UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2026

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Commission File Number 001-42645

Arrive AI Inc.

(Exact name of registrant as specified in its charter)

Delaware

85-0935006

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

9100 Fall View Drive

Fishers, Indiana

46037

(Address of principal executive offices)

(Zip code)

(463) 270-0092

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.

Yes

☒

☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes

☒

☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer	☐	Accelerated filer	☐	Non-accelerated filer	☒
Smaller Reporting Company	☒	Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

☐

☒

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock par value $0.0002 per share		ARAI		The Nasdaq Stock Market LLC

The number of shares of the registrant’s common stock, par value $0.0002 per share, outstanding as of May 15, 2026, was 51,859,347.

TABLE OF CONTENTS

		Page(s)

PART I. FINANCIAL INFORMATION		4
Item 1. Financial Statements (unaudited)		4
Condensed Balance Sheets		4
Condensed Statements of Operations		5
Condensed Statements of Changes in Stockholders’ Equity		6
Condensed Statements of Cash Flows		7
Condensed Notes to Unaudited Financial Statements		8-33
Item 2. Management’s Discussion and Analysis of Financial Conditions and Results of Operations		34
Item 3. Quantitative and Qualitative Disclosures About Market Risk		44
Item 4. Controls and Procedures		44
PART II. OTHER INFORMATION		44
Item 1. Legal Proceedings		44
Item 1A. Risk Factors		45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		45
Item 3. Defaults Upon Senior Securities		45
Item 4. Mine Safety Disclosures		45
Item 5. Other Information		45
Item 6. Exhibits		45

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends impacting the financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements.

Forward-looking statements include all statements that are not historical facts. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “could,” “would,” “expect,” “intend,” “seek,” “plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “might,” “forecast,” “continue,” or the negative of those terms, and similar expressions and comparable terminology intended to reference future periods. Forward-looking statements include, but are not limited to, statements about:

	●	our ability to protect and enforce our intellectual property protection and the scope and duration of such protection;
	●	our reliance on third parties, including suppliers, delivery platforms, brand sponsors, software providers and service providers;
	●	our ability to commercialize our products at a large scale;
	●	the competitive industry in which we operate, which is subject to rapid technological change;
	●	our ability to access the full funds under the existing convertible note payable facility;
	●	our ability to raise additional capital to develop our technology and scale our operations;
	●	developments and projections relating to our competitors and our industry;
	●	our ability to adequately control the costs associated with our operations;
	●	the impact of current and future laws and regulations, especially those related to autonomous delivery;
	●	potential cybersecurity risks to our operational systems, infrastructure, and integrated software by us or third-party vendors; and
	●	other risks and uncertainties, including those listed in our Annual Report on Form 10-K for the year ended December 31, 2025, including the factors described in the section entitled “Item 1A – Risk Factors.”

Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended or planned.

Factors or events that could cause our actual results to differ may emerge from time to time, and it is not possible for us to predict all of them. We cannot guarantee future results, levels of activity, performance or achievements. Accordingly, the forward-looking statements in this Quarterly Report on Form 10-Q should not be regarded as representations that the results or conditions described in such statements will occur or that our objectives and plans will be achieved, and we do not assume any responsibility for the accuracy or completeness of any of these forward-looking statements.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

ARRIVE AI INC.

CONDENSED BALANCE SHEETS

	March 31, 2026			December 31, 2025
	(Unaudited)

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	5,667,553		$	2,104,004
Investments at fair value		2,802,060			-
Accounts receivable, net of allowance		-			4,975
Prepaid expenses		280,102			189,878
Other current assets		12,325			12,325

Total current assets		8,762,040			2,311,182

OTHER ASSETS
Property and equipment, net		679,333			514,684
Right of use assets - operating leases		2,023,420			2,117,284
Patents, net of accumulated amortization of $3,120 and $2,603		271,580			272,097
Deferred offering costs		3,475,514			5,650,185
Other assets		279,187			65,633

