What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-04-07 compared with 2025-03-31 · 263 added, 192 removed, 174 unchanged (72% of the section changed)

Management’s Discussion and Analysis

of Financial Condition and Results of Operations

You should read the following discussion and

analysis of our financial condition and results of operations together with our condensed consolidated financial statements and the related

notes and other financial information included elsewhere in this Annual Report on Form 10-K.

As discussed in the section titled “Note

Regarding Forward-Looking Statements,” the following discussion and analysis contains forward-looking statements that involve risks

and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially

from those expressed or implied by such forward-looking statements.

Factors that could cause or contribute to these differences include,

but are not limited to, those identified below and those discussed in the section titled “Risk Factors”.

Our mission is to power

the future of sustainable transportation by creating stylish, innovative and cost-efficient premium electric vehicles centered around

differentiated designs and solutions tailored for every lifestyle.

We are a technology innovator and a developer of premium electric

vehicles (“EVs”).

We have developed several proprietary technologies which are the building blocks of the Thunder Power family

We focus on the development

and manufacturing of premium EVs with differentiated designs and solutions for every lifestyle.

Four models are currently featured in

our phased development and roll-out strategy:

the limited-edition coupe, (the “Coupe” or “488”), long-range Sedan

(the “Sedan”), compact city car (the “City Car” or “Chloe”) and the long-range SUV (the “SUV”,

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

Our mission is to power the

future of sustainable transportation by creating stylish, innovative and cost-efficient premium electric vehicles centered around differentiated

designs and solutions tailored for every lifestyle.

We are a technology innovator and a developer of premium electric vehicles (“EVs”).

We have developed several proprietary technologies which are the building blocks of the Thunder Power family of EVs.

Four models are currently

featured in our phased development and roll-out strategy:

the limited-edition coupe, (the “Coupe” or “488”), long-range

Sedan (the “Sedan”), compact city car (the “City Car” or “Chloe”) and the long-range SUV (the “SUV”,

and together with the Coupe, Sedan, and City Car, the “Models”).

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modular integration concept starting with the modularized chassis system patented by us, we are creating a family of EVs (excluding the

City Car) which share common parts and modules which we believe requires lower investment and reduced design and production time as opposed

City Car) which share common parts and modules which we believe require lower investment and reduced design and production time as opposed

to those of traditional automotive manufacturers.

We intend to first create the initial design for our Sedan, and then scale upwards

to create the Coupe and scale downward to create the City Car.

We intend to first create the initial design for our Sedan and then scale upwards to

create the Coupe and scale downward to create the City Car.

In time, we expect to round off our offering with the SUV.

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Among other advantages,

we believe that our proprietary technologies will significantly increase the driving range for our EVs while allowing for faster recharging

and lower costs of ownership.

we believe that our proprietary technologies will significantly increase the driving range for our potential EVs while allowing for faster

recharging and lower costs of ownership.

Business Combination

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Holdings”), pursuant to the Merger Agreement (the “Business Combination”).

Following the Business Combination, the

combined company changed its name to “Thunder Power Holdings, Inc.” (the “Company”), which is organized under

the laws of the State of Delaware.

Following the Business Combination, the combined

company changed its name to “Thunder Power Holdings, Inc.” (the “Company”), which is organized under the laws

of the State of Delaware.

Upon consummation of the

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12 – Contingent Consideration ”).

Following the consummation

of the Business Combination, the combined Company’s common stock began trading on the Nasdaq Global Market (the “Nasdaq”)

under the symbol “AIEV” on June 24, 2024.

Following the consummation of the Business Combination, the combined

Company’s common stock began trading on the Nasdaq Global Market under the symbol “AIEV” on June 24, 2024.

July 31, 2025, Nasdaq delisted the Company’s securities.

As of the date of this report, the Company’s Common Stock is traded

on OTCQB Venture Market under the symbol “AIEV”.

The reverse recapitalization

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of TP Holdings and recognized and measured at their pre-combination carrying amounts.

Recent development

Recent Developments

On December 19, 2024, the

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of Electric Power Technology Limited, a Taiwan corporation (“TW Company”).

Pursuant to the Agreement,

the TW Company Shareholders will exchange 26,079,550 ordinary shares of TW Company for 31,034,666 newly issued shares of the Company’s

common stock, par value $0.0001 per share (the “Exchange”).

