Arrive AI Inc. 10-Q

Item 1. Financial Statements. CONDENSED FINANCIAL STATEMENTS ARRIVE AI INC. CONDENSED BALANCE SHEETS (Unaudited) September 30, 2025 December 31, 2024 ASSETS CURRENT ASSETS Cash $ 816,715 $ 129,318 Accounts receivable 4,900 - Prepaid expenses 164,777 55,867 Deferred offering costs 6,312,586 427,898 Investments at fair value 1,918,995 - Other current assets 721 4,179 Total current assets 9,218,694 617,262 LONG-TERM ASSETS Property and equipment, net 152,915 95,425 Right of use assets - operating leases 73,041 - Patents, net 272,914 273,601 Security deposit 1,500 1,500 Long-term assets 500,370 370,526 TOTAL ASSETS $ 9,719,064 $ 987,788 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable $ 707,100 $ 1,868,689 Accrued liabilities 205,398 79,556 Credit card payable 8,574 3,636 Current portion of operating lease liability 38,041 - Convertible note payable, net of discount of $ 282,667 and issuance costs of $ 240,000 4,002,333 - Current portion of note payable 8,982 8,524 Total current liabilities 4,970,428 1,960,405 NONCURRENT LIABILITIES Noncurrent portion of operating lease liability 35,000 - Note payables, net of current portion 3,763 10,558 Total liabilities 5,009,191 1,970,963 Commitments and Contingencies (See Note 13) - - STOCKHOLDERS’ EQUITY (DEFICIT) Common stock, $ 0.0002 par value, 200,000,000 shares authorized, 34,233,087 issued and 34,213,387 outstanding as at September 30, 2025, and 29,120,905 issued and outstanding at December 31, 2024 6,845 5,822 Treasury stock, at cost, 19,700 and - 0 - shares as of September 30, 2025, and December 31, 2024 ( 74,743 ) - Additional paid-in capital 29,602,998 14,984,561 Subscription receivable - ( 53,003 ) Accumulated deficit ( 24,825,227 ) ( 15,920,555 ) Total stockholders’ equity (deficit) 4,709,873 ( 983,175 ) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 9,719,064 $ 987,788 See accompanying condensed notes to unaudited financial statements. - 3 - ARRIVE AI INC. CONDENSED STATEMENTS OF OPERATIONS (Unaudited) Three Months Nine Months Ended September 30, Ended September 30, 2025 2024 2025 2024 REVENUE $ 7,450 $ - $ 98,175 $ - OPERATING EXPENSES General and administrative 1,370,347 791,639 7,551,884 2,395,881 Research and development 179,854 7,940 564,585 548,879 Sales and marketing 107,530 28,414 164,793 281,160 Total operating expenses 1,657,731 827,993 8,281,262 3,225,920 OTHER INCOME (EXPENSES) Other income 23,388 5,434 83,454 29,523 Interest expense and bank charges ( 580,021 ) ( 1,192 ) ( 775,410 ) ( 3,209 ) Realized gain on investments 46,491 - 46,491 - Unrealized loss on investments ( 76,120 ) - ( 76,120 ) - Total other income (expenses) ( 586,262 ) 4,242 ( 721,585 ) 26,314 NET LOSS BEFORE TAXES ( 2,236,543 ) ( 823,751 ) ( 8,904,672 ) ( 3,199,606 ) PROVISION FOR INCOME TAXES - - - - NET LOSS $ ( 2,236,543 ) $ ( 823,751 ) $ ( 8,904,672 ) $ ( 3,199,606 ) NET LOSS PER SHARE: Basic and diluted $ ( 0.07 ) $ ( 0.03 ) $ ( 0.28 ) $ ( 0.11 ) WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted 33,241,510 29,000,241 31,515,121 28,935,738 See accompanying condensed notes to unaudited financial statements. - 4 - ARRIVE AI INC. CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) For the Nine Months Ended September 30, 2025 and 2024 (Unaudited) Number of Common Shares Common Stock ($) Number of Treasury Shares Treasury Stock ($) Additional Paid-In Capital, Subscription Receivable ($) Accumulated Deficit ($) Total Stockholders’ Equity (Deficit) ($) BALANCE, JANUARY 1, 2025 29,120,905 $ 5,822 - $ - $ 14,984,561 $ ( 53,003 ) $ ( 15,920,555 ) $ ( 983,175 ) Issuance of common stock, net 33,846 6 - - 380,527 40,219 - 420,752 Issuance of common stock upon exercise of warrants, net 62,500 13 - - 296,863 - - 296,876 Issuance of common stock for deferred offering costs 532,913 107 - - 6,927,762 - - 6,927,869 Stock-based compensation 84,874 17 - - 1,348,228 - - 1,348,245 Net loss - - - - - - ( 1,978,165 ) ( 1,978,165 ) BALANCE, MARCH 31, 2025 29,835,038 $ 5,965 - $ - $ 23,937,941 $ ( 12,784 ) $ ( 17,898,720 ) $ 6,032,402 Issuance of common stock, net 2,941,039 589 - - 15,402 7,617 - 23,608 Issuance of common stock upon exercise of warrants, net 58,320 12 - - 277,008 - - 277,020 Issuance of common stock for options exercise 690 - - - 8,970 - - 8,970 Issuance of common stock for settlement of debt 92,673 19 - - 1,204,718 - - 1,204,737 Reclassification of deferred offering costs - - - - ( 871,882 ) - - ( 871,882 ) Stock-based compensation 95,625 19 - - 1,487,989 - - 1,488,008 Net loss - - - - - - ( 4,689,964 ) ( 4,689,964 ) BALANCE, JUNE 30, 2025 33,023,385 $ 6,604 - $ - $ 26,060,146 $ ( 5,167 ) $ ( 22,588,684 ) $ 3,472,899 Issuance of common stock, net - - - - ( 1,471 ) 5,167 - 3,696 Issuance of common stock for options exercise 83 - - - 299 - - 299 Issuance of common stock for the conversion of convertible notes 1,207,355 241 - - 4,124,759 - - 4,125,000 Repurchase of common stock - - 19,700 ( 74,743 ) - - - ( 74,743 ) Reclassification of deferred offering costs - - - - ( 869,868 ) - - ( 869,868 ) Stock-based compensation 2,264 - - - 289,133 - - 289,133 Net loss - - - - - - ( 2,236,543 ) ( 2,236,543 ) BALANCE, SEPTEMBER 30, 2025 34,233,087 6,845 19,700 ( 74,743 ) 29,602,998 - ( 24,825,227 ) 4,709,873 BALANCE, JANUARY 1, 2024 28,844,643 $ 5,769 - $ 10,924,624 $ ( 25,505 ) $ ( 11,382,654 ) $ ( 477,766 ) Issuance of common stock, net 75,343 15 - - 824,603 ( 50,260 ) - 774,358 Stock-based compensation - - - - 246,612 - - 246,612 Net loss - - - - - - ( 916,753 ) ( 916,753 ) BALANCE, MARCH 31, 2024 28,919,986 $ 5,784 - - $ 11,995,839 $ ( 75,765 ) $ ( 12,299,407 ) $ ( 373,549 ) Issuance of common stock and warrants for cash, net 33,997 6 - - 356,650 70,219 - 426,875 Stock-based compensation 11,787 2 - - 359,001 - - 359,003 Net loss - - - - - - ( 1,459,102 ) ( 1,459,102 ) BALANCE, JUNE 30, 2024 28,965,770 $ 5,792 - - $ 12,711,490 $ ( 5,546 ) $ ( 13,758,509 ) $ ( 1,046,773 ) Balance 28,965,770 $ 5,792 - - $ 12,711,490 $ ( 5,546 ) $ ( 13,758,509 ) $ ( 1,046,773 ) Issuance of common stock and warrants 76,661 15 - - 848,852 ( 18,418 ) - 830,449 Stock-based compensation - stock awards 375 - - - 4,494 - - 4,494 Stock-based compensation - stock options - - - - 270,011 - - 270,011 Net loss - - - - - - ( 823,751 ) ( 823,751 ) BALANCE, SEPTEMBER 30, 2024 29,042,806 $ 5,807 - - $ 13,834,847 $ ( 23,964 ) $ ( 14,582,260 ) $ ( 765,570 ) Balance 29,042,806 $ 5,807 - - $ 13,834,847 $ ( 23,964 ) $ ( 14,582,260 ) $ ( 765,570 ) See accompanying condensed notes to unaudited financial statements. - 5 - ARRIVE AI INC. CONDENSED STATEMENTS OF CASH FLOWS For the Nine Months Ended September 30, 2025 and 2024 (Unaudited) 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 8,904,672 ) $ ( 3,199,606 ) Adjustments to reconcile net loss to net cash used in operating activities Stock-based compensation 3,134,655 880,120 Depreciation and amortization 31,048 21,792 Amortization of discount on convertible debt 357,333 - Amortization of issuance costs on convertible debt 240,000 - Realized gain on investments ( 46,491 ) - Unrealized depreciation on investments 76,120 - Changes in operating assets and liabilities (Increase) decrease in Accounts receivable ( 4,900 ) - Prepaid expenses ( 108,910 ) ( 63,407 ) Other current assets 3,458 - Increase (decrease) in Accounts payable 43,148 408,485 Accrued liabilities 125,842 21,889 Credit card payable 4,938 ( 28,720 ) Net cash used in operating activities ( 5,048,431 ) ( 1,959,447 ) CASH FLOWS FROM INVESTING ACTIVITIES Construction in progress ( 87,850 ) - Proceeds from sales of investments 3,018,635 - Purchase of investments ( 4,967,259 ) - Net cash used in investing activities ( 2,036,474 ) - CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from sale of common stock, net 448,056 2,031,682 Purchase of treasury stock ( 74,743 ) - Proceeds from the exercise of warrants, net 573,896 - Repayments of note payables ( 6,337 ) ( 5,914 ) Proceeds from issuance of convertible debt 7,530,000 - Deferred offering costs ( 698,570 ) ( 100,000 ) Net cash provided by financing activities 7,772,302 1,925,768 NET INCREASE (DECREASE) IN CASH 687,397 ( 33,679 ) CASH, BEGINNING OF PERIOD 129,318 325,472 CASH, END OF PERIOD $ 816,715 $ 291,793 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for: Interest $ 175,640 $ 1,277 Income taxes $ - $ - SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION Common stock issued as payment of offering costs $ 6,927,869 $ - Common stock issued as settlement of legal expenses $ 1,204,737 $ - Conversion of notes payable to common stock $ 4,125,000 $ - Deferred offering costs recognized as additional paid-in capital $ 1,741,750 $ - Cashless exercise of stock options $ 9,269 $ - See accompanying condensed notes to unaudited financial statements. - 6 - ARRIVE AI INC. CONDENSED NOTES TO FINANCIAL STATEMENTS For the nine months ended September 30, 2025 (Unaudited) 1. NATURE OF OPERATIONS Arrive AI Inc. (the Company) was incorporated on April 30, 2020, in the State of Delaware as Dronedek Corporation. On July 27, 2023, Dronedek Corporation changed its name to Arrive Technology Inc. On September 27, 2024, Arrive Technology Inc. changed its name to Arrive AI Inc. The Company is a developmental technology company with a focus on designing and implementing a commercially viable smart mailbox for drone, robotic and human package receiving and storage. The Company is subject to a number of risk similar to those of other companies of similar size in its industry, including, but not limited to, the need for successful development of products, the need for additional capital (or financing) to fund operating losses, competition from substitute products and services from larger companies, protection of proprietary technology, patent litigation, dependence on key individuals, and risks associated with changes in information technology. 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements (unaudited) have been prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP) and with the instructions to Form 10-Q of Regulation S-K. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements and related notes thereto for the year ended December 31, 2024. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements for the fiscal year ended December 31, 2024, have been omitted. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Management evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment and makes adjustments when facts and circumstances dictate. These estimates are based on information available as of the date of the financial statements; therefore, actual results could differ from those estimates. - 7 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Concentration of Credit Risk The Company maintains its cash balances at two financial institutions. The accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to a specified limit. The Company’s balances at the financial institutions periodically exceed federally insured limits. At September 30, 2025 and December 31, 2024, the Company’s uninsured cash balances totaled approximately $ 541,775 and $ 0 , respectively. Management believes that the Company is not exposed to any significant risk concerning its cash balances. To date, the Company has not recognized any losses caused by uninsured balances. Accounts Receivable and Allowance for Credit Losses Accounts receivable are customer obligations due under normal trade terms, which are typically due upon receipt of the invoice. Credit is extended based on evaluation of a customer’s financial condition and collateral is not required. Accounts receivable are stated at amounts due from customers net of an allowance for credit losses. The Company recognizes an allowance for expected credit losses at each balance sheet date. This estimate is derived from a review of the Company’s historical losses based on the aging of receivables. Receivables with similar risk characteristics are pooled for the estimation of expected credits losses. Management adjusts its historical estimate based on its assessment of current conditions, reasonable and supportable forecasts regarding future events, and any other factors deemed relevant by the Company. At each reporting date, the Company updates its estimate of expected credit losses to reflect any changes in credit risk since the receivable was initially recorded. The Company writes off receivables when there is information that indicates the debtor is facing significant financial difficulty and there is no possibility of recovery. If any recoveries are made from any accounts previously written off, they will be recognized in earnings in the year of recovery, in accordance with the entity’s accounting policy election. The Company has not incurred material write-offs as a whole for the nine months ended September 30, 2025. Based upon the information available, no allowances for credit losses has been recorded as the Company believes the balance is fully collectable. Property and Equipment The property and equipment is recorded at cost. The Company’s policy is to depreciate the cost of the property and equipment using the straight-line method over the estimated useful life of the asset. The costs of maintenance and repairs are charged to expense when incurred (none noted in the current or prior year as it relates to vehicles). The useful life of the property and equipment for purposes of computing depreciation is: SCHEDULE OF PROPERTY AND EQUIPMENT USEFUL LIFE Useful Life Vehicles and Equipment 2 - 5 years - 8 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Intangible Assets – Patents The Company capitalizes external costs, such as filing fees, registration documentation, and attorney fees associated with the application and issuance of patents. The Company expenses costs associated with maintaining and defending patents subsequent to issuance in the period incurred. The Company amortizes capitalized patent costs for internally generated patents on a straight-line basis over 20 years or