Total other assets		6,729,034			8,619,883

TOTAL ASSETS	$	15,491,074		$	10,931,065

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES
Accounts payable	$	227,909		$	183,993
Accrued expenses		1,490,720			538,234
Operating lease liability		408,345			392,950
Derivative liabilities		1,440,000			1,460,000
Convertible note payable, net of discount and debt issuance costs of $4,507,852 and $350,794, and $3,379,447 and $240,896, respectively		7,681,354			4,144,657
Note payable		8,336			9,140

Total current liabilities		11,256,664			6,728,974

LONG TERM LIABILITIES
Operating lease liability		1,616,553			1,725,073
Note payables, net of current portion		-			1,418

Total long term liabilities		1,616,553			1,726,491

Total liabilities		12,873,217			8,455,465

Commitments and Contingencies (See Note 16)

STOCKHOLDERS’ EQUITY
Common stock, $0.0002 par value, 200,000,000 authorized, 37,731,391 and 34,213,387 issued and outstanding at March 31, 2026 and December 31, 2025		7,545			6,841
Additional paid-in capital		37,834,831			31,215,698
Deferred compensation		(107,334	)		-
Accumulated deficit		(35,117,185	)		(28,746,939	)

Total stockholders’ equity		2,617,857			2,475,600

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	15,491,074		$	10,931,065

See accompanying notes to these condensed financial statements.

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ARRIVE AI INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended			Three Months Ended
	March 31, 2026			March 31, 2025

REVENUE	$	14,925		$	-

OPERATING EXPENSES
General and administrative		4,210,066			1,894,981
Research and development		357,073			91,263
Sales and marketing		111,350			7,661

Total operating expenses		4,678,489			1,993,905

OTHER INCOME (EXPENSES)
Interest expense		(361,870	)		(1,175	)
Other income		177,789			16,915
Change in fair value of derivative liabilities		1,129,769			-
Accretion of debt discount		(250,969	)		-
Loss on conversion of convertible notes payable		(2,345,613	)		-
Realized gain on investments		446,324			-
Unrealized loss on investments		(502,112	)		-

Total other income (expenses)		(1,706,682	)		15,740

NET LOSS BEFORE TAXES		(6,370,246	)		(1,978,165	)

PROVISION (BENEFIT) FOR INCOME TAXES		-			-

NET LOSS	$	(6,370,246	)	$	(1,978,165	)

NET LOSS PER SHARE:
Basic and diluted	$	(0.18	)	$	(0.07	)

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted		36,167,200			29,721,248

See accompanying notes to these condensed financial statements.

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ARRIVE AI INC.

CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

For the Three Months Ended March 31, 2026 and 2025 (Unaudited)

	Number of						Additional												Total
	Common			Common			Paid-In			Subscription			Deferred			Accumulated			Stockholders’
	Shares			Stock ($)			Capital ($)			Receivable ($)			Compensation ($)			Deficit ($)			Equity (Deficit) ($)

BALANCE, JANUARY 1, 2025		26,620,905		$	5,822		$	14,984,561		$	(53,003	)	$	-		$	(15,920,555	)	$	(983,175	)

Issuance of common stock and warrants for cash		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		27,335,038		$	5,965		$	23,937,941		$	(12,784	)	$	-		$	(17,898,720	)	$	6,032,402

BALANCE, JANUARY 1, 2026		34,213,387		$	6,841		$	31,215,698		$	-		$	-		$	(28,746,939	)	$	2,475,600

Issuance of common stock for deferred compensation		118,343			24			160,976			-			(161,000	)		-			-

Issuance of common stock under stock plans		102,492			20			(20	)		-			-			-			-

Shares withheld for taxes upon vesting of restricted stock units		(32,308	)		(6	)		(25,743	)		-			-			-			(25,749	)

Issuance of common stock for the conversion of convertible notes payable		3,329,477			666			6,468,237			-			-			-			6,468,903

Reclassification of derivative liabilities upon conversion of convertible notes payable		-			-			1,200,231			-			-			-			1,200,231

Reclassification of deferred offering costs upon financing drawdown		-			-			(2,174,671	)		-			-			-			(2,174,671	)

Stock-based compensation		-			-			990,123			-			53,666			-			1,043,789

Net loss		-			-			-			-						(6,370,246	)		(6,370,246	)

BALANCE, MARCH 31, 2026		37,731,391			7,545			37,834,831			-			(107,334	)		(35,117,185	)		2,617,857

See accompanying notes to these condensed financial statements.