Upon completion of the Exchange, the Company will acquire approximately

30.8% of TW Company’s total issued and outstanding shares.

The closing of the Exchange is subject to customary conditions, including

receipt of all necessary regulatory approvals and the approval of the Company’s shareholders.

The Agreement contains customary

representations, warranties and covenants by the parties.

The closing must occur no later than October 31, 2025.

The Agreement may be

(1) by mutual consent of the parties;

(2) by either party upon material breach by the other party that remains uncured for

10 days after notice;

(3) if the closing has not occurred within 90 days of signing (subject to extension for regulatory approvals);

or (4) by either party if a court or regulatory authority permanently enjoins the transaction.

On January 27, 2025, the Company and TW Company

Shareholders have agreed to execute an amendment to the Share Exchange Agreement (the “First Amendment”, together with the

Agreement, the “Amended Agreement”), amending, among other things, the share exchange ratio as 119 shares of the Company’s

common stock for every 100 ordinary shares of TW Company.

Pursuant to the Amended Agreement, a portion of the TW Company Shareholders

are expected to exchange a total of 26,783,838 ordinary shares in TW Company for an aggregate of 31,832,768 shares of newly issued Common

Stock of the Company in weeks, with the remaining total of 1,715,000 shares of the TW Company to be transferred to the Company for 2,038,621

shares in a few months.

Upon completion of the transaction, the Company is expected to hold approximately 33.71% of TW Company’s

total issued and outstanding shares.

On June 26, 2025, the Company held its 2025 Annual Meeting of Stockholders (the “Annual Meeting”).

At the Annual Meeting, the shareholders voted to approve, among others, the share exchanges.

Key Factors Affecting Our Results of Operations

We believe that our performance

and future success will depend on several Company specific factors, including those key factors discussed below and other factors in

the section under the heading “ Risk Factors ” of the registration statement on Form S-4 filed with the Securities and

Exchange Commission (the “SEC”) on December 7, 2023, as amended from time to time.

and future success will depend on several Company specific factors, including those key factors discussed below and other factors in the

section under the heading “ Risk Factors ” of this report.

Our ability to evaluate our business and future prospects

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with an early stage/limited operating history, operating in a rapidly evolving and highly regulated market.

Furthermore, we have not

released any commercially available vehicle, and we have no experience manufacturing or selling a commercial product at scale.

we have not generated revenue from the sale of EVs, and because of the capital-intensive nature of our business, we expect to continue

to incur substantial operating losses for the foreseeable future.

Furthermore, we have not released

any commercially available vehicles, and we have no experience manufacturing or selling a commercial product at scale.

Because we have

not generated revenue from the sale of EVs, and because of the capital-intensive nature of our business, we expect to continue to incur

substantial operating losses for the foreseeable future.

Our ability to develop different models of vehicles

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additional financing earlier than we expect, and such financing may not be available to us on commercially reasonable terms, or at all.

Our ability to control the substantial costs associated

with our operations

Our ability to control the substantial costs associated with

our operations

We will require significant

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increase our expenses.

Our ability to develop a third-party retail product

distribution and a full-service network

We anticipate utilizing

third-party retail product distribution and full-service networks to execute on such plans in all markets.

If our use of third-party

retail production and full-service networks is not effective, our results of operations and financial conditions could be adversely affected.

Our ability to develop a third-party retail product distribution

and a full-service network

We anticipate utilizing third-party

retail product distribution and full-service networks to execute on such plans in all markets.

If our use of third-party retail production

and full-service networks is not effective, our results of operations and financial conditions could be adversely affected.

Key Components of Results of Operations

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the key components of our results of operations by the nature of corresponding operating activities for the periods indicated.

read this financial information in conjunction with those presented elsewhere in this Annual Report including our financial statements

and notes to our financial statements.

read this financial information in conjunction with those presented elsewhere in this report including our financial statements and notes

to our financial statements.

We have not generated revenue

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Although we have no revenue,

we have incurred costs associated with trying to generate revenue such as research and development, general and administrative expenses,

liquidity and financing expenses and other operating activities as further described below.

we have incurred costs associated with trying to generate revenue such as general and administrative expenses, liquidity and financing

expenses and other operating activities as further described below.

General and administrative expenses

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the Inflation Reduction Act of 2022 (the “IRA”) was signed into federal law.

