accordingly, substantial doubt about the Company’s ability to continue as a going concern is not alleviated by management’s plans. The accompanying Financial Statements do not include any adjustment that might result from the Company’s inability to continue as a going concern.

Subsequent to June 30, 2026, on August 6, 2026, our VWAP fell below the Floor Price of $0.25 per share for at least five Trading Days within a seven consecutive Trading Day period, constituting a Floor Price Trigger under the SPA. As a result of this triggering event, we became obligated to make mandatory monthly cash repayments totaling $962,500, plus accrued and unpaid interest, beginning three Trading Days after the trigger date. These mandatory repayments consist of $550,000 under Pre-paid Purchase Agreement 2 and $412,500 under Pre-paid Purchase Agreement 3. These mandatory repayment obligations will continue until such time as our VWAP exceeds 120% of the Floor Price (i.e., $0.30 per share) for five consecutive Trading Days. There can be no assurance that this cure condition will occur. The Company is currently in discussions with Streeterville regarding potential remediation of the obligations arising from the Floor Price Trigger. There can be no assurance that the Company and Streeterville will reach any agreement with respect thereto.

As of August 13, 2026, the Company’s cash, cash equivalents, and short-term investments are approximately $3 million.

Cash Flow and Liquidity

Operating Activities

Net cash used in operating activities was $6,257,843 for the six months ended June 30, 2026, compared to $3,799,494 for the same period in 2025. The increase in cash outflows of $2,458,349 was primarily due to our increased net loss.

For the six months ended June 30, 2026, our net loss of $20,446,633 was offset by non-cash items of stock-based compensation expense of $1,846,078, depreciation and amortization expense of $121,553, loss on conversion of convertible notes payable of $12,042,410 the accretion of a discount on the convertible notes payable of $379,915, the accretion of issuance costs on convertible notes payable of $133,927, unrealized loss on investments of $260,976, and other non-cash items of $16,515. These are offset by the change in fair value of derivative liabilities of $1,222,822 and the realized gain on investments of $322,818.

Other working capital movements in the period resulted in a positive net cash adjustment of $931,278, primarily due to an increase in accrued expenses of $1,408,768 and an increase in accounts payable of $65,618. This positive adjustment was offset by an increase in other assets of $235,624, an increase in prepaid expenses of $272,981, an increase to inventory of $29,378 and an increase in accounts receivable of $5,125.

For the six months ended June 30, 2025, net cash flow used in operating activities of $3,799,494 was composed of our net loss of $5,667,236 and the change in fair value of derivative liabilities of $190,000, offset by non-cash items of stock-based compensation expense of $2,032,723, depreciation and amortization of $17,118, the accretion of a discount on the convertible notes payable of $27,738, and accretion of issuance costs on convertible notes payable of $165,869. Other working capital movements in the period resulted in a net cash outflow of $185,706, primarily due to an increase in prepaid expenses of $141,431, accounts receivable of $89,075, and a reduction of accrued expenses of $17,302 partially offset by increases in accounts payable of $61,131.

Investing Activities

Net cash used for investing activities was $2,479,970 for the six months ended June 30, 2026. This was due to capital expenditures of $439,688. We also incurred a net cash outflow from sales and purchases of short-term investments of $2,040,282.

Net cash used for investing activities was $47,827 for the six months ended June 30, 2025. This was due to an increase in capital expenditures for Arrive Point units.

Financing Activities

Net cash provided by financing activities was $9,610,344 for the six months ended June 30, 2026. We received $10,000,000 in proceeds from issuance of convertible notes payable under the Purchase Agreement. These cash inflows were offset by payments made on an outstanding note payable of $4,486, payments for tax withholding for vested restricted stock units of $25,749, and payments of debt issuance costs of $400,000.

For the six months ended June 30, 2025, net cash provided by financing activities was $4,325,499, resulting from proceeds from the issuance of convertible note payable of $4,000,000 under the Streeterville Purchase Agreement, net proceeds of $444,360 from other sales of common stock, and $573,896 from exercise of outstanding warrants. These cash inflows were offset by payments made on the note payable of $4,187 and payments for deferred offering costs of $688,570.

