Factorial Energy Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of the financial condition and results of operations of Factorial Energy Inc. (“Factorial Energy,” “Factorial,” ”Company,” “we” “our” or “us”) should be read together with the audited annual financial statements of Factorial Inc. (“Legacy Factorial”), our predecessor reporting entity, for the years ended December 31, 2025 and 2024 which are included in the proxy statement/prospectus dated as of, and filed with the Securities and Exchange Commission ("SEC") pursuant to Rule 424(b) on, May 6, 2026 (the “Proxy Statement/Prospectus”) beginning on Page F-25, and Factorial Energy’s unaudited condensed consolidated financial statements for the three and six months ended June 30, 2026 and 2025, and related notes included in this Quarterly Report on Form 10-Q (“Quarterly Report”). This discussion contains forward-looking statements reflecting our current expectations, estimates, and assumptions concerning events and financial trends that may affect our future operating results or financial position. Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections entitled “Risk Factors” and “Cautionary Statement Regarding Forward-Looking Statements” included in this Quarterly Report. Overview Factorial, a US-based leader in solid-state battery technology, develops next generation battery technology for planned use by drone, mobile robots, roadgoing vehicles, energy storage, and other demanding applications. Our FEST ® cells are designed to meet the demands of the high-power market and, relative to conventional Li-ion batteries, deliver lighter weight, smaller size, longer life, and faster charging, in each case meeting or exceeding conventional batteries in each of these key parameters we believe are valued by end users. In addition, for some of our customers whose applications do not need all of the benefits of our solid-state technology, we develop batteries that combine a lithium metal anode and a liquid electrolyte. Such batteries provide some of the improved size, weight and duration of our solid-state battery technology at a lower cost and faster timeline to production. Factorial is a development stage company with no revenue to date that has incurred a net loss of approximately $11.3 million and $19.9 million, with cash used in operations of $0.5 million and $11.4 million, for the three and six months ended June 30, 2026, respectively, and an accumulated deficit of approximately $275.5 million as of June 30, 2026. The Business Combination On December 17, 2025, Legacy Factorial entered into a definitive business combination agreement, as amended on March 26, 2026 and May 18, 2026 (as amended, the “BCA”), with Fenway MS, Inc., (“Merger Sub”), and Cartesian Growth Corporation III (“CGC”). Pursuant to the BCA, and after CGC’s shareholders voted to approve it, Merger Sub, a newly formed subsidiary of CGC, merged with and into Legacy Factorial (the “Merger”). On June 5, 2026 (the “Closing”), the separate corporate existence of Merger Sub ceased to exist, and Legacy Factorial survived and became a wholly-owned subsidiary of CGC. In connection with the consummation of the Merger, CGC changed its corporate name to Factorial Energy Inc. The Merger was accounted for as a reverse recapitalization. Legacy Factorial was deemed the accounting acquirer and the combined entity is the successor SEC registrant, meaning that Legacy Factorial’s financial statements for previous periods will be disclosed in the registrant’s future periodic reports filed with the SEC. Under this method of accounting, CGC was treated as the acquired company for financial statement reporting purposes. As a result of the closing of the Merger, the most significant change in Legacy Factorial’s financial position and results is a $92.0 million net increase in cash and cash equivalents (as compared to Legacy Factorial’s consolidated balance sheet at March 31, 2026), which includes $112.1 million in gross proceeds from the sale of a private placement (the “PIPE Financing”) of Class A ordinary shares of CGC, par value $0.0001 per share (the “CGC Class A Shares”) (inclusive of the proceeds from the trust account resulting from an aggregate of 3,470,764 shares (the “NRA Shares”) of Class A ordinary shares of CGC, par value $0.0001 per share (the “CGC Class A Shares”) acquired by an affiliate of CGC III Sponsor LLC, a Cayman Islands limited liability company (the “Sponsor” and such affiliate, the “Sponsor Investor”) and a certain institutional investor (the “Institutional Investor,” and together with the Sponsor Investor, the “PIPE Investors” to satisfy their obligations under the applicable Investor Stock Purchase Agreement) that was received at the Closing offset by the transaction expenses. Transaction expenses paid at the Closing for the Merger and PIPE Financing were approximately $20.1 million. As a result of the Merger, Factorial became the successor to an SEC-registered and Nasdaq-listed company, which will require Factorial to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. Factorial expects to incur additional annual expenses as a public company for, among other things, directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal, and administrative resources, including increased personnel costs, audit and other professional service fees. Basis of Presentation Table of Contents Factorial currently