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ARRIVE AI INC.

CONDENSED STATEMENTS OF CASH FLOWS

For the Three Months Ended March 31, 2026 and 2025 (Unaudited)

	2026			2025
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(6,370,246	)	$	(1,978,165	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation		1,043,789			1,348,245
Depreciation and amortization		56,214			7,391
Credit loss expense		300			-
Operating lease liability - non-cash adjustment		739			-
Change in fair value of derivative liability		(1,129,769	)		-
Loss on conversion of convertible notes payable		2,345,613			-
Accretion of discount on convertible note payable		250,969			-
Accretion of issuance costs on convertible note payable		119,018			-
Realized gain on investments		(446,324	)		-
Unrealized loss on investments		502,112			-
Changes in operating assets and liabilities
(Increase) decrease in
Accounts receivable		4,675			-
Prepaid expenses		(90,224	)		7,081
Other current assets		-			1,412
Other assets		(213,554	)		-
Increase (decrease) in
Accounts payable		43,916			(66,262	)
Accrued expenses		952,486			133,627

Net cash used in operating activities		(2,930,286	)		(546,671	)

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures		(220,346	)		(2,832	)
Proceeds from sales of investments		8,893,827			-
Purchase of investments		(11,751,675	)		-

Net cash used in investing activities		(3,078,194	)		(2,832	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock, net		-			420,753
Taxes paid for shares withheld upon vesting of restricted stock units		(25,749	)		-
Proceeds from the exercise of warrants, net		-			296,875
Repayments of note payables		(2,222	)		(2,075	)
Proceeds from issuance of convertible notes payable		10,000,000			-
Debt issuance costs		(400,000	)		-

Net cash provided by financing activities		9,572,029			715,553

NET INCREASE IN CASH AND CASH EQUIVALENTS		3,563,549			166,050

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		2,104,004			129,318

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	5,667,553		$	295,368

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	1,064		$	321
Income taxes	$	-		$	-

SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION
Common stock issued as payment of offering costs	$	-		$	6,927,869
Common stock issued for deferred compensation	$	161,000		$	-
Common stock issued for conversion of convertible notes payable	$	6,468,903		$	-
Derivative liabilities reclassified as additional paid-in capital upon conversion of convertible notes payable	$	1,200,231		$	-
Deferred offering costs recognized as additional paid-in capital upon financing drawdown	$	2,174,671		$	-

See accompanying notes to these condensed financial statements.

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ARRIVE AI INC.

CONDENSED NOTES TO FINANCIAL STATEMENTS

NOTE 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 an early-stage 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 risks 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.

The Company is an emerging growth company as the term is used in The Jumpstart Our Business Startups Act (JOBS Act), enacted on April 5, 2012 and has elected to comply with certain reduced public company reporting requirements.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). These statements include all adjustments which management believes are necessary for a fair presentation of the statements and have been prepared on a consistent basis using the accounting policies described in the Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 as originally filed with the Securities and Exchange Commission on April 15, 2026 (“the 2025 Annual Report”). Certain financial information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company firmly believes that the accompanying disclosures are adequate to make the information presented not misleading. The financial statements should be read in conjunction with the financial statements and notes thereto included in the 2025 Annual Report. The interim operating results for the three months ended March 31, 2026 may not be indicative of operating results expected for the full year.