The IRA provides for, among other things, a

federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.)

corporations and certain domestic subsidiaries of publicly traded foreign corporations.

The excise tax is imposed on the repurchasing

corporation itself, not its shareholders from which shares are repurchased.

The amount of the excise tax is generally 1% of the

fair market value of the shares repurchased at the time of the repurchase.

However, for purposes of calculating the excise tax, repurchasing

corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases

during the same taxable year.

The IRA provides for, among other things, a new

federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations

and certain domestic subsidiaries of publicly traded foreign corporations.

The excise tax is imposed on the repurchasing corporation itself,

not its shareholders from which shares are repurchased.

The amount of the excise tax is generally 1% of the fair market value of

the shares repurchased at the time of the repurchase.

However, for purposes of calculating the excise tax, repurchasing corporations are

permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same

taxable year.

In addition, certain exceptions apply to the excise tax.

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Thunder Power New Electric Vehicles (TPNEV) are under the current and applicable laws of BVI and is not subject to tax on income or capital

As of December 31, 2024 and 2023, there was no temporary differences and no deferred tax asset or liability recognized.

not believe that there was any uncertain tax position as of December 31, 2024 and 2023.

Results of Operations for the years ended December 31, 2024

TP HK is incorporated in

Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted

in accordance with relevant Hong Kong tax laws.

The applicable tax rate for the first HKD$2 million of assessable profits is

8.25% and assessable profits above HKD$2 million will continue to be subject to the rate of 16.5% for corporations in Hong Kong.

TP TW is incorporated

in Taiwan and is subject to Taiwan corporate income tax on the taxable income as reported in its statutory financial statements adjusted

in accordance with relevant Taiwan tax laws.

The applicable tax rate for the first TW$120,000 of assessable profits is exempt from tax

and assessable profits above TWD$120,000 (approximately $3,900) will be subject to the rate of 20% for resident companies in Taiwan.

Result of operations

The following table sets

forth a summary of our results of operations for the years ended December 31, 2024 and 2023.

This information should be read together

with our consolidated financial statements and related notes included elsewhere in this Annual Report.

The operating results in any period

are not necessarily indicative of the results that may be expected for any future period.

For the Year Ended

forth a summary of our results of operations for the year ended December 31, 2025 and 2024.

This information should be read together with

our consolidated financial statements and related notes included elsewhere in this report.

The operating results in any period are not

necessarily indicative of the results that may be expected for any future period.

For the Years Ended

Operating expenses

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Other income (expenses)

Interest income, net

Foreign currency exchange loss

Other expenses, net

Interest (expenses) income

Foreign currency exchange income (loss)

Total other expenses, net

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and $2.5 million, respectively.

The increase in general and administrative expenses was primarily due to an increase of approximately

$0.3 million in professional expenses which were incurred to support the closing of business combination, and an increase of share-based

compensation of approximately $0.7 million as we issued 90,000 shares of common stock to three independent directors of FLFV at the consummation

of the Business Combination, partially offset by a decrease of share-based settlement expenses of approximately $0.5 million.

a result of the foregoing, we incurred a net loss of approximately $2.5 million and $1.8 million for the years ended December

The decrease in general and administrative expenses was primarily because we incurred share-based compensation

expenses of approximately $1.0 million upon closing of the Business Combination in June 2024 as we issued 900,000 shares of Common Stock

to three FLFV’s independent directors and transferred 429,350 shares of Common Stock from Sponsor to FLFV’s officers, directors,

secretary and their designees, partially offset by an increase of approximately $0.3 million in provision for credit losses against other

current assets.

a result of the foregoing, we incurred a net loss of approximately $2.2 million and $2.5 million for the year ended December

31, 2025 and 2024.

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and Balances ”), and equity financing including private placements.

As of September 30, 2024, our cash was $142,616.

We have been incurring losses

from operations since inception.

Accumulated loss amounted to approximately $36.9 million and $34.4 million as of December 31, 2024 and

2023, respectively.

Net cash used in operating activities were approximately $1.2 million and $0.7 million for the years ended December

31, 2024 and 2023.

As of December 31, 2024, we had a negative working capital of $6.6 million, compared to a working capital of approximately

$0.7 million as of December 31, 2023.