conducts its business through one operating segment. As a pre-revenue company with no commercial operations, Factorial’s activities to date have been limited and were conducted primarily in the United States and Korea and its historical results are reported under U.S. GAAP and in U.S. dollars. Factorial’s Korean subsidiary’s functional currency is the Korean Won. Upon commencement of commercial operations, Factorial expects to expand its global operations substantially, including in the United States, Asia, and the European Union, and as a result Factorial expects its future results to be sensitive to foreign currency transaction and translation risks and other financial risks that are not reflected in its historical financial statements. As a result, Factorial expects that the financial results it reports for periods after it begins commercial operations will not be comparable to the financial results included in this Quarterly Report. Components of Results of Operations Factorial is a research and development stage company, and its historical results may not be indicative of its future results for reasons that may be difficult to anticipate. Accordingly, the drivers of Factorial’s future financial results, as well as the components of such results, may not be comparable to Factorial’s historical or projected results of operations. Research and Development Expense To date, Factorial’s research and development expenses have consisted primarily of personnel-related expenses for scientists, experienced engineers and technicians as well as costs associated with the expansion and ramp up of our engineering facility in the United States and Cheonan, South Korea, including the material and supplies to support the product development and process engineering efforts. As Factorial ramps up its engineering operations to complete the development of its solid-state, lithium-metal batteries and required process engineering to meet automotive cost targets, Factorial anticipates that research and development expenses will increase significantly for the foreseeable future as Factorial expands its hiring of scientists, engineers, and technicians and continues to invest in additional plant and equipment for product development (e.g. multi-layer cell stacking, packaging and engineering), building prototypes, and testing of battery cells as the team works to meet the full set of Original Equipment Manufacturers (“OEMs”) product requirements. General and Administrative Expense General and administrative expenses consist mainly of personnel-related expenses for Factorial’s executive, sales and marketing and other administrative functions and expenses for outside professional services, including legal, accounting and other advisory services. Factorial is expanding its headcount in anticipation of planning for and ramping up commercial manufacturing operations and to meet public company financial and compliance requirements. Accordingly, in addition to the non-recurring transaction costs discussed above, Factorial expects its general and administrative expenses to increase significantly in the near term and for the foreseeable future. Upon commencement of commercial operations, Factorial also expects general and administrative expenses to include sales, marketing and advertising costs. Financing Costs Related to Issuance of Convertible Promissory Notes – Related Parties Financing costs related to issuance of convertible promissory notes to related parties represents the excess of the fair value of the convertible promissory notes over the proceeds received, if any, as well as direct financing costs paid in cash at issuance. Financing Costs Related to Issuance of Convertible Promissory Notes Financing costs related to issuance of convertible promissory notes represents the excess of the fair value of the convertible promissory notes over the proceeds received, if any, as well as direct financing costs paid in cash at issuance. Change in Fair Value of Convertible Promissory Notes – Related Parties Change in fair value of convertible promissory notes to related parties represents the fair value adjustment to mark the convertible promissory note liability to fair value. Change in Fair Value of Convertible Promissory Notes Change in fair value of convertible promissory notes represents the fair value adjustment to mark the convertible promissory note liability to fair value. Change in Fair Value of Warrant Liabilities Change in fair value of warrant liabilities represents the fair value adjustment to mark the warrant liabilities to fair value based on changes in the underlying equity valuation. Other (Expenses) Income, Net Table of Contents Factorial’s other income (expense) consists of interest income from interest-bearing accounts, interest expense, and the effects of foreign currency. Provision for Income Taxes Factorial’s income tax provision consists of an estimate for U.S. federal and state income taxes based on enacted rates, as adjusted for allowable credits, deductions, uncertain tax positions, changes in deferred tax assets and liabilities, and changes in the tax law. Factorial maintains a valuation allowance against the full value of its U.S. and state net deferred tax assets because Factorial believes the recoverability of the tax assets is not more likely than not. Results of Operations Comparison of the Three and Six Months Ended June 30, 