the period in which the goods associated with the patent will be revenue-generating, which represents the estimated useful lives of the patents. The estimated useful lives for internally generated patents are based on the assessment of the following factors: the integrated nature of the patent portfolios being licensed (including the ability of the patent to generate viable goods and revenues), the overall makeup of the patent portfolio over time, and the length of license agreements for such patents. The Company assesses the potential impairment of all capitalized patent costs when events or changes in circumstances indicate that the carrying amount of the Company’s patent portfolio may not be recoverable. Impairment of Long-Lived Assets Intangibles and other long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of any long-lived asset may not be fully recoverable. In the event that facts and circumstances indicate that the carrying amount of any long-lived assets may be impaired, an evaluation of recoverability is performed. If an evaluation was required, the estimated future undiscounted cash flows associated with the asset (or group of assets) would be compared to the assets’ (or group of assets’) carrying amount to determine if a write-down to fair value is required on the basis of the assets’ associated undiscounted cash flows. The Company has three types of long-lived assets: property and equipment, including operational Arrive Point units, vehicles, office equipment, and aerial drones; construction-in-progress (CIP), and intangible patent assets including those acquired by the acquisition of Airbox Technology in 2023. The vehicles and drone hexacopter were evaluated for impairment, and no impairments were considered necessary as of September 30, 2025. The Company acquired three “Gen 3” (or “AP3”) Arrive Point units in December 2024, and four in April 2025. These units are recorded as construction in progress until they are placed into service. Six units have been delivered to customer sites, four of which have been placed into revenue service and are being depreciated on a straight-lined basis over two years. One unit not yet entered into service was damaged beyond repair. An impairment loss of $ 10,541 was recognized as of September 30, 2025. No impairment loss on these units was recognized as of September 30, 2024. - 9 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers . Revenue is derived from consulting and implementation services provided to clients and recurring subscription services for access to the Arrive Point network. Revenue is recognized over time as services are performed, based on the transfer of control to the customer. Contracts are typically short-term in nature and do not contain significant variable consideration or multiple performance obligations. Disaggregated revenue as of the three and nine months ended September 30, 2025 is as follows: SCHEDULE OF DISAGGREGATED REVENUE Three Months Nine Months Ended September 30 Ended September 30 Revenue source Consulting services $ - $ 89,000 Installation services 2,175 3,675 Subscription fees 5,275 5,500 TOTAL REVENUE $ 7,450 $ 98,175 Timing of Revenue Recognition Services transferred over time $ 5,275 $ 94,500 Services transferred at a point in time 2,175 3,675 TOTAL REVENUE $ 7,450 $ 98,175 The Company did no t generate revenue during the three and nine months ended September 30, 2024. Various economic factors affect the recognition of revenue and cash flows including availability of skilled labor and prompt payment by customers. The Company did not generate revenue during the three or nine months ended September 30, 2024. As such, no comparative disaggregation is presented for that period. Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets), and customer advances and deposits (contract liabilities) on the balance sheet. The Company may request advances or deposits from customers before revenue is recognized, which results in contract liabilities. These contract liabilities are released as the performance obligations are satisfied. - 10 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Contract Balances (continued) As of September 30, 2025, there were no such liabilities or contract assets included within the balance sheet. The beginning and ending contract balances were as follows: SCHEDULE OF CONTRACT ASSETS/LIABILITIES September 30, 2025 January 1, 2025 Accounts receivable $ 4,900 $ - Significant Judgments and Estimates There are no significant judgments involved in the recognition of revenue from the services provided by the Company. Equity Financing The Company engages in equity financing transactions to obtain the funds necessary to continue operations and develop a commercially viable drone delivery system. These equity financing transactions involve the issuance of common stock and may include equity warrants. Equity warrants are instruments that bestow upon the holder of the instrument the right to buy a particular stock at a predetermined price within a stipulated time frame. Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 480, the Company classified the warrants as equity instruments. Depending on the terms and conditions of each equity financing transaction, the warrants are exercisable into additional common shares at an agreed-upon price, as defined in the Stock and Warrant Purchase Agreement (“the agreement”) prior to the expiration of the warrants as stipulated by the terms of the transaction in the agreement. The shares eligible for issuance under the outstanding warrants were registered under the Securities Act of 1933 on July 28, 2025. Treasury Stock In September 2025, the Board of Directors authorized the Company to repurchase shares of common stock. The Company repurchased 19,700 shares for $ 74,743 during the nine months ended September 30, 2025. The stock is held in Treasury and recorded using the cost method. - 11 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Loss per share The Company follows FASB ASC 260, “Earnings per Share,” resulting in the presentation of basic and diluted earnings per share. Because the Company reported a net loss for the three and nine months ended September 30, 2025 and 2024, common stock equivalents, including stock options and warrants were anti-dilutive; therefore, the amounts reported for basic and dilutive loss per share were the same. See footnotes 16 and 17 for the details on these instruments. Comprehensive Loss The Company follows FASB ASC 220.10, “Reporting Comprehensive Income (Loss).” Comprehensive loss is a more inclusive financial reporting methodology that includes disclosure of certain financial information that historically has not been recognized in the calculation of net loss. Since the Company has no items of other comprehensive loss, comprehensive loss is equal to net loss. Offering Costs The Company complies with the requirements of FASB ASC 340-10-S99-1 and SEC Staff Accounting Bulletin (“SAB”) Topic 5A - Expenses of Offering . During the three and nine months ended September 30, 2025, the Company recognized $ 0 and $ 7,626,439 , respectively, in deferred offering costs related to ongoing and anticipated capital raising activities. These costs primarily consisted of legal, advisory, and other professional service fees incurred in connection with financing efforts. During the nine months ended September 30, 2025, the Company raised gross proceeds of $ 9,037,007 , which included $ 8,650,000 under prepaid purchase agreements and $ 387,007 through a crowdfunding offering. Of the total deferred offering costs recognized, $ 869,868 and $ 1,741,750 were allocated and recognized as a reduction of proceeds raised under the prepaid purchase agreements for the three and nine months ended September 30, 2025, respectively, based on a pro-rata allocation of total expected funding (Note 9 and 12). In addition, $ 1,471 and $ 91,543 of offering costs were directly associated with the crowdfunding raise and were recognized as a reduction to the related proceeds for the three and nine months ended September 30, 2025, respectively. The remaining deferred offering costs are included as current asset on the balance sheet and will be recognized as a reduction to additional paid-in capital upon completion of the related equity offerings. Research and Development Research and development (R&D) costs, that do not meet the criteria for capitalization are expensed as incurred. Research and development expenses include fees paid to outside consultants for the Company’s proprietary technology. - 12 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Research and Development (Continued) For the three and nine months ended September 30, 2025, and 2024, the Company had R&D costs totaling $ 179,854 and $ 564,585 and $ 7,940 and $ 548,879 , respectively. Marketing Expenses The Company uses various marketing methods to create brand awareness to promote and alert the public about future product and service offerings to generate future capital or revenue when a viable product is created. The Company’s policy is to charge marketing costs to expenses in the period they are incurred. Marketing expenses were $ 107,530 and $ 164,793 and $ 28,414 and $ 281,160 for the three and nine months ended September 30, 2025 and 2024, respectively. Stock-Based Compensation The Company measures and records the expense related to stock-based payment awards based on the fair value of those awards as determined on the date of the grant. The Company recognizes stock-based compensation expense over the requisite service period of the individual grant, generally equal to the vesting period, and uses the straight-line method to recognize stock-based compensation, as applicable. For stock-based compensation with performance conditions, the Company records compensation expenses when the performance condition is met. The Company uses the Black-Scholes model to estimate the fair value of stock options and forfeitures are accounted for when incurred. The average fair value of one (1) share of the Company’s common stock was determined to be $ 13.00 for the period of January 1, 2025 to May 15, 2025 and $ 12.71 as of December 31, 2024. On May 15, 2025, the Company completed its initial public offering and its common stock began trading on the Nasdaq Stock Exchange. Subsequent to May 15, 2025, the price of the Company’s common stock was determined by the Nasdaq daily closing stock price. Prior to May 15, 2025, the fair value of common stock is based on the prior Company’s transaction method. The prior company transaction method utilizes actual transactions in the Company’s non-controlling, non-marketable private company equity interests. Therefore, the result is reflective of a non-controlling, non-marketable private company value and no discount for lack of control or marketability was considered necessary in the application of this methodology. As part of this methodology, there are a number of limiting assumptions, however, management believes it appropriately represents the fair market value indication for one (1) share of the Company’s common stock. Since, prior to May 15, 2025, the Company’s stock was not publicly traded, the expected volatility is based on the historical and implied volatility of similar companies whose stock or option prices are publicly available, after considering the industry, stage of the life cycle, size, market capitalization, and financial leverage of the other companies. - 13 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes There is no income tax benefit for the losses for the three and nine months ended September 30, 2025 and 2024 since management has determined that the realization of the net deferred tax asset is not assured and has created a valuation allowance for the entire amount of such benefits. The Company’s policy is to record interest and penalties associated with unrecognized tax benefits as additional income taxes in the statement of operations. As of January 1, 2025, the Company had no unrecognized tax benefits, or any tax related interest or penalties, and it does not expect significant changes in the amount of unrecognized tax benefits to occur within the next twelve months. There were no changes in the Company’s unrecognized tax benefits during the three and nine month period ended September 30, 2025. The Company did no t recognize any interest or penalties during 2025 related to unrecognized tax benefits. With few exceptions, the U.S. and state income tax returns filed for the tax years ending on December 31, 2021 and thereafter are subject to examination by the relevant taxing authorities. Net operating loss (NOL) carryforwards are subject to examination in the year they are utilized regardless of whether the tax year in which they are generated has been closed by the statute. The amount subject to disallowance is limited to the NOL utilized. Accordingly, the Company may be subject to examination for prior NOLs generated as such NOLs are utilized. Fair Value of Financial Instruments The carrying value of the Company’s short-term financial instruments such as cash, accounts receivable, prepaid expenses, accounts payable and accrued expenses approximate their fair values because of their short maturities. The estimated fair value of the Company’s debt approximates the carrying value due to the interest rates on the debt approximating current market interest rates. Recently Adopted Accounting Standard In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires incremental disclosures about reportable segments but does not change the definition of a segment or the guidance for determining reportable segments. The requirements are effective for annual reporting periods beginning on January 1, 2024, and are required to be applied retrospectively. The Company has adopted the additional disclosure requirements under ASU 2023-07. The additional requirements did not have a material impact on the financial statements. - 14 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Recently Issued Accounting Standard Not Yet Adopted In November 2024, the FASB issued ASU 2024-03, ASC Subtopic “Disaggregation of Income Statement Expenses (ASC 220-40): Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures”. The amendments require additional disclosure of the nature of expenses included in the income statement. The amendments in this update are effective for public business entities for fiscal years, beginning after December 15, 2026. Early adoption is permitted. The Company is currently assessing the impact of the adoption of this standard on its financial statements. 