Arrive AI Inc. 10-Q

Item 1. Financial Statements. ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) BALANCE SHEETS (Unaudited) March 31, 2025 December 31, 2024 (Unaudited) ASSETS CURRENT ASSETS Cash $ 295,368 $ 129,318 Prepaid expenses 48,786 55,867 Deferred offering costs 7,355,767 427,898 Other current assets 2,767 4,179 Total current assets 7,702,688 617,262 LONG-TERM ASSETS Property and equipment, net 91,168 95,425 Patents, net 273,299 273,601 Security deposit 1,500 1,500 Long-term assets 365,967 370,526 TOTAL ASSETS $ 8,068,655 $ 987,788 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) CURRENT LIABILITIES Accounts payable $ 1,802,427 $ 1,868,689 Accrued liabilities 213,024 79,556 Credit card payable 3,795 3,636 Current portion of note payable 8,674 8,524 Total current liabilities 2,027,920 1,960,405 NONCURRENT LIABILITIES Note payable, net of current portion 8,333 10,558 Total liabilities 2,036,253 1,970,963 Commitments and Contingencies (See Note 11) - - STOCKHOLDERS’ EQUITY (DEFICIT) Common stock, $ 0.0002 par value, 200,000,000 shares authorized, 29,835,038 shares and 29,120,905 issued and outstanding at March 31, 2025, and December 31, 2024, respectively 6,465 6,322 Treasury stock, 2,500,000 at cost ( 500 ) ( 500 ) Additional paid-in capital, net of offering costs 23,937,941 14,984,561 Subscription receivable ( 12,784 ) ( 53,003 ) Accumulated deficit ( 17,898,720 ) ( 15,920,555 ) Total stockholders’ equity (deficit) 6,032,402 ( 983,175 ) TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) $ 8,068,655 $ 987,788 See accompanying condensed notes to unaudited financial statements. - 3 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended March 31, 2025 2024 REVENUE $ - $ - GENERAL AND ADMINISTRATIVE EXPENSES Salaries and wages - office 1,583,937 498,401 Legal and professional fees 200,201 174,916 Research and development 91,263 88,401 Licensing fee 30,000 30,000 Office supplies and software 22,154 26,741 Insurance 20,137 19,027 Rent 17,550 13,150 Taxes and licenses 9,651 23,193 Depreciation 7,089 7,096 Travel 4,857 8,572 Shipping and freight 2,386 5,253 Meals and entertainment 1,548 10,327 Utilities 1,360 1,425 Marketing 1,256 7,558 Interest 321 461 Amortization 302 159 Transportation 215 1,476 Repairs and maintenance - 93 Total general and administrative expenses 1,994,227 916,249 OTHER INCOME (EXPENSES) Other income 16,915 - Miscellaneous expense ( 853 ) ( 504 ) Total other income (expenses) 16,062 ( 504 ) NET LOSS BEFORE TAXES ( 1,978,165 ) ( 916,753 ) PROVISION FOR INCOME TAXES - - NET LOSS $ ( 1,978,165 ) $ ( 916,753 ) NET LOSS PER SHARE: Basic and diluted $ ( 0.07 ) $ ( 0.03 ) WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted 29,721,248 28,919,986 See accompanying condensed notes to unaudited financial statements. - 4 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) For the Three Months Ended March 31, 2025 and 2024 (Unaudited) Additional Paid-In Total Number of Common Number of Capital, Net of Subscription Stockholders’ Common Stock Treasury Treasury Offering Receivable Accumulated Equity Shares ($) Shares Stock ($) Costs ($) ($) Deficit ($) (Deficit) ($) BALANCE, JANUARY 1, 2024 28,844,643 $ 6,269 2,500,000 $ ( 500 ) $ 10,924,624 $ ( 25,505 ) $ ( 11,382,654 ) $ ( 477,766 ) Issuance of common stock 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 $ 6,284 2,500,000 $ ( 500 ) $ 11,995,839 $ ( 75,765 ) $ ( 12,299,407 ) $ ( 373,549 ) BALANCE, JANUARY 1, 2025 29,120,905 $ 6,322 2,500,000 $ ( 500 ) $ 14,984,561 $ ( 53,003 ) $ ( 15,920,555 ) $ ( 983,175 ) BALANCE 29,120,905 $ 6,322 2,500,000 $ ( 500 ) $ 14,984,561 $ ( 53,003 ) $ ( 15,920,555 ) $ ( 983,175 ) Issuance of common stock and warrants for cash, net 96,346 19 - - 677,390 40,219 - 717,628 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 $ 6,465 2,500,000 $ ( 500 ) $ 23,937,941 $ ( 12,784 ) $ ( 17,898,720 ) $ 6,032,402 BALANCE 29,835,038 $ 6,465 2,500,000 $ ( 500 ) $ 23,937,941 $ ( 12,784 ) $ ( 17,898,720 ) $ 6,032,402 See accompanying condensed notes to unaudited financial statements. - 5 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) STATEMENTS OF CASH FLOWS For the Three Months Ended March 31, 2025 and 2024 (Unaudited) 2025 2024 CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ ( 1,978,165 ) $ ( 916,753 ) Adjustments to reconcile net loss to net cash used in operating activities Stock-based compensation 1,348,245 246,612 Depreciation and amortization 7,391 7,255 Changes in operating assets and liabilities (Increase) decrease in Prepaid expenses 7,081 4,377 Other current assets 1,412 - Increase (decrease) in Accounts payable ( 66,262 ) ( 3,554 ) Accrued liabilities 133,468 87,676 Credit card payable 159 ( 28,090 ) Net cash used in operating activities ( 546,671 ) ( 602,477 ) CASH FLOWS FROM INVESTING ACTIVITIES Construction in progress ( 2,832 ) - Net cash used in investing activities ( 2,832 ) - CASH FLOWS FROM FINANCING ACTIVITIES Net proceeds from the issuance of stock and warrants 717,628 774,358 Payments on note payable ( 2,075 ) ( 1,935 ) Net cash provided by financing activities 715,553 772,423 NET INCREASE IN CASH 166,050 169,946 CASH, BEGINNING OF PERIOD 129,318 325,472 CASH, END OF PERIOD $ 295,368 $ 495,418 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for: Interest $ 321 $ 1,476 Income taxes $ - $ - SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION Deferred offering costs in exchange for shares of common stock $ 6,927,869 $ - See accompanying condensed notes to unaudited financial statements. - 6 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) CONDENSED NOTES TO FINANCIAL STATEMENTS March 31, 2025 and 2024 (Unaudited) 1. NATURE OF OPERATIONS Arrive AI Inc. (formerly Arrive Technology 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). 