2026 to the Three and Six Months Ended June 30, 2025 The following tables set forth Factorial’s historical operating results for the periods indicated: Three Months Ended June 30, 2026 2025 Operating expenses: Research and development $ (6,582) $ (6,745) Selling, general and administrative (6,379) (4,657) Loss from operations (12,961) (11,402) Other income (expense), net: Change in fair value of convertible promissory notes – related parties (2,384) — Change in fair value of convertible promissory notes (964) — Change in fair value of warrant liabilities for Series B-1 and Series D redeemable convertible preferred stock (293) — Change in fair value of warrant liability for Series A Common Stock 4,738 — Other income, net 523 833 Total other income (expenses), net 1,620 833 Loss before income taxes $ (11,341) $ (10,569) Income tax expense — — Net loss $ (11,341) $ (10,569) Table of Contents Six Months Ended June 30, 2026 2025 Operating expenses: Research and development $ (8,524) $ (13,499) Selling, general and administrative (10,928) (11,025) Loss from operations (19,452) (24,524) Other income (expense), net: Financing costs related to issuance of convertible promissory notes – related parties (37) — Change in fair value of convertible promissory notes – related parties (3,791) — Change in fair value of convertible promissory notes (1,264) — Change in fair value of warrant liabilities for Series B-1 and Series D redeemable convertible preferred stock (399) — Change in fair value of warrant liability for Series A Common Stock 4,738 — Other income, net 289 1,085 Total other income (expenses), net (464) 1,085 Loss before income taxes $ (19,916) $ (23,439) Income tax expense — — Net loss $ (19,916) $ (23,439) Research and Development Research and development expenses decreased by $0.2 million, or 2.4%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily the result of lower facility costs from the closing of our Methuen facility in October 2025 offset by increased research and development activities and engineering services. Research and development expenses decreased by $5.0 million, or 36.9%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The decline primarily resulted from the recognition of $3.6 million of expense reimbursements from joint development partners for the six months ended June 30, 2026, compared to $0.2 million for the six months ended June 30, 2025. The decrease is also attributed to lower facility costs from the closing of our Methuen facility. General and Administrative General and administrative expenses increased by $1.7 million, or 37.0%, for the three months ended June 30, 2026 compared to the three months ended June 30, 2025, primarily driven by: • an increase in professional fees, including legal, audit, and advisory services; and • an increase in marketing expenses. General and administrative expenses decreased by $0.1 million, or 0.9%, for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. This was primarily due to a decrease in stock-based compensation expense. This was offset by: • an increase in professional fees, including legal, audit, and advisory services; and • an increase in marketing expenses. Financing Costs Related to Issuance of Convertible Promissory Notes In January 2026, we issued convertible promissory notes under which we could receive aggregate proceeds of up to $5.4 million. During the three and six months ended June 30, 2026, we received proceeds of $1.0 million and $5.3 million, respectively. Change in Fair Value of Convertible Promissory Notes - Related Parties The fair value of our convertible promissory notes to related parties increased by $2.4 million and $3.8 million for the three and six months ended June 30, 2026, respectively. These notes were issued in August 2025. Changes in fair value of convertible promissory notes to related parties are non-cash and are included in net loss. Upon the consummation of the Merger, all principal and accrued interest for the convertible promissory notes to related parties were converted into shares of Series A Common Stock. Table of Contents Change in Fair Value of Convertible Promissory Notes The fair value of our convertible promissory notes to related parties increased by $1.0 million and $1.3 million for the three and six months ended June 30, 2026, respectively. These notes were issued in January 2026. Changes in fair value of convertible promissory notes to related parties are non-cash and are included in net loss. Upon the consummation of the Merger, all principal and accrued interest for the convertible promissory notes were converted into shares of Series A Common Stock. Change in Fair Value of Series B-1 and Series D Warrant Liability The change in fair value of our Series B-1 and Series D warrant liabilities increased by $0.3 million and $0.4 million for the three and six months ended June 30, 2026, respectively. There was no change in fair value of our warrant liabilities for the three and six months ended June 30, 2025. Changes in fair value of warrant liabilities are non-cash and are included in net loss. Upon the consummation of the Merger, the Series B-1 and Series D warrants were exercised cashless for shares of Series A Common Stock. Change in Fair Value of Warrant Liability for Series A Common Stock The change in fair value of our warrant liability for Series A Common Stock decreased by $4.7 million for the