3. SEGMENT REPORTING The Company’s principal business is described in Note 1. The Company has determined that it operates in a 1 single operating and reportable segment. The Company’s Chief Financial Officer is designated as the chief operating decision maker (“CODM”). The CODM evaluates the business as a whole and does not receive discrete financial information for separate business units. The CODM is responsible for evaluating financial results and making resource allocation decisions. Significant Segment Expenses The Company considers the following as significant expenses in evaluating its segment performance: ● Research and Development: Includes costs related to materials and supplies, prototype hardware development, and third-party consulting costs. ● General and Administrative: Includes personnel costs, contractor expenses, and other overhead expenses. ● Legal and Professional Fees: Includes the cost of legal services to expand and maintain the Company’s patent portfolio, fees associated with various business transactions, and compliance with regulatory requirements. Entity-Wide Disclosures ● Geographic Revenue Information: For both the three and nine months ended September 30, 2025, 100 % of the Company’s net sales were generated in the United States. ● Major Customers: The Company has one customer that accounted for 10 % or more of total revenue. The Company did no t generate revenue during the three and nine months ended September 30, 2024. - 15 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 4. GOING CONCERN The Company’s financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary if the Company is unable to continue as a going concern. The Company has a minimum cash balance available for payment of ongoing operating expenses. As of September 30, 2025, the Company has an accumulated deficit of $ 24,825,227 and a net loss for the current period of $ 8,904,672 . These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date of this report. The Company’s continued existence is dependent upon its ability to continue to execute its operating plan and to obtain additional debt or equity financing. There can be no assurance that the necessary debt or equity financing will be available or will be available on terms acceptable to the Company. These financial statements do not include any adjustments that might result from the Company’s inability to continue as a going concern 5. FAIR VALUE MEASUREMENTS The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820 “Fair Value Measurements and Disclosures” (“ASC 820”) which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value: Level 1 — Quoted prices in active markets for identical assets or liabilities Level 2 — Quoted prices for similar assets and liabilities in active markets or inputs that are observable Level 3 — Inputs that are unobservable (for example, cash flow modeling inputs based on assumptions) - 16 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 5. FAIR VALUE MEASUREMENTS (Continued) The following table sets forth by level, within the fair value hierarchy, the Company’s assets at fair value as of September 30, 2025: SCHEDULE OF FAIR VALUE MEASUREMENTS Fair Value of September 30, 2025 Level 1 Level 2 Level 3 Total Money market funds $ - $ 24,940 $ - $ 24,940 Common stock and Mutual funds 1,918,995 - - 1,918,995 TOTAL INVESTMENTS AT FAIR VALUE $ 1,918,995 $ 24,940 $ - $ 1,943,935 6. PROPERTY AND EQUIPMENT Property and equipment consist of the following: SCHEDULE OF PROPERTY AND EQUIPMENT September 30, 2025 December 31, 2024 Vehicles $ 94,751 $ 58,443 Equipment 115,784 50,000 Construction in progress 23,914 38,155 Total property and equipment 234,449 146,598 Less: accumulated depreciation ( 81,534 ) ( 51,173 ) TOTAL PROPERTY AND EQUIPMENT, NET $ 152,915 $ 95,425 For the three and nine months ended September 30, 2025 and 2024, total depreciation expense was $ 13,695 and $ 30,360 and $ 7,089 and $ 21,215 , respectively. 7. PREPAID EXPENSES Prepaid expenses and other current assets consist of the following: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS September 30, 2025 December 31, 2024 Prepaid payroll wages $ 38,271 $ 38,271 Prepaid insurance 74,929 10,017 Prepaid software and other 51,577 7,579 TOTAL PREPAID EXPENSES $ 164,777 $ 55,867 - 17 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 8. LEASES The Company leases ground robots from a third-party, which are implemented in customer solutions. The robots are used on delivery routes to transport goods between Arrive Point units. At the inception of a contract, the Company assesses whether the contract is, or contains, a lease. The Company’s assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether the Company obtains the right to substantially all the economic benefit from the use of the asset throughout the term, and (3) whether the Company has the right to direct the use of the asset. The Company allocates the consideration in the contract to each lease and non-lease component based on the component’s relative stand-alone price to determine the lease payments. Lease and non-lease components are accounted for separately. Leases are classified as either finance leases or operating leases based on criteria in Topic 842. The Company has operating leases which are generally comprised of distinctly identified assets (ground robots) whereby the Company derives all economic benefits through customer contracts for use of the service through the term of the contract. The Company may elect to purchase the assets for a residual value at the end of the lease term. At lease commencement, the Company records a lease liability equal to the present value of the remaining lease payments, discounted using the rate implicit in the lease or, if that rate cannot be readily determined, the Company’s incremental borrowing rate. A corresponding right-of-use asset (“ROU asset”) is recorded, measured based on the initial measurement of the lease liability. ROU assets also include any lease payments made and exclude lease incentives. Lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for operating leases, consisting of lease payments, is recognized on a straight-line basis over the lease term. Included in lease expense are any variable lease payments incurred in the period that were not included in the initial lease liability. Lease expense for finance leases