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.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less at the time of purchase to be cash equivalents, including money market accounts held at financial institutions. The Company had cash equivalents of $5,118,225 at March 31, 2026, and $0 at December 31, 2025.

Concentration of Credit Risk

The Company’s policy is to maintain its cash balances in accounts insured by the Federal Deposit Insurance Corporation (the “FDIC”) or by the Securities Investor Protection Corporation (the “SIPC”). The Company may periodically have cash balances in financial institutions in excess of FDIC and SIPC insurance limits. At March 31, 2026, and December 31, 2025, the Company had approximately $5,167,553 and $1,604,004 of cash in excess of insured limits, respectively.

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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.

Investments at Fair Value

During the three months ended March 31, 2026, the Company invested a portion of its excess cash in exchange-traded equity securities. The Company accounts for these investments in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) ASC 321, Investments—Equity Securities. Equity securities with readily determinable fair values are measured at fair value at each reporting date, with changes in fair value recognized in the statement of operations as unrealized gains or losses. Realized gains and losses on the sale or disposition of equity securities are also recognized in the statement of operations in the period of sale. The Company classifies the fair value of these securities within Level 1 of the fair value hierarchy established under ASC 820, Fair Value Measurement, as the securities are exchange-traded with quoted prices in active markets. As of March 31, 2026 the company had equity securities. At December 31, 2025, the Company held no equity securities.

During the three months ended March 31, 2026 and the year ended December 31, 2025, the Company wrote covered call options against its long equity security positions to generate income from option premiums. Written call options are recognized as liabilities at fair value in accordance with ASC 815, Derivatives and Hedging, and are remeasured at fair value at each reporting date. The Company does not designate these instruments as accounting hedges; accordingly, changes in fair value are recognized in the statement of operations within other income (expense). These instruments are classified within Level 1 of the fair value hierarchy, as they are exchange-traded and valued using quoted market prices in active markets. Premiums received are reflected in the initial fair value of the derivative liability and are subsequently recognized in earnings through changes in fair value over the life of the contract, as the options are traded on recognized national exchanges with quoted prices in active markets. Option premium income received at the time of writing is initially recorded as a liability representing the fair value of the written option and is recognized in earnings upon settlement or expiration of the contract.

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 an evaluation of a customer’s financial condition and collateral is not required. Accounts receivable are stated as 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 credit 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. The Company recorded an allowance for credit losses at March 31, 2026 of $300. At December 31, 2025, management determined that substantially all outstanding receivables were fully collectible. The Company did not incur material write-offs during the three months ended March 31, 2026 and year ended December 31, 2025.

Property and Equipment

Property and equipment is recorded at cost. Depreciation is computed using the straight-line method over the estimated useful life of the asset ranging from 2two to five years. The cost of leasehold improvements is amortized over the lesser of the length of the related leases or the estimated useful lives of the assets.

Maintenance and repairs of property are charged to operations, and major improvements are capitalized. Upon retirement, sale, or other disposition of property and equipment, the costs and accumulated depreciation are eliminated from the accounts, and any resulting gain or loss is included in operations.

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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. Amortization commences when the patent is granted and placed in service and is calculated on a straight-line basis over the remaining legal life of the patent. Costs associated with pending applications are capitalized but not amortized until issuance. Maintenance patent fees are paid to a government patent authority to maintain a granted patent in force. Some countries require the payment of maintenance fees for pending patent applications; these are expensed as incurred. Maintenance fees paid after a patent is granted are expensed, as these are considered ongoing costs to “maintain a patent.” The Company expenses costs associated with maintaining and defending patents subsequent to issuance in the period incurred. 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

The Company evaluates the recoverability of its long-lived assets in accordance with ASC 360, Property, Plant, and Equipment. The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets are measured by a comparison of the carrying amount of an asset to future cashflows expected to be generated by the asset, undiscounted and without interest or independent appraisals. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the assets.