The working capital excluded the non-cash items, which are prepaid expenses for the certain forward

purchase agreement entered into on June 11, 2024, by and among FLFV, the Company and certain investors (the “Forward Purchase Agreement”),

deferred offering costs and advance of subscription fees from shareholders.

These conditions raised substantial doubts about the Company’s

ability to continue as a going concern.

Our liquidity is based on

our ability to generate cash from operating activities, obtain capital financing from equity interest investors and borrow funds on favorable

economic terms to fund our general operations and capital expansion needs.

Our ability to continue as a going concern is dependent on

management’s ability to successfully execute our business plan, which includes increasing revenue while controlling operating cost

and expenses to generate positive operating cash flows and obtaining funds from outside sources of financing to generate positive financing

Currently, we are working to improve our liquidity and capital sources mainly through borrowing from related parties by obtaining

financial support from our principal shareholder who has committed to continue providing funds for our working capital needs whenever

In addition, in order to

fully implement our business plan and sustain continued growth, we are also actively seeking private equity financing from outside investors.

However, there can be no assurance that these plans and arrangements will be sufficient to fund our ongoing capital expenditure, working

capital, and other requirements.

As of December 31, 2025,

the Company had cash of $10,093 and has incurred recurring losses from operations since inception.

The Company reported a net loss of

approximately $2.1 million for the year ended December 31, 2025 and has an accumulated deficit of approximately $39.1 million.

These conditions

raise substantial doubt about the Company’s ability to continue as a going concern.

The Company faces several significant uncertainties,

Operating losses and liquidity constraints – The Company has not generated sufficient revenues to support its operations and has limited cash resources to meet its obligations.

Prepaid Forward Contract – The Company has recorded a prepaid balance related to a forward purchase agreement as a current asset.

The realization of this balance is dependent on the counterparty’s sale of the Company’s shares and is subject to significant uncertainty, including market conditions and the Company’s listing status.

The arrangement is not expected to generate near-term cash inflows and may not be readily realizable in cash.

Accordingly, this balance does not provide immediate liquidity to support the Company’s operations.

Nasdaq delisting – The Company’s common stock was suspended from trading on the Nasdaq Stock Market on April 21, 2025 and subsequently delisted in July 2025.

The Company’s securities are currently quoted on the over-the-counter market.

This significantly limits the Company’s ability to access public capital markets and raises substantial uncertainty regarding its ability to obtain financing.

Dependence on principal shareholder – The Company has historically relied on financial support from its principal shareholder.

Due to ongoing legal proceedings involving the shareholder, there is significant uncertainty regarding the shareholder’s ability and willingness to continue providing financial support.

Management has undertaken

certain actions to address these conditions, including exploring potential financing alternatives, seeking additional equity or debt funding,

and evaluating cost reduction and restructuring initiatives.

The Company is also pursuing strategic transactions, including a proposed

however, such transaction remains subject to completion and other uncertainties, and the target entity is also subject to

its own going concern considerations.

However, there can be no

assurance that these plans will be successfully implemented or will be sufficient to alleviate the substantial doubt regarding the Company’s

ability to continue as a going concern, including the Company’s ability to realize value from the forward purchase arrangement.

Accordingly, the Company’s

ability to continue as a going concern is dependent upon its ability to obtain additional financing and generate sufficient cash flows

from operations.

The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and

classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

The following table sets

forth a summary of our cash flows for the periods presented:

For the Year Ended

For the Years Ended

Net cash used in operating activities

$ (1,514,036 )

Net cash provided by investing activities

Net cash provided by financing

$ (1,227,253 )

Net cash (used in) provided by investing activities

Net cash provided by financing activities

Effect of exchange rates on cash

Net decrease in cash

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Net cash used in operating

activities for the year ended December 31, 2025 was approximately $1.5 million, primarily attributable to net loss of approximately

$2.1 million, adjusted for non-cash item of provision for credit losses of approximately $0.3 million against other current assets,

and changes in operating assets and liabilities, including an increase of approximately $0.2 million in due to related parties and a decrease

of approximately $0.4 million in other payable and accrued expenses.

Net cash used in operating

activities for the years ended December 31, 2024 was approximately $1.2 million, primarily attributable to net loss of approximately

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professional consulting expenses since the closing of the Business Combination.