consists of the amortization of the ROU asset on a straight-line basis over the shorter of the useful life of the asset or the lease term, and interest expense is calculated using the effective interest rate method. The following is a summary of the lease cost recognized in the Company’s consolidated statement of operations: SCHEDULE OF LEASE COST Operating Leases Three months ended September 30, 2025 Nine months ended September 30, 2025 Lease cost in general and administrative expense Operating lease expense $ 8,195 $ 8,195 Total lease cost in general and administrative expense $ 8,195 $ 8,195 - 18 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 8. LEASES (Continued) The following is a summary of the impact of the Company’s leases on the statements of cash flows: Three months ended September 30, 2025 Nine months ended September 30, 2025 Leasing activity in cash flows from operating activities Operating leases $ 12,600 $ 12,600 Total leasing activity in cash flows from operating activities $ 12,600 $ 12,600 The weighted-average remaining lease term in years and weighted-average discount rate for operating leases at September 30, 2025 is 1.75 and 23.70 %. The future minimum lease payments required under the Company’s leases as of September 30, 2025 are as follows: SCHEDULE OF FUTURE MINIMUM LEASE PAYMENTS Future minimum lease payments 2025 $ 50,400 2026 37,800 Toal future minimum lease payments 88,200 Less: Amount representing interest ( 15,159 ) Present value of lease liabilities 73,041 Less: current portion ( 38,041 ) Long-term portion $ 35,000 9. DEFERRED OFFERING COSTS Pursuant to ASC 340-10-S99-1, costs directly attributable to an offering of equity securities are deferred and would be charged against the gross proceeds of the offering. Deferred offering costs consist of underwriting, legal, accounting, and other expenses incurred through the balance sheet date that are directly related to the proposed public offering. The Company’s registration statement was declared effective and the stock began trading on May 15, 2025. During the three months ended March 31, 2025, the Company issued 532,913 shares of common stock in exchange for investment banking advisory services with a fair value of $ 6,927,869 , which was recorded as deferred offering costs. During the six months ended June 30, 2025, the Company recorded an additional $ 698,570 for filing and legal fees related to the transaction. As of September 30, 2025, $ 1,741,750 of the deferred offering costs have been recorded as a reduction of the proceeds, in proportion to the funds received from the offering, which were recognized in additional paid-in capital. - 19 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 10. PATENTS, NET Patents consist of the following: SCHEDULE OF PATENTS September 30, 2025 December 31, 2024 Patents $ 274,700 $ 274,700 Less: accumulated amortization ( 1,786 ) ( 1,099 ) TOTAL PATENTS $ 272,914 $ 273,601 As of September 30, 2025, six of the Company’s fifty-seven international patents were issued and began being amortized over twenty years . As of September 30, 2024, five of the Company’s forty-four patents were approved by the countries in which the patent applications were filed. Amortization expense was $ 235 and $ 688 and $ 234 and $ 577 for the three and nine months ended September 30, 2025 and 2024, respectively. 11. NOTE PAYABLE Note payable consists of the following: SCHEDULE OF NOTES PAYABLE September 30, 2025 December 31, 2024 Vehicle note payable for $ 40,248 with monthly installment payments of $ 799 , including interest at 6.99 % per annum. The loan is collateralized by the respective vehicle and is due in February 2027. $ 12,745 $ 19,082 Less current portion ( 8,982 ) ( 8,524 ) LONG-TERM PORTION $ 3,763 $ 10,558 The balance of the above debt matures as follows: SCHEDULE OF MATURITIES OF LONG-TERM DEBT Twelve Months Ending September 30, Amount 2026 $ 8,982 2027 3,763 TOTAL $ 12,745 Interest expense related to this note payable for the three and nine months ended September 30, 2025 and 2024, was $ 248 and $ 855 and $ 389 and $ 1,277 , respectively. - 20 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 12. CONVERTIBLE NOTE PAYABLE On March 21, 2025, the Company issued a convertible promissory note with a face amount of $ 4,330,000 , with a $ 4,000,000 initial purchase price and a $ 320,000 original issue discount, to Streeterville Capital LLC (“Streeterville”). On August 11, 2025 the Company issued a second convertible promissory note with a face amount $ 4,320,000 , with a $ 4,000,000 initial purchase price and a $ 320,000 original issue discount, to Streeterville. The notes bear interest at a rate of 8 % per annum and are pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) dated March 21, 2025. Under the purchase agreement, Streeterville agrees to purchase an amount of up to $ 40,000,000 in pre-paid purchases of the Company’s common stock, $ 0.0002 par value per share. The original principal amount is a $ 8,650,000 pre-paid purchase with a $ 8,000,000 initial purchase price and $ 640,000 original issue discount. In addition, the Company paid $ 10,000 to cover Streeterville’s transaction expenses, along with 62,500 shares of common stock issued as a commitment fee at closing, with a fair value of $ 812,500 . The commitment fee was recorded as stock based compensation. A 6% fee on gross proceeds due to the Company’s investment banker of $ 480,000 has been capitalized in the notes payable as issuance costs. The original issue discount and issuance costs are amortized to interest expense using the effective method over a period of six months. In May 2025, Streeterville purchased 2,937,500 shares of common stock, at par value, in exchange for $ 588 . The Company has the right to repurchase these pre-delivery shares at par value. SCHEDULE OF CONVERTIBLE NOTE PAYABLE September 30, 2025 December 31, 2024 March 21, 2025 issuance $ 4,330,000 $ - August 11, 2025 issuance 4,320,000 - Discount ( 640,000 ) - Issuance costs ( 480,000 ) - Amortization of discount and issuance costs 597,333 - Conversion of note ( 4,125,000 ) - TOTAL BALANCE $ 4,002,333 $ - During the three months ended September 30, 2025, Streeterville converted $ 4,125,000 of the notes payable for 1,207,355 shares of common stock. Upon conversion, the Company immediately expensed to interest expense the remaining unamortized discount and issuance costs relative to the proportion of notes converted to total outstanding notes. During the three and nine months ended September 30, 2025 and 2024, the Company recognized interest expense associated with the amortization of the discount and issuance costs of $ 405,333 and $ 597,333 and $ 0 and $ 0 , respectively. During the three and nine months ended September 30, 2025, the Company also recognized interest expense of $ 165,823 and $ 0 , respectively. 