The Company has three types of long-lived assets: property and equipment, including vehicles, equipment, and leasehold improvements; construction-in-progress (CIP), and intangible patent assets including those acquired by the acquisition of Airbox Technology in 2023. No impairments of long-lived assets were considered necessary as of March 31, 2026 and December 31, 2025.

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. The Company generates revenue from consulting and implementation services and recurring subscription services for access to the Arrive Point network. The Company identifies performance obligations in its contracts with customers, which generally consist of consulting services, installation services, and subscription services. The transaction price is allocated to each distinct performance obligation based on relative standalone selling prices. Contracts are typically short-term in nature and generally do not include significant variable consideration or financing components.

Consulting and subscription services are recognized over time as the customer simultaneously receives and consumes the benefits of the services in accordance with ASC 606-10-25-27(a). Revenue is recognized using an appropriate measure of progress that reflects the transfer of control to the customer, generally based on time elapsed or services performed.

Installation services are generally recognized at a point in time when control of the service is transferred to the customer, which typically occurs upon completion of installation and customer acceptance, if applicable.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, and, when applicable, 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. As disclosed in NOTE 3, the Company did not have any contract assets or contract liabilities recorded on the balance sheet as of March 31, 2026 and December 31, 2025.

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Leases

The Company accounts for leases in accordance with ASC 842, Leases. The Company determines whether an arrangement is a lease at contract inception. The Company classifies leases as operating or finance leases at commencement; however, all of the Company’s leases are currently classified as operating leases. Operating leases are included in “Right-of-use assets – operating leases” and “Operating lease liabilities” in the Company’s balance sheets.

Right-of-use (“ROU”) assets represent the Company’s right to use the underlying asset for the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. Lease payments included in the measurement of the lease liability consist of fixed payments and variable payments that depend on an index or rate, as applicable. Variable lease payments that do not depend on an index or rate are expensed as incurred.

The Company uses the rate implicit in the lease when that rate is readily determinable. If the implicit rate is not readily determinable, the Company uses its incremental borrowing rate at the commencement date, which reflects the rate of interest the Company would pay to borrow on a collateralized basis over a similar term in a similar economic environment. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise such options. Lease and non-lease components are generally accounted for separately. The Company has elected the short-term lease exemption and does not recognize ROU assets or lease liabilities for leases with an initial term of 12 months or less. Lease expense for operating leases is recognized on a straight-line basis over the lease term.

Equity Financing

The Company has entered into equity financing transactions to obtain the funds necessary to continue operations and develop a commercially viable smart mailbox system for drone, robotic and human package receiving and storage. These transactions have included the issuance of common stock and warrants to purchase common stock.

The Company evaluates warrants issued in connection with equity financing transactions under ASC 480, Distinguishing Liabilities from Equity, and, if the warrants are not required to be classified as liabilities under ASC 480, the Company then evaluates them under ASC 815-40, Derivatives and Hedging, to determine whether they are indexed to the Company’s own stock and meet the criteria for equity classification. The Company concluded that the warrants meet the criteria for equity classification and are accounted for 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.

Loss per share

The Company follows ASC 260, Earnings per Share, resulting in the presentation of basic and diluted earnings 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. Because the Company reported a net loss for the three months ended March 31, 2026 and 2025, common stock equivalents, including stock options and warrants, were anti-dilutive; therefore, the amounts reported for basic and diluted loss per share were the same.

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The following securities were excluded from the computation of diluted loss per share because their effect would have been anti-dilutive:

SCHEDULE OF DILUTIVE SECURITIES

	March 31, 2026		March 31, 2025
Convertible notes payable ⁽¹⁾		19,055,032		-
Warrants ⁽²⁾		-		172,739
Stock options		607,493		613,201
Restricted stock units		4,024,760		-
Total excluded shares		23,687,285		785,940

(1)

Amount assumes conversion of convertibles notes payable outstanding principal and interest as of March 31, 2026, using the conversion price calculated from the minimum 10-day volume weighted average price at March 31, 2026.

(2)

Warrants outstanding as of March 31, 2026 were out of the money and therefore excluded.