Capital Expenditures

Capital expenditures for the six months ended June 30, 2026 and 2025 were $439,688 and $47,827, respectively. Our future capital expenditures will depend on many factors, including, but not limited to our growth, our ability to attract and retain customers, market acceptance of our offerings, the time and extent of spending to support our efforts to develop our platform, the expansion of sales and marketing activities, and the timing and extent of spending for initiatives. Further, we may in the future enter into arrangements to acquire or invest in businesses, products, services, and technologies. We may be required to seek additional equity or debt financing. If additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, our business, financial condition, and results of operations could be adversely affected.

Contractual Obligations/Indebtedness

To provide a clear picture of matters potentially impacting our liquidity position, the table below sets forth a summary of our contractual obligations as of June 30, 2026. Some of the figures included in this table are based on management’s estimates and assumptions about these obligations, including their duration, the possibility of renewal and other factors. Because these estimates and assumptions are necessarily subjective, the obligations we may actually pay in future periods could vary from those reflected in the table.

(1) Convertible notes payable principal represents borrowings under the Company’s security purchase agreement with Streeterville Capital. The note bears interest at 8% per annum with no set maturity date. The amounts presented represent outstanding principal as of June 30, 2026. The note is convertible into shares of common stock at a price determined pursuant to the agreement. Upon conversion, the obligation would be settled in equity rather than cash. As there is no stated maturity for the notes, the payments were presented in the less than 1 year category for this table.

(2) The Vehicle note payable matures in February 2027 and the Equipment note payable matures in June 2030. Both loans are secured by the related asset. The amounts presented represent scheduled principal.

(3) Operating lease obligations represent undiscounted fixed lease payments under the Company’s office lease in accordance with ASC 842. Variable lease payments and non-lease components are excluded.

(4) Interest related to notes payable primarily represents accrued interest at June 30, 2026 and projected contractual interest payments on the convertible note, assuming payment proportionately over 2026.

(5) The Company is party to an exclusive patent license agreement with its Chief Executive Officer, Daniel O’Toole, providing rights to certain patented technology through April 2040. The agreement requires fixed payments of $10,000 per month through the patent’s expiration. As of June 30, 2026, the remaining fixed commitment totals approximately $1,660,000. The agreement also provides for a $25 per unit royalty upon achievement of unit sales revenue milestones in excess of $10,000 a month. No royalties have been incurred to date, and future royalty obligations are not currently estimable due to the Company’s limited operating history and uncertain future sales volumes. The License Agreement constitutes a related-party transaction.

Critical Accounting Estimates

The preparation of our financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect reported amounts of assets, liabilities, revenues, and expenses, along with the disclosure of contingent assets and liabilities at the date of the financial statements. We consider an accounting estimate to be critical if it requires assumptions about highly uncertain matters and different estimates reasonably could have been used that would have had a material impact on our financial statements. We have identified the following critical accounting estimate.

Fair Value of Bifurcated Derivative Liabilities and Carrying Value of the Host Convertible Notes Payable

In connection with our convertible notes issued under the Securities Purchase Agreement with Streeterville Capital, LLC, we are required to bifurcate the embedded conversion feature and account for it as a derivative liability measured at fair value at each reporting date, with changes recognized in earnings. The conversion feature must be bifurcated because it fails the indexed-to-own-stock test under ASC 815-40-15-7. Because this formula does not permit a closed-form solution, we engaged an independent third-party valuation firm to estimate fair value using a Monte Carlo simulation model. This measurement is classified as Level 3 in the fair value hierarchy, as it relies on significant unobservable inputs, including expected equity volatility, an estimated instrument term (the notes have no stated maturity, as they are convertible solely at the discretion of the investor with no fixed repayment date specified in the agreement), and a debt discount rate calibrated to comparable issuers. Equity volatility is the most sensitive input; the conversion feature’s asymmetric payoff structure means higher assumed volatility increases the expected value of the noteholder’s conversion optionality.

The fair value of the bifurcated derivative at issuance also directly determines the initial carrying value of the host debt instrument, which is measured as cash proceeds received, reduced by the original issue discount, allocated debt issuance costs, and that derivative fair value. The resulting discount is accreted to par using the effective interest method over the estimated term of each note, the same expected term assumption used in the Monte Carlo model. A shorter assumed term accelerates interest expense recognition through faster accretion; a longer term decelerates it.