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. Reclassifications On November 25, 2024, the Company effected a 1-for-4 reverse stock split (the “Reverse Stock Split”). The Reverse Stock Split reduced the total number of issued and outstanding shares of Common Stock, including shares held by the Company as treasury shares. All share amounts have been retroactively adjusted for the Reverse Stock Split, unless stated otherwise. - 7 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. Cash Cash is defined as currency on hand and on-demand deposits. Cash equivalents are unrestricted highly liquid cash investments purchased with a maturity of three (3) months or less. There were no cash equivalents at March 31, 2025 and December 31, 2024. Concentration of Credit Risk The Company maintains its cash balances at one financial institution. The account is 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 March 31, 2025 and December 31, 2024, the Company’s uninsured cash balances totaled approximately $ 45,000 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. 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 the vehicle). The useful life of the property and equipment for purposes of computing depreciation is: SCHEDULE OF PROPERTY AND EQUIPMENT USEFUL LIFE Useful Life Vehicle and Equipment 3 - 5 years - 8 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY 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 a vehicle, aerial drones; construction-in-progress (CIP), and intangible patent assets including those acquired by the acquisition of Airbox Technology in 2023. The vehicle and drone hexacopter were evaluated for impairment, and no impairments were considered necessary as of March 31, 2025. The Company acquired three “Gen 3” Arrive Point units in December 2024 for approximately $ 38,000 . One of the units entered into commercial service in April 2025 and the remaining two units are expected to enter commercial service in May 2025. The Company believes the cost of the Gen 3 Arrive Point units have an alternative future use and the cost of these units and associated installation costs were capitalized but had not been placed into service as of March 31, 2025. These units will be placed into service once accepted by the end customer. No impairment loss on these units was recognized as of March 31, 2025. - 9 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounts Payable and Accrued Liabilities Payables are obligations to pay for materials or services that have been acquired or have been rendered in the ordinary course of business from suppliers or vendors. Payables and accrued liabilities are classified as current if payment is due within one year. 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 at times, if the cash investment by each investor exceeds $ 250,000 , 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 and carries the warrants at the grant date fair market value. 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 fair value of the stock purchase warrants issued is determined by using the Black-Scholes-Merton (“Black-Scholes”) model. The Black-Scholes model requires the use of highly subjective and complex assumptions, which determine the fair value of warrants, including the warrants’ expected terms and the price volatility of the underlying stocks. The Company calculates the fair value of warrants granted by using the Black-Scholes pricing model with the following assumptions: Expected Volatility: The Company estimated volatility for warrants by evaluating the average historical volatility of a peer group of companies for the period immediately preceding the warrant for a term that is approximately equal to the warrants’ expected terms. Expected Term: The expected term of the Company’s warrants represents the period that the warrants are expected to be outstanding (typically, to expiration). The Company used the time remaining to the expiration of the warrants (contractual expiration) to compute the expected term, as the Company does not have sufficient historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior. - 10 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Equity Financing (continued) Risk-Free Interest Rate: The risk-free interest rate is based on the implied yield currently available on U.S. Treasury zero-coupon issues with a term that is equal to the warrants’ expected terms at the grant date. Dividend Yield: The Company has not declared or paid dividends to date and does not anticipate declaring dividends. As such, the dividend yield has been estimated to be zero . The warrants have not been registered under the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder, or qualified under any state or foreign securities