three and six months ended June 30, 2026, respectively. These warrants were reclassified from equity to liability as a result for the de-SPAC transaction. No warrant liability was present in 2025. Other Income, Net Other income, net decreased by $0.3 million for the three months ended June 30, 2026, compared to the three months ended June 30, 2025, primarily due to fluctuations in the effects of foreign exchange. Other income, net decreased by $0.8 million for the six months ended June 30, 2026, compared to the six months ended June 30, 2025, due to fluctuations in the effects of foreign exchange offset by a reduction of interest income. Liquidity and Capital Resources Since inception, we have financed our operations primarily from the sales of preferred and convertible preferred stock, equity-linked securities, and capital raised through our de-SPAC Transaction and PIPE Financing. As of June 30, 2026, our principal sources of liquidity were our cash and cash equivalents in the amount of $112.8 million. Our cash equivalents are invested primarily in U.S. Treasury money market funds. As of the date of this filing, Factorial has yet to generate any revenue from its business operations. To date, Factorial has funded its capital expenditure and working capital requirements primarily through equity as further discussed below. Factorial’s ability to successfully develop its products, commence commercial operations and expand its business will depend on many factors, including its working capital needs, the availability of equity or debt financing and, over time, its ability to generate cash flows from operations. As of June 30, 2026, Factorial’s cash and cash equivalents amounted to $112.8 million. Factorial received net proceeds of approximately $92.0 million in connection with the Merger. In connection with the Merger, the holders of 23,051,313 CGC Class A Shares exercised their right to redeem their shares for cash at a redemption price of approximately $10.42 per share, for an aggregate redemption amount of approximately $240.1 million. Factorial expects its capital expenditures and working capital requirements to increase materially in the near future, as it seeks to accelerate its research and development efforts and scale up the production operations with its OEM partners. Factorial expects to satisfy early demand for its solid-state battery products by expanding its existing fabrication line operations in South Korea and the United States, to support initial commercial production. During the six months ended June 30, 2026, Factorial paid capital expenditures for such expansion of approximately $0.6 million and expects to incur capital expenditures of approximately $12.0 million during the remainder of 2026. The expansion is expected to be completed by the end of 2027. Beyond the initial investment to expand our existing fabrication line operations in South Korea and the United States, we do not plan to build or acquire additional manufacturing facilities or incur substantial capital expenditures for the expansion of our existing facilities. Instead, as demand grows, including incremental high spec applications and gigawatt-scale ramp-up in the automotive market, we expect to scale primarily through a partner manufacturing approach. Factorial believes that its cash on hand will be sufficient to meet its working capital and capital expenditure requirements for a period of at least twelve months from the date of this filing and sufficient to fund its operations until it commences commercial production of the Factorial solid-state battery, assuming Factorial is able to do so as currently contemplated. Factorial may, however, need additional cash resources due to changed business conditions or other developments, including unanticipated delays in negotiations with OEMs and tier-one automotive suppliers or other suppliers, supply Table of Contents chain challenges, competitive pressures, and regulatory or permitting developments, among other developments. To the extent that Factorial’s current resources are insufficient to satisfy its cash requirements, Factorial may need to seek additional equity or debt financing. If the financing is not available, or if the terms of financing are less desirable than Factorial expects, Factorial may be forced to decrease its level of investment in product development or scale back its operations, which could have an adverse impact on its business and financial prospects. Based on its current operating plan, the Company estimates that its cash and cash equivalents as of the date of this filing will be sufficient to fund its operating expenses and capital expenditure requirements into the first quarter of 2028. The Company has based this estimate on assumptions that may prove to be wrong and could deplete its liquid resources sooner than it currently expects. Cash Flows The following table provides a summary of Factorial’s cash flow data for the periods indicated: Six Months Ended June 30, 2026 2025 Amount in thousands Net cash used in operating activities $ (11,391) $ (13,088) Net cash used in investing activities (578) (185) Net cash provided by (used in) financing activities 96,091 (408) Cash Flows from Operating Activities Factorial’s cash flows used in operating activities to date have been primarily comprised of payroll, material and supplies, facilities expense, and professional services