13. COMMITMENTS AND CONTINGENCIES Lease Obligation Effective April 1, 2024, the Company expanded its leased office space. The new term is nine months , and thereafter a month-to-month lease which can be canceled with a 90-day written notice and agreement to suitable terms by both parties. Under this lease, base rent is $ 3,600 per month. The Company is required to pay insurance, listing the property owner as an additional insured, and normal maintenance costs for certain of this leased property. Additionally, the Company rents a warehouse from an officer and shareholder for $ 2,250 per month on a month-to-month basis. - 21 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 13. COMMITMENTS AND CONTINGENCIES (Continued) Lease Obligation (Continued) FASB ASU No. 2016-02, Topic 842, Leases, allows companies to elect certain policies for short-term leases. The Company has elected not to recognize right-of-use assets and lease liabilities arising from short-term leases with an initial term of 12 months or less. Litigation On September 9, 2025, John Doan and Jami Town named the Company as a defendant in Case No. 3:2025cv00721, pending in U.S. District Court for the Eastern District of Virginia. Doan and Town claim the Company is in breach of contract for loans made to AirBox. The loans were extended to AirBox before the Company purchased its assets in 2023. The Company explicitly acquired only the assets of AirBox and therefore does not believe it is liable for any of its previous liabilities. The Company has filed for removal from the claim. The plaintiffs have filed to have the case remanded to Virginia state court, where it was originally filed on August 13, 2025. Since this matter is still in its initial stages, the Company is unable to predict the outcome at this time. From time to time, the Company may become involved in various legal proceedings in the ordinary course of its business and may be subject to third-party infringement claims. In the normal course of business, the Company may agree to indemnify third parties with whom it enters into contractual relationships, including customers, lessors, and parties to other transactions with the Company, with respect to certain matters. The Company has agreed, under certain conditions, to hold these third parties harmless against specified losses, such as those arising from a breach of representations or covenants, other third-party claims that the Company’s products, when used for their intended purposes, infringe the intellectual property rights of such other third parties, or other claims made against certain parties. It is not possible to determine the maximum potential amount of liability under these indemnification obligations due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances that are likely to be involved in each particular claim. 14. RELATED-PARTY TRANSACTIONS On May 26, 2020, the Company entered into a three year agreement with a stockholder of the Company for the use of a patent. Beginning June 1, 2020, the Company began paying the stockholder a monthly license fee of $ 10,000 . Once revenue from sales, rentals, and leases begins, the Company is required to pay $ 25.00 per unit sold. If the Company does not sell 400 units per month (or $10,000), the original fixed $10,000 is paid. Accordingly, for the three and nine months ended September 30, 2025 and 2024, the Company recorded licensing fee costs in the amount of $ 30,000 and $ 90,000 each period, respectively. - 22 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 14. RELATED-PARTY TRANSACTIONS (Continued) On March 10, 2025, the Company entered into the second amendment to the Exclusive Patent License Agreement of May 26, 2020. The Second Amendment extends the license to perpetuity, covering the full term and life of the patents, and cures in the event of default. The Second Amendment also removes prior restrictions on the Company’s use, sale, or commercialization of the technology after termination, permitting the sale of remaining inventory for up to 90 days post-termination, provided all required reports and payments are made under the Agreement. 15. STOCKHOLDERS’ EQUITY Common Stock As of April 30, 2020 (date of incorporation), the Company had 100,000,000 shares of common stock, with a par value of $ 0.0001 , authorized and available to issue for purposes of satisfying any future transactions. No other class of stock has been authorized or is available for issuance. Effective September 15, 2021, the Company authorized a 2-for-1 stock split, with 200,000,000 shares authorized and available, with a par value of $ 0.00005 , to issue for purposes of satisfying any future transactions. Effective November 25, 2024, the Company authorized a 1-for-4 reverse stock split, with 200,000,000 shares authorized and available to issue for purposes of satisfying any future transactions. The par value is now $ 0.0002 . During the nine months ended September 30, 2025, the Company issued 5,112,182 shares of common stock as follows: a) 11,692 shares with accredited investors in exchange for cash of $ 152,000 at an average share price of $ 13.00 per share. 7,692 of the shares were issued with warrants and deemed as equity, as described in Note 16. b) 2,937,500 shares with an accredited investor in exchange for cash of $ 588 . The shares were issued at par value, subject to the securities purchase agreement, dated March 21, 2025, by and between Streeterville Capital, LLC and the Company (the “Purchase Agreement”), as described in Note 12. c) 120,820 warrants exercised, for 120,820 shares in exchange for cash of $ 573,895 . d) 25,693 shares issued through a crowdfunding campaign with other investors in exchange for net cash of $ 295,469 , at an average share price of $ 11.50 per share net of offering costs. e) 147,374 shares issued to employees and consultants, recognized as compensation expense, fair valued at $ 13.00 per share, for a total fair value of $ 1,915,862 , based on the price per stock issued to investors for cash during the period January 1, 2025 to May 15, 2025. f) 35,389 shares issued to employees or consultants via stock awards, recognized as compensation expense, for a total of $ 451,567 , fair valued based on the Company’s closing stock price on the day the shares were issued. g) 773 shares issued for the cashless exercise of vested options under the 2023 equity incentive plan, for a total of $ 9,269 , fair value based on the Company’s closing stock price on the day the shares were exercised. - 23 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 15. STOCKHOLDERS’ EQUITY (Continued) Common Stock (Continued) h) 532,913 shares issued to a consultant via stock awards, recognized as deferred offering costs, fair valued at $ 13.00 per share, for a total of $ 6,927,869 , based on the price per stock issued to investors for cash. i) 92,673 shares issued with a consultant as settlement of legal expenses incurred in prior periods, fair valued at $ 13.00 per share, for a total of $ 1,204,737 , based on the price per stock issued to investors for cash. j) 1,207,355 shares issued, with a fair value of $ 4,125,000 , as a conversion