Net cash used in operating

activities for the year ended December 31, 2023 was approximately $0.7 million, primarily attributable to net loss of approximately

$1.8 million, adjusted for non-cash share-based compensation expenses of approximately $0.3 million, share-based settlement

expenses of approximately $0.5 million, and an increase of approximately $0.2 million in amounts due to related parties which

paid certain operating expenses on behalf of us.

Investing activities

For the year ended December

31, 2024, we reported cash provided by investing activities of approximately $0.9 million, which was from the reverse acquisition we

closed with FLFV in June 2024.

31, 2025, we reported cash used in investing activities of approximately $1,400, which was from purchase of short-term investments of

approximately $1,400.

For the year ended December

31, 2023, we did not report cash provided by or used in investing activities.

31, 2024, we reported cash provided by investing activities of approximately $0.9 million, which was from the reverse acquisition we closed

with FLFV in June 2024.

Financing Activities

For the year ended December

31, 2025, we reported cash provided by financing activities of approximately $1.5 million, which were primarily provided by borrowings

of approximately $1.5 million from our controlling shareholder and his family member.

For the year ended December

31, 2024, we reported cash provided by financing activities of approximately $0.2 million, which were primarily provided by subscription

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of the Sponsor.

For the year ended

December 31, 2023, we reported cash provided by financing activities of approximately $0.6 million, which were primarily provided

by subscription fees of approximately $1.8 million advanced from shareholders, partially offset by payment of approximately $0.6 million

of extension loans on behalf of the sponsor of a SPAC and payment of approximately $0.4 million of offering costs.

Commitment and Contingencies

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(i) an aggregate of 5,000,000 Earnout Shares (the “Tranche 1 Earnout Shares”)

will be vested, if and only if, on the occurrence that the amount of sales/revenues of the Company for any of the fiscal years (such

fiscal year is referred to as “Tranche 1 Fiscal Year”) ending from December 31, 2023 to December 31, 2025 is no less than

will be vested, if and only if, on the occurrence that the amount of sales/revenues of the Company for any of the fiscal years (such fiscal

year is referred to as “Tranche 1 Fiscal Year”) ending from December 31, 2023 to December 31, 2025 is no less than $42,200,000

as evidenced by the audited financial statements of the Company prepared in accordance with U.S.

GAAP for the Tranche 1 Fiscal

Year that is contained in an annual report on Form 10-K filed by the Company with the SEC (the “Tranche 1 Annual Report”);

(ii) an aggregate of 15,000,000 Earnout Shares (the “Tranche 2 Earnout Shares”) will be vested, if and only if, on the occurrence

that the amount of sales/revenues of the Company for any of the fiscal years (such fiscal year is referred to as “Tranche 2 Fiscal

Year”) ending from December 31, 2023 to December 31, 2026 is no less than $415,000,000 as evidenced by the audited financial statements

of the Company prepared in accordance with U.S.

GAAP for the Tranche 2 Fiscal Year that is contained in an annual report on Form 10-K

filed by the Company with the SEC (the “Tranche 2 Annual Report”);

GAAP for the Tranche 1 Fiscal Year that

is contained in an annual report on Form 10-K filed by the Company with the SEC (the “Tranche 1 Annual Report”);

(ii) an aggregate

of 15,000,000 Earnout Shares (the “Tranche 2 Earnout Shares”) will be vested, if and only if, on the occurrence that the amount

of sales/revenues of the Company for any of the fiscal years (such fiscal year is referred to as “Tranche 2 Fiscal Year”)

ending from December 31, 2023 to December 31, 2026 is no less than $415,000,000 as evidenced by the audited financial statements of the

Company prepared in accordance with U.S.

GAAP for the Tranche 2 Fiscal Year that is contained in an annual report on Form 10-K filed by

the Company with the SEC (the “Tranche 2 Annual Report”);

(iii) Within five (5) business days following the determination

that all or any portion of the Tranche 1 Earnout Shares or Tranche 2 Earnout Shares become vested, the Company, together with Mr.

Ma, shall instruct the Escrow Agent to irrevocably and unconditionally release the vested tranche of Earnout Shares from the

Escrow Account in accordance with the terms of the Escrow Agreement to certain of the Company’s shareholders.

Each tranche of Earnout

Shares may be released only once, but more than one tranche can be released in any year in accordance with the Escrow Agreement.

The Earnout Shares are determined

as contingent consideration in connection with the reverse recapitalization.