laws and may not be offered for sale, sold, pledged, hypothecated, or otherwise transferred or assigned unless ( i ) a registration statement covering such shares is effective under the act and is qualified under applicable state and foreign law or ( ii ) the transaction is exempt from the registration and prospectus delivery requirements under the act and the qualification requirements under applicable state and foreign law and, if the corporation requests, an opinion satisfactory to the corporation to such effect has been rendered by counsel. The Company registered with the Security and Exchange Commission (SEC) on July 16, 2021, however, is not yet traded on the public market. Loss per share Basic loss per share is computed by dividing net loss by weighted average number of shares of common stock outstanding during each period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period. As the Company reported a net loss for the three months ended March 31, 2025, common stock equivalents were anti-dilutive. As of March 31, 2025 and 2024 the outstanding warrants and stock options are excluded from the calculation of weighted average dilutive shares because their inclusion would have been anti-dilutive. Refer to Note 14 and Note 15 for additional information. 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 . For the three months ended March 31, 2025 and 2024, the Company recognized $ 59,468 and $ 84,027 of offering costs, respectively. Accumulated offering costs were $ 637,102 and $ 431,667 as of March 31, 2025 and 2024, respectively. These offering costs consisted of professional, regulatory, and other costs; all of which were charged to additional paid-in capital for all funding campaigns (crowdfunding, seed series, StartEngine, PicMii, etc.) held by the Company. - 11 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. For the three months ended March 31, 2025 and 2024, the Company had R&D costs totaling $ 91,263 and $ 88,401 , 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 $ 1,256 and $ 7,558 for the three months ended March 31, 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 price of one (1) share of the Company’s common stock was determined to be $ 13.00 and $ 12.71 as of March 31, 2025 and December 31, 2024, respectively. 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 the Company’s stock is 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. - 12 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 2. SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating loss, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is recorded for deferred tax assets if it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of March 31, 2025 and 2024, the Company has recorded a full valuation allowance against its deferred tax assets. The Company evaluates uncertain income tax positions in order to determine if it is more likely than not that they would be sustained upon examination. As the Company was incorporated in 2020, the Company’s Federal and State income tax returns for all years of operation are subject to examination by the Internal Revenue Service. Fair Value Measurements Fair value accounting is applied for all assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The Company follows established frameworks for measuring fair value and expands disclosures about fair value measurements (Note 5). Recently Adopted Accounting Guidance 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. - 13 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 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 manages operations and reviews the financial information as a single operating segment at the entity level for the purposes of allocating resources and evaluating its financial performance. 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 should the Company be unable to continue as a going concern. The Company has a minimum cash balance available for payment of ongoing operating expenses. As of March 31, 2025, the Company has an accumulated deficit of $ 17,898,720 and a net loss for the current period of $ ( 1,978,165 ) . 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. 5. FAIR VALUE MEASUREMENTS The Company reports all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Plan has the ability to access at the measurement date. - 14 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 5. FAIR VALUE MEASUREMENTS (Continued) Level 2: Inputs to the valuation methodology other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, such as: a. Quoted prices for similar assets or liabilities in active markets, b. Quoted prices for identical or similar assets or liabilities in inactive markets, c. Inputs other than quoted prices that are observable for the asset or liability, and d. Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The financial statements as of and for the three months ended March 31, 2025 and 2024, do not include any nonrecurring fair value measurements relating to assets or liabilities. The Company measures the warrants using Level 3 unobservable inputs within the Black-Scholes pricing model, as described in Note 2. The Company used various key assumptions, such as the fair value of the common stock, volatility, the risk-free interest rate, and expected term (remaining contractual term of the warrants). 