of $ 4,125,000 notes payable, as described in Note 12. , Share Repurchase Program On September 8, 2025, the Company announced a new share repurchase program (the “Repurchase Program”), pursuant to which the Company may purchase up to $ 10 million of its common stock through March 31, 2026. Share repurchases under the Repurchase Program may be made from time to time through various means, including open market purchases, privately negotiated transactions, and/or pursuant to Rule 10b5-1 trading plans, in each case in accordance with Rule 10b-18 under the Securities Exchange Act of 1934. The timing, volume, and nature of share repurchases pursuant to the Repurchase Program are at the discretion of management and may be suspended or discontinued at any time. Shares repurchased under the Repurchase Program are held for sale and are included in the category of treasury stock. The following table sets forth the Company’s share repurchases: SCHEDULE OF SHARES REPURCHASE Three and nine months ended September 30, 2025 Total number of shares repurchased 19,700 Amount repurchased $ 74,743 Average price per share $ 3.79 Share repurchases for the three months ended September 30, 2025 were made on the open market subject to regulatory constraints. As of September 30, 2025, the Company had approximately $ 9.925 million available for repurchase remaining under the repurchase program. - 24 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 16. WARRANTS The following table summarizes the warrants outstanding as of September 30, 2025: SCHEDULE OF WARRANTS OUTSTANDING Warrants Outstanding Weighted Average Exercise Price Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value BALANCE, DECEMBER 31, 2024 227,549 $ 10.08 $ 4.76 0.97 $ 598,996 Granted 7,692 11.00 8.55 3.45 - Exercised ( 120,820 ) 9.52 3.87 - - Cancelled/Expired ( 6,680 ) 9.52 3.90 - - BALANCE, SEPTEMBER 30, 2025 107,741 $ 10.80 $ 6.09 1.27 $ - The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $ 3.64 for the Company’s common shares on September 30, 2025 and the closing stock price of $ 12.71 for the Company’s common shares on December 31, 2024. 17. EQUITY INCENTIVE PLAN The Company created the 2023 Equity Incentive Plan (the Plan) on April 27, 2023, under which shares of common stock became available for issuance not to exceed 1,500,000 . The Stock Plan is designed to attract, retain, and motivate key employees. Currently, the fair value is recognized as an expense over the vesting period of the award. Option awards are generally granted with an exercise price equal to the fair market value of the Company’s stock at the date of grant, vest over a four-year period, and expire after ten years. There are certain situations that may accelerate the vesting or termination of all outstanding options, such as a change in control. As of September 30, 2025, 854,042 shares were available for grant. The compensation expenses related to incentive units is included in general and administrative expenses with a corresponding increase to additional paid-in-capital. - 25 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 17. EQUITY INCENTIVE PLAN (Continued) The following table summarizes the options outstanding as of September 30, 2025: SCHEDULE OF SHARE OPTIONS OUTSTANDING Share Options Outstanding Weighted Average Exercise Price Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value BALANCE, DECEMBER 31, 2024 614,704 $ 0.80 $ 10.88 8.87 $ 7,322,656 Granted - - - - - Exercised ( 1,251 ) 0.76 10.30 - - Canceled/Expired ( 4,135 ) 0.76 11.69 - - BALANCE, SEPTEMBER 30, 2025 609,318 $ 0.80 $ 10.87 8.12 $ 1,731,782 EXERCISABLE, SEPTEMBER 30, 2025 226,590 $ 0.80 $ 10.87 8.12 $ 643,211 The following table summarizes the nonvested share options for the nine months ended September 30, 2025: SCHEDULE OF NONVESTED SHARE OPTION Nonvested Share Options Weighted Average Exercise Price Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term (years) Aggregate Intrinsic Value BALANCE, DECEMBER 31, 2024 452,875 $ 0.80 $ 10.89 8.88 $ 5,396,007 Vested ( 66,737 ) 0.79 10.92 8.15 190,042 Canceled/Expired ( 3,079 ) 0.76 12.38 - - BALANCE, SEPTEMBER 30, 2025 382,729 $ 0.80 $ 10.87 8.13 $ 1,088,571 The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying share options and the closing stock price of $ 3.64 for the Company’s common shares on September 30, 2025 and the closing stock price of $ 12.71 for the Company’s common shares on December 31, 2024. - 26 - ARRIVE AI INC. NOTES TO FINANCIAL STATEMENTS (Continued) 17. EQUITY INCENTIVE PLAN (Continued) There were no options granted during the nine months ended September 30, 2025. As of September 30, 2025, there was $ 4,161,913 unrecognized compensation expense related to nonvested stock options to be recognized through June 30, 2028. Total compensation expense related to stock options during the three and nine months ended September 30, 2025 and September 30, 2024 was $ 268,191 and $ 757,957 and $ 270,011 and $ 732,293 , respectively. During the nine months ended September 30, 2025 there were 1,251 options exercised in a cashless exchange for 773 shares. Additionally, fully vested stock awards of 2,264 and 35,389 shares were issued under the Plan to employees during the three and nine months ended September 30, 2025 resulting in compensation expense of $ 20,942 and $ 541,567 , respectively. 18. RESEARCH AND DEVELOPMENT TAX CREDITS The Company qualifies as a small business under Internal Revenue Code Section 41(h) and has elected to apply a portion of its federal research and development (R&D) credit against the employer portion of Social Security payroll taxes, in accordance with IRS Form 6765. As of September 30, 2025, the Company had $ 226,011 of unused payroll tax credits. These credits are being applied as an offset to the Company’s payroll tax liability and are recognized as a reduction of payroll tax expense in the period the benefit is realized. 19. SUBSEQUENT EVENTS On October 1, 2025, the Company signed a new five-year lease agreement for office space in Fishers Indiana. The lessor and building owner is a related party owned by the Company’s CEO Dan O’Toole. Under the triple-net lease, the Company is responsible for monthly rent expense plus taxes, insurance and common area maintenance. The lease term is October 1, 2025 through September 30, 2030, with a monthly rent payment of $ 54,366 . On October 2, 2025 the Company was the plaintiff in a lawsuit filed in federal court in the Southern District of Indiana for misappropriation of trade secrets. Taft, Stettinius & Hollister, LLP is representing the Company in the matter. Since this matter is still in its initial stages, the Company is unable to predict the outcome at this time. On October 6, 2025, the Company awarded 21,876 restricted stock units with a fair value of $ 108,942 to three independent board members for their services during the third quarter of 2025. These shares vest on September 30, 2026 and are expensed as compensation expense over the vesting period. - 27 -