related to research and development and general and administrative activities. As Factorial continues to ramp up hiring for technical headcounts to accelerate its developmental efforts, Factorial expects its cash used in operating activities to increase significantly before it starts to generate any material cash flows from its business. Net cash used in operating activities for the six months ended June 30, 2026 was $11.4 million, and was driven primarily by the net loss of $19.9 million. This was offset by: • a $2.9 million increase in accrued expenses; • a $1.0 million decrease in receivables under collaboration agreements; and • non-cash expenses of $6.3 million, which primarily consisted of: ◦ changes in fair value of our promissory notes (including related parties) of $5.1 million; ◦ stock-based compensation of $2.6 million; and ◦ depreciation and amortization of non-cash lease expense of $2.4 million. ◦ This was offset by the change in fair value of our warrant liability for Series A Common Stock of $4.7 million. Net cash used in operating activities for the six months ended June 30, 2025 was $13.1 million, and was driven primarily by the net loss of $23.4 million and offset by non-cash expenses of $10.0 million, which primarily consisted of stock-based compensation of $5.6 million and depreciation expense of $4.4 million. Cash Flows from Investing Activities Factorial’s cash flows used in investing activities, to date, have been comprised of purchases of property and equipment and purchases and disposals of equipment. Factorial expects the costs to acquire property and equipment to increase in the near future as it builds pilot and sample production lines for its FEST Silicon and Solstice programs. Net cash used in investing activities was $0.6 million for the six months ended June 30, 2026, was primarily the result of purchases of property and equipment. Net cash used in investing activities was $0.2 million for the six months ended June 30, 2025, was primarily the result of purchases of property and equipment. Table of Contents Cash Flows from Financing Activities Through June 30, 2026, Factorial has financed its operations primarily through the sale of equity and equity-linked securities. Net cash provided by financing activities was $96.1 million for the six months ended June 30, 2026 was primarily driven by: • Net proceeds received from the reverse recapitalization and PIPE Financing of $92.0 million ; and • Issuance of convertible promissory notes of $5.3 million. Offset by the payment of deferred financing costs of $1.3 million. Net cash used in financing activities was $0.4 million for the six months ended June 30, 2025 was primarily driven by the principal paid on the Methuen lease that terminated in October 2025. Contractual Obligations and Commitments Factorial leases its headquarters space in Billerica, Massachusetts (the “Billerica Sublease”) under a single sublease classified as an operating lease expiring on October 30, 2032. The Billerica Sublease does not contain any provision for an extension. Factorial also leased laboratory and office space in Tallahassee, Florida (the “Tallahassee Lease”) under a single lease classified as an operating lease that expired at the end of its term on February 28, 2025. Additionally, Factorial leases laboratory and storage space, which includes offices, in Woburn, Massachusetts (the “Woburn Lease”) under a single lease classified as an operating lease expiring on April 30, 2028. The Woburn Lease does not contain any provision for extension. Finally, Factorial leased laboratory and manufacturing space, which included offices, in Methuen, Massachusetts (the “Methuen Lease”) under a single lease classified as a financing lease. The Methuen Lease was terminated on October 18, 2025. Factorial has not commenced negotiations with respect to extending the Billerica Sublease or the related lease between the applicable sublessor from whom the Company subleases such property and the ultimate lessor, but intends to do so prior to the expiration thereof. Off-Balance Sheet Arrangements Factorial is not a party to any off-balance sheet arrangements, as defined under SEC rules. Critical Accounting Policies Factorial’s financial statements have been prepared in accordance with GAAP. In the preparation of these financial statements, Factorial is required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Except for the addition of the critical accounting policy for Private Placement Warrants and critical accounting estimate related to the valuation of our warrant liability for the 6,800,000 redeemable private placement warrants for Series A Common Stock (the “Private Warrants”) described below, there have been no significant changes to our critical accounting policies in the preparation of our condensed consolidated financial statements during the three and six months ended June 30, 2026 compared to those disclosed in our audited annual consolidated financial statements for the year ended December 31, 2025, included in the Proxy Statement/Prospectus. Private Warrants The Company evaluated the Private Warrants under ASC 815-40 and concluded that the Private Warrants do not meet the criteria for equity classification because certain settlement provisions differ depending on whether the warrants are held by the Sponsor or its permitted transferees. Because the holder of the instrument is