6. PROPERTY AND EQUIPMENT Property and equipment consist of the following: SCHEDULE OF PROPERTY AND EQUIPMENT March 31, 2025 December 31, 2024 Vehicle $ 58,443 $ 58,443 Equipment 50,000 50,000 Construction in progress 40,987 38,155 Total property and equipment 149,430 146,598 Less: accumulated depreciation ( 58,262 ) ( 51,173 ) TOTAL PROPERTY AND EQUIPMENT, NET $ 91,168 $ 95,425 For the three months ended March 31, 2025 and 2024, total depreciation expense was $ 7,089 and $ 7,096 , respectively. - 15 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 7. PREPAID EXPENSES Prepaid expenses and other current assets consist of the following: SCHEDULE OF PREPAID EXPENSES AND OTHER CURRENT ASSETS March 31, 2025 December 31, 2024 Prepaid payroll wages $ 38,271 $ 38,271 Prepaid insurance 5,562 10,017 Prepaid software and other 4,953 7,579 TOTAL PREPAID EXPENSES $ 48,786 $ 55,867 8. 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 as a reduction of additional paid-in capital. 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. Should the proposed public offering prove to be unsuccessful, these deferred costs, as well as additional expenses to be incurred, will be expensed. The Company filed its S-1 Registration Statement on December 23, 2024 and an amended S-1/A on January 27, 2025. The Company is working to resolve all remaining inquiries before the registration can become effective. During the three months ended March 31, 2025, the Company issued 532,913 shares of common stock in exchange for investment banking advisory services, which was recorded as deferred offering costs. 9. PATENTS, NET Patents consist of the following: SCHEDULE OF PATENTS March 31, 2025 December 31, 2024 Patents $ 274,700 $ 274,700 Total patents 274,700 274,700 Less: accumulated amortization ( 1,401 ) ( 1,099 ) TOTAL PATENTS $ 273,299 $ 273,601 As of March 31, 2025, five (5) of the Company’s sixty-two (62) patents were approved and began being amortized over twenty years . As of March 31, 2024, three (3) of the Company’s forty-six (46) patents were approved by the countries in which the patent applications were filed. Amortization expense was $ 302 and $ 159 for the three months ended March 31, 2025 and 2024, respectively. - 16 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 10. NOTE PAYABLE Note payable consists of the following: SCHEDULE OF NOTES PAYABLE March 31, 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. $ 17,007 $ 19,082 Less current portion ( 8,674 ) ( 8,524 ) LONG-TERM PORTION $ 8,333 $ 10,558 The balance of the above debt matures as follows: SCHEDULE OF MATURITIES OF LONG-TERM DEBT Twelve Months Ending March 31, Amount 2026 $ 8,674 2027 8,333 TOTAL $ 17,007 Interest expense related to this note payable for the three months ended March 31, 2025 and 2024, was $ 321 and $ 461 , respectively. 11. COMMITMENTS AND CONTINGENCIES On January 29, 2024, the Company was included in the SEC Form F-4 filed by Brüush Oral Care, Inc. (Bruush) to register the intent of the parties to merge into a new public company, per the signed Merger Agreement of December 15, 2024. Bruush failed to remedy several deficiencies cited by Nasdaq in a timely manner, and was officially de-listed from the Nasdaq exchange on or about June 28, 2024. As a direct consequence of the delisting of Bruush shares, the merger was terminated. The terms of the merger included a termination fee of $ 250,000 in the event either party caused the termination. The Company assessed the collection of the termination fee as not probable, thus a receivable has not been recorded. On March 21, 2025, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an investor. Under the Securities Purchase Agreement, the investor 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 $ 4,330,000 pre-paid purchase with a $ 4,000,000 initial purchase price and $ 320,000 original issue discount. In addition, the Company agrees to pay $ 10,000 to cover the investor’s transaction expenses, along with 62,500 shares of common stock issued as a commitment fee at closing. - 17 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 11. COMMITMENTS AND CONTINGENCIES (Continued) 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. Under FASB ASU No. 2016-02, Topic 842, Leases , allows companies to elect certain policies for short-term leases. To qualify as a short-term lease, a lease must have an initial term of 12 months or less and not include renewal options or a purchase option that the lessee is reasonably certain to exercise. Litigation 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. On February 7, 2024, the Company entered into a settlement agreement to resolve a long-standing dispute. The settlement relates to a case brought against the Company’s CEO in 2020, prior to the formation of the Company, by a contractor hired to perform certain services for the Company. As a result of the agreement, a payment of $ 18,500 was made in exchange for full settlement and mutual release of all claims in the matter. 12. RELATED-PARTY TRANSACTIONS On May 26, 2020, the Company entered into a 3-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 months ended March 31, 2025 and 2024, the Company recorded licensing fee costs in the amount of $ 30,000 each period. - 18 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 12. 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. 13. 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 . For the three months ended March 31, 2025, the Company issued 714,133 shares of common stock as follows: a) 11,692 shares with accredited investors in exchange for cash of $ 152,000 at an average of $ 13.00 per share. 7,692 of the shares were issued with warrants and deemed as equity, as described in Note 14. b) 250,000 warrants exercised, for 62,500 shares in exchange for cash of $ 296,875 . c) 22,154 shares issued through a crowdfunding campaign with other investors in exchange for net cash of $ 268,753 , at an average of $ 12.13 per share after offering costs. d) 84,874 shares issued with employees or consultants via stock awards, recognized as compensation expense, fair valued at $ 13.00 per share, for a total of $ 1,103,362 , based on the price per stock issued to investors for cash during the three months ended March 31, 2025. e) 532,913 shares issued with 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. - 19 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 14. WARRANTS The following table summarizes the warrants outstanding for the three months ended March 31, 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 227,547 $ 10.08 $ 4.76 0.97 $ 598,993 Granted 7,692 11.00 8.55 3.95 15,384 Exercised ( 62,500 ) 9.52 3.84 - - BALANCE, MARCH 31, 2025 172,739 $ 10.32 $ 5.26 1.15 $ 462,866 The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying warrants and the closing stock price of $ 13.00 for the Company’s common shares on March 31, 2025 and the closing stock price of $ 12.71 for the Company’s common shares on December 31, 2024. 15. 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 five-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 March 31, 2025, 886,799 shares were available for grant. The compensation expenses related to incentive units is included in general and administrative expenses with a corresponding increased to additional paid-in-capital. - 20 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 15. EQUITY INCENTIVE PLAN (Continued) The following table summarizes the share options outstanding for the three months ended March 31, 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 Canceled/Expired ( 1,503 ) 0.76 11.26 - - BALANCE, MARCH 31, 2025 613,201 $ 0.80 $ 10.87 8.63 $ 7,482,524 EXERCISABLE, MARCH 31, 2025 183,896 $ 0.80 $ 10.85 8.62 $ 2,242,965 The following table summarizes the nonvested share options for the three months ended March 31, 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 ( 22,410 ) 0.79 10.93 8.66 273,582 Canceled/Expired ( 1,160 ) 0.76 11.36 - - BALANCE, MARCH 31, 2025 429,305 $ 0.80 $ 10.88 8.18 $ 5,239,559 The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying share options and the closing stock price of $ 13.00 for the Company’s common shares on March 31, 2025 and the closing stock price of $ 12.71 for the Company’s common shares on December 31, 2024. There were no options granted during the three months ended March 31, 2025. As of March 31, 2025, there was $ 4,672,620 unrecognized compensation expense related to nonvested stock options to be recognized over the remaining vesting period. Total compensation expense related to stock options during the three months ended March 31, 2025 was $ 244,883 . No options were exercised during the three months ended March 31, 2025. - 21 - ARRIVE AI INC. (FORMERLY ARRIVE TECHNOLOGY INC.) NOTES TO FINANCIAL STATEMENTS (Continued) 16. 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 March 31, 2025, the Company had $ 206,174 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. 17. SUBSEQUENT EVENTS During the period April 1, 2025 through June 5, 2025 the Company issued 3,539 shares for $ 46,007 on a crowdfunding platform. The Company also issued 92,673 shares with a fair value of $ 1,204,749 in exchange for legal services related to the initial public offering. This cost will be charged against the gross proceeds of the offering as a reduction of additional paid-in capital. On April 15, 2025, warrants to purchase 47,370 shares of common stock were exercised for proceeds of $ 225,008 . On May 13, 2025, warrants to purchase 10,950 shares of common stock were exercised for proceeds of $ 52,013 . On May 13, 2025, the Company’s S-1 Registration Statement was declared effective, registering 29,978,212 shares of our common stock representing one hundred percent (100%) of the company’s currently issued and outstanding common stock. On May 14, 2025, the Company filed a resale registration statement pursuant to a securities purchase agreement with an investor, registering 8,125,779 shares of common stock. On May 15, 2025, the Company’s common stock began trading on the Nasdaq Global Market under the ticker “ARAI”. On May 15, 2025, the Company closed a financing agreement with an investor. Per the terms of the agreement, the investor transferred $ 4,000,000 as the initial pre-paid advance. The Company issued 2,937,500 pre-delivery shares at par value, for proceeds of $ 587 , and 62,500 shares with a fair value of $ 812,500 to the investor. - 22 -