Comprehensive Loss

The Company follows 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. The Company had no items of other comprehensive income (loss) for three months ended March 31, 2026 and 2025. Accordingly, comprehensive loss equals net loss for those periods.

Offering Costs

The Company accounts for offering costs in accordance with ASC 340-10-S99-1, Other Assets and Deferred Costs and SAB Topic 5A, Expenses of Offering. Costs that are directly attributable to proposed or actual equity offerings are capitalized as deferred offering costs until the offering is completed. Deferred offering costs consist of underwriting, legal, accounting, and other expenses. Upon completion of an equity offering, such costs are recorded as a reduction of the related proceeds and reflected as a reduction of additional paid-in capital. If an offering is abandoned, the related deferred offering costs are expensed.

Research and Development

Research and Development (“R&D”) costs are expensed as incurred in accordance with ASC 730, Research and Development. R&D expenses primarily consist of fees paid to third-party consultants and other costs incurred in the development of the Company’s proprietary technology.

For the three months ended March 31, 2026 and 2025, the Company recognized R&D expense of $357,073 and $91,263, respectively.

Advertising Costs

Advertising costs are expensed as incurred. Advertising costs were $28,028 and $1,256 for the three months ended March 31, 2026 and 2025. These costs when incurred are included in sales and marketing expenses.

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Stock-Based Compensation

The Company accounts for stock-based compensation under the provisions of ASC 718, Compensation—Stock Compensation, which requires the measurement and recognition of compensation expense for all stock-based awards made to employees and directors based on estimated fair values on the grant date. The Company estimates the fair value of stock option awards on the date of grant using the Black-Scholes model. The fair value of restricted stock units is measured at the market price of the Company’s stock on the date of grant. The value of the portion of the award that is ultimately expected to vest is recognized as expense over the requisite service periods using the straight-line method.

In accordance with Accounting Standards Update (“ASU”) No. 2018-07, Compensation—Stock Compensation (Topic 718), Improvements to Nonemployee Share-Based Payment Accounting, the Company accounts for share-based payment transactions for acquiring goods and services from nonemployees in a manner consistent with employee awards. Such awards are measured at the grant-date fair value of the equity instruments issued and recognized as expense when the goods are delivered or services are rendered, unless the awards are subject to vesting conditions, in which case expense is recognized over the requisite service period.

The Company has elected to account for forfeiture of stock-based awards as they occur.

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. On May 15, 2025, the Company completed its direct listing, 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 was determined using the prior transaction method, which considers actual transactions in the Company’s non-controlling, non-marketable private company equity interests. This method reflects the value of a non-controlling, non-marketable interest; however, management concluded that no additional discount for lack of control or marketability was necessary based on the specific facts and circumstances. 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. Prior to May 15, 2025, because the Company’s stock was not publicly traded, expected volatility was estimated based on the historical and implied volatility of comparable publicly traded companies, considering factors such as industry, stage of the life cycle, size, market capitalization, and financial leverage.

Convertible Notes Payable and Derivative Liabilities

The Company accounts for convertible notes in accordance with ASC 470, Debt, and ASC 815, Derivatives and Hedging. At issuance, the Company evaluates each convertible note to determine whether any embedded features must be bifurcated and accounted for separately as a derivative liability.

If an embedded conversion feature fails the indexed-to-own-stock test under ASC 815-40-15, because the conversion price is determined by a path-dependent formula rather than a fixed price or a current observable price, the conversion feature is bifurcated from the host debt instrument and recognized as a derivative liability at fair value on the issuance date. The host debt instrument is then recorded at an initial carrying value equal to the cash proceeds received, reduced by (i) the original issue discount (“OID”), (ii) the fair value of the bifurcated derivative liability at issuance, and (iii) debt issuance costs allocable to the host instrument.

When an embedded derivative is bifurcated from a convertible note at issuance, the Company initially records the derivative liability at fair value, with the residual proceeds allocated to the host debt instrument, consistent with