Because the derivative valuation and host note carrying value share critical assumptions, particularly expected term and equity volatility, changes in those assumptions affect both the fair value of the derivative liabilities and the pattern of interest expense recognized on the host instruments and could have a material effect on our reported net loss in any given period. As of June 30, 2026, the aggregate fair value of the derivative liabilities was $290,000 and the net carrying value of the host instruments was $3,460,834. For the six months ended June 30, 2026, the net change in fair value of the derivative liabilities recognized in earnings was a gain of $1,222,822, and interest expense on the convertible notes consisted of stated interest of $372,940, EIM accretion of discount $379,915, and EIM accretion of debt issuance costs of $41,527.

For a complete discussion of these estimates, including valuation inputs, sensitivity analysis, and roll-forward schedules, refer to Note 5, Fair Value Measurements, and Note 10, Convertible Notes Payable.

New Accounting Standards

For a description of new accounting standards that could affect the Company, reference the “Recently Issued Accounting Standards Not Yet Adopted” section of Note 2 to the Financial Statements included in this Form 10-Q.

Off Balance Sheet Arrangements

As of June 30, 2026, we had no off-balance sheet arrangements pursuant to Item 303 of Regulation S-K under the Securities Exchange Act of 1934, as amended, that we believe are reasonably likely to have a current or future effect on our financial condition, results of operations, or cash flows.

The Company is not required to provide the information required by this Item because it is a “smaller reporting company.”

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, we carried out an evaluation under the supervision and with the participation of our management, including the Chief Executive Officer and Interim Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Exchange Act Rules 13a-15(e) and 15d-15(e). Based upon that evaluation, the Chief Executive Officer and Interim Chief Financial Officer concluded that as of June 30, 2026, our disclosure controls and procedures were not effective due to the material weakness in our internal control over financial reporting described below.

The Company did not maintain sufficient controls to ensure the proper identification, bifurcation and fair value measurement of embedded derivatives in hybrid financial instruments, or to ensure that the effective interest method was applied over the accretion period for host debt instruments containing a discount. As described in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025, filed on April 15, 2026, corrective actions have been implemented to address this control weakness; however, as of June 30, 2026, the material weakness had not yet been fully remediated.

Remediation Plan for the Material Weakness

Management has implemented remediation measures to address the material weakness discovered in connection with the preparation of our Annual Report on Form 10-K, filed on April 15, 2026, including enhancing its technical accounting review procedures for complex financial instruments, engaging additional external resources with expertise in derivative accounting under ASC 815, and strengthening its controls around the review and approval of significant accounting estimates and elections. The Company’s Insider Trading Policy has been modified to emphasize the restrictions on any stock transactions within six months of a previous reported transaction. Management may determine to take additional measures to address the material weakness or modify the remediation efforts described above. The material weakness will be considered remediated after the applicable controls have operated for a sufficient period of time and management has concluded that the controls are effective.

On April 15, 2026, the Company filed amended Quarterly Reports on Form 10-Q/A for the periods ended June 30, 2025 and September 30, 2025, reflecting restated financial information related to this material weakness.

Changes in Internal Controls over Financial Reporting

During the three months ended June 30, 2026, management implemented the corrective actions described above under “Remediation Plan for the Material Weakness.” Other than those remediation measures, no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) was identified during the quarter ended June 30, 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

As a smaller reporting company under Rule 12b-2 of the Exchange Act, the Company is not required to provide risk factors in this report. For our current risk factors relating to our operations see the section entitled “Risk Factors” contained in our Annual Report on Form 10-K filed on April 15, 2026.

Subsequent to June 30, 2026, the risk factor entitled “Triggering Events May Require Substantial Monthly Cash Repayments That Could Materially Impair Our Liquidity” has materialized. As described in Note 4, Going Concern, Note 18, Subsequent Events, and the Liquidity and Capital Resources section of Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, the Company’s VWAP fell below the Floor Price of $0.25 per share, constituting a Floor Price Trigger under the Securities Purchase Agreement with Streeterville Capital, LLC. As a result, the Company is obligated to make mandatory monthly cash repayments totaling $962,500, plus accrued and unpaid interest, until such time as the Company’s VWAP exceeds 120% of the Floor Price (i.e., $0.30 per share) for five consecutive Trading Days. There can be no assurance that this cure condition will occur. The Company is currently in discussions with Streeterville regarding potential remediation of the obligations arising from the Floor Price Trigger. There can be no assurance that the Company and Streeterville will reach any agreement with respect thereto.