not an input into the pricing of a fixed-for-fixed option on equity shares, the Private Warrants are not indexed to the Company’s own stock. Accordingly, the Private Warrants are classified as liabilities and measured at fair value at each reporting date, with changes in fair value recognized in other income (expense), net. Critical Accounting Estimates Except for the addition of the critical accounting estimate related to the valuation of our warrant liability for Private Warrants described below, there have been no significant changes to our critical accounting estimates in the preparation of our condensed consolidated financial statements during the three and six months ended June 30, 2026 compared to those disclosed in our audited annual consolidated financial statements for the year ended December 31, 2025, included in the Proxy Statement/Prospectus. Our warrant liability for Series A Common Stock was recorded in connection with the Merger and did not exist as of December 31, 2025; accordingly, it was not identified as a critical accounting estimate in the Proxy Statement/Prospectus. Table of Contents Private Warrant Liability In connection with the Merger, we assumed 6,800,000 Private Warrants that are classified as liabilities and remeasured at fair value each reporting period, with changes recognized in change in fair value of warrant liabilities within other income (expense), net. The liability was $45 million as of June 30, 2026, and we recognized a gain of $4.7 million on remeasurement for the period then ended. We estimate the fair value of the Private Warrants using a Black-Scholes model. The exercise price and contractual term are fixed by the warrant agreement, the risk-free interest rate is observable, and we assume no dividend yield. Expected volatility is the only significant unobservable input to the model, and it is a management estimate. Accordingly, the Private Warrants are classified within Level 3 of the fair value hierarchy. We estimate expected volatility based on the historical volatility of a group of comparable publicly traded companies, measured over a period commensurate with the expected remaining term of the warrants, because the Company’s common stock had limited trading history as of the valuation dates, expected volatility was estimated using the historical volatility of selected comparable publicly traded companies over a period commensurate with the remaining contractual term of the Private Warrants. Management also considered whether implied volatility could be derived from the 13,800,000 redeemable public warrants for Series A Common Stock (the “Public Warrants). The calculation produced a result outside the range we consider reasonable for a company at our stage of development and we concluded it was not a reliable input. Identifying the comparable companies and selecting the measurement period each require judgment, and a different but supportable selection could produce a different volatility assumption and a materially different fair value. Expected volatility was 68.5% at initial measurement and 68.7% as of June 30, 2026. Significant increases or decreases in expected volatility, in isolation, would result in significantly higher or lower fair value measurements, respectively. Holding all other inputs constant, an increase by 10% in the volatility input to 78.7% as of June 30, 2026 would increase the fair value of the Private Warrants by approximately $4.4 million and a decrease of 10% to 58.7% as of June 30, 2026 would decrease the fair value of the Private Warrants by approximately $4.7 million, in each case with a corresponding effect on other income (expense), net. Emerging Growth Company Statu s Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can choose not to take advantage of the extended transition period and comply with the requirements that apply to non-emerging growth companies, and any such election to not take advantage of the extended transition period is irrevocable. Factorial is an “emerging growth company” as defined in Section 2(a) of the Securities Act and has elected to take advantage of the benefits of the extended transition period for new or revised financial accounting standards. This may make it difficult or impossible to compare Factorial’s financial results with the financial results of another public company that is either not an emerging growth company or is an emerging growth company that has chosen not to take advantage of the extended transition period exemptions because of the potential differences in accounting standards used. Factorial may continue to qualify as an “emerging growth company” after the Merger until the earliest of (i) such time as of which it is a “large accelerated filer”, (ii) its annual gross revenues exceed $1.235 billion, (iii) it issues more than $1 billion of non-convertible debt securities during a three-year period or (iv) the end of the fifth fiscal year after CGC’s initial public offering (“IPO”), which occurred in 2025. Recent Accounting Pronouncements See Note 2 to the audited consolidated financial statements included elsewhere in the Proxy Statement/Prospectus for more information about recent accounting pronouncements, the timing of their adoption, and Factorial’s assessment, to the extent it has made one, of their potential impact on Factorial’s financial condition and its results of operations and cash flows.