In addition, the issuance of Earnout Shares does not meet

any condition to be classified as a liability under ASC 815, thus it should be classified as an equity financial instrument, and measure

at fair value using the quoted market price on grant date, June 11, 2024, which was $2.56 per share.

For the years ended December

31, 2024, the sales/revenue condition described above was not met.

Currently the Company could not reasonably assess the performance

condition for the year ending December 31, 2025.

Other than the above, in

the normal course of business, we are subject to loss contingencies, such as certain legal proceedings, claims and disputes.

a liability for such loss contingencies when the likelihood of an unfavorable outcome is probable and the amount of loss can be reasonably

Ma, shall instruct the Escrow Agent to irrevocably and unconditionally release the vested tranche of Earnout Shares from the Escrow

Account in accordance with the terms of the Escrow Agreement to certain of the Company’s shareholders.

Each tranche of Earnout Shares

may be released only once, but more than one tranche can be released in any year in accordance with the Escrow Agreement.

The Earnout Shares were issued

in connection with the Business Combination and are classified as equity instruments.

The Earnout Shares were measured at their grant-date

fair value on June 21, 2024 and recorded within additional paid-in capital.

Because the Earnout Shares are classified as equity instruments,

they are not subsequently remeasured.

For the years ended December 31, 2025 and 2024, the revenue performance conditions required for

vesting were not achieved.

Accordingly, no Earnout Shares were released from escrow as of December 31, 2025.

The Earnout Shares are classified

as equity instruments.

Because the Earnout Shares are subject to vesting conditions, the Company evaluated the appropriate grant-date

measurement basis in accordance with applicable U.S.

GAAP and recorded the Earnout Shares within equity.

The Earnout Shares are not subsequently

Off-Balance Sheet Arrangements

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The researched and development expenses were recorded

in “general and administrative expenses” in the consolidated statements of operations.

in “general and administrative expenses” in the consolidated statements of operations and comprehensive loss.

Critical Accounting Estimates

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statements in accordance with U.S.

GAAP, which requires our management to make judgments, estimates and assumptions that affect

the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities on the date of the consolidated financial

GAAP, which requires our management to make judgments, estimates and assumptions that affect the

reported amounts of assets and liabilities, disclosures of contingent assets and liabilities on the date of the consolidated financial

statements, and the reported amounts of revenue and expenses during the reporting period.

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basis for making judgments about matters that are not readily apparent from other sources.

Since the use of estimates is an integral

component of the financial reporting process, our actual results could differ from those estimates.

Some of our accounting policies require

a higher degree of judgment than others in their application.

The selection of critical

accounting policies, the judgments and other uncertainties affecting application of those policies and the sensitivity of reported results

to changes in conditions and assumptions are factors that should be considered when reviewing our financial statements.

We believe the

following accounting policies involve the most significant judgments and estimates used in the preparation of our financial statements.

You should read the description of critical accounting policies, judgments and estimates in conjunction with our consolidated financial

statements and other disclosures included in this Annual Report.

We do not have critical

accounting estimates that are related to us.

A list of accounting policies, judgements and estimates that are relevant to us is included

in notes to our consolidated financial statements included elsewhere in this Annual Report (see “ Note 2 – Summary of Significant

Accounting Policies ”).

Since the use of estimates is an integral component

of the financial reporting process, our actual results could differ from those estimates.

Some of our accounting policies require a higher

degree of judgment than others in their application.

Our expectations regarding

the future are based on available information and assumptions that we believe to be reasonable, which together form our basis for making

judgments about matters that are not readily apparent from other sources.

Since the use of estimates is an integral component of the financial

reporting process, our actual results could differ from those estimates.

Some of our accounting policies require a higher degree of judgment

than others in their application.

We consider an accounting

estimate to be critical if:

(i) the accounting estimate requires us to make assumptions about matters that were highly uncertain

at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to

period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial

condition or results of operations.

When reading our unaudited

condensed consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other

uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions.

See Note 2 — Summary of Significant Accounting Policies to our consolidated financial statements for the disclosure of

these accounting policies.

We believe the following accounting estimates involve the most significant judgments used in the preparation

of our financial statements.

While management believes

its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ

significantly from those estimates under different assumptions and conditions.

We believe that the following critical accounting estimates

involve the most significant judgments used in the preparation of our financial statements.

(i) Allowance for expected credit losses of other receivable

We assessed the collectability

by reviewing other receivable on an individual basis in accordance with ASC Topic 326, Credit Losses (“ASC 326”).

Before entering into a Merger Agreement with FLFV, we entered into a letter of intent with Aetherium Acquisition Corp.

to explore a potential business combination.

We paid extension loans in an amount of $300,000 and working capital loans in an amount of

$15,000 on behalf of GMFI.

In March 2024, the letter of intent with GMFI was terminated.

For the year ended December

31, 2025, we assessed the payment intention and payment ability of GMFI and provided full allowance for credit losses against the balance

due to liquidation of GMFI.

(ii) Allowance for prepaid expenses for Forward Purchase Contract

As of December 31, 2025,

we assessed the recoverability of prepaid expenses for forward purchase contract which will be realized as the counterparty sells our

The evaluation of impairment

requires significant judgment, particularly in assessing whether the prepaid balance will be fully recovered through future share transactions.

Key factors considered include:

(a) our current and expected share price relative to the reference/reset price under the agreement, (b)

the enforceability of the Forward Purchase Contract, (c) the counterparty’s performance, including whether the counterparty continues

to sell shares in accordance with the contract, (d) the volume of remaining shares held and expected pace of future sales, and (e) overall

market conditions and liquidity of the Company’s shares.

Given that recovery of the

prepaid amount is dependent on future share sales and market prices, there is inherent uncertainty in the timing and amount of recovery.

As of December 31, 2025, we did not provide allowance against prepaid expenses for Forward Purchase Contract.

(iii) Classification of prepaid expenses for Forward Purchase Contract

Pursuant to the agreement

between us and the counterparty, we made an upfront payment to facilitate a forward share transaction whereby the counterparty acquires

and subsequently sells our shares in the market.

Our economic benefit is realized through the sales of these shares, with settlement reflected

through equity (additional paid-in capital) rather than cash flows.

The arrangement does not

meet the definition of a derivative or financial asset in accordance with ASC 815, rather the upfront payment represents a prepaid asset

under ASC 340, providing future economic benefit as the underlying shares are sold.

Accordingly, the upfront payment is recognized as

a prepaid expense and will be derecognized as the related share transactions occur, with any differences recognized in additional paid-in

capital in accordance with ASC 505.

(iv) Classification of prepaid expenses for Forward Purchase Contract as a current asset

We also applied judgment

in classifying the prepaid balance as current, based on the expectation that the underlying share sales and related settlement will occur

within 12 months of the reporting date, supported by the ongoing execution of the Forward Purchase Contract and historical pace of share

dispositions.

(v) Accrued legal expenses

We exercised significant

judgment in estimating accrued legal expenses where invoices are disputed and final settlement has not been reached.

As of December 31, 2025,

we recorded an accrual of $250,000 related to legal services provided by Brown Rudnick.

The original invoices totaled approximately $659,910,

which management disputed due to delayed filings and incomplete services.

No settlement agreement had been finalized as of the reporting

We based our estimation on

actual services rendered, which represents the best assessment of the probable obligation under ASC 450.

Given the range of possible outcomes

and ongoing negotiations, the ultimate settlement amount may differ from the amount accrued.

Recently Issued Accounting Pronouncements

The Company has evaluated

all recently issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company’s condensed

consolidated financial statements.

A list of recently issued accounting pronouncements that are relevant to us is included in the notes

to our consolidated financial statements included elsewhere in this Annual Report (see “ Note 2 – Summary of Significant

Accounting Policies ”).

Quantitative and Qualitative Disclosures

About Market Risk

all recently issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company’s consolidated

financial statements.

A list of recently issued accounting pronouncements that are relevant to us is included in the notes to our consolidated

financial statements included elsewhere in this report (see “ Note 2 – Summary of Significant Accounting Policies ”).

Quantitative and Qualitative Disclosures About Market Risk

Under SEC rules and regulations,

1 unchanged sentence

this item in this report.

Financial Statements and Supplementary

Financial Statements and Supplementary Data

The Financial Statements

and Supplementary Data required by this Item 8 are incorporated by reference to information beginning on Page F-1 of this Form 10-K.

Changes in and Disagreements with Accountants

on Accounting and Financial Disclosures

Changes in and Disagreements with Accountants on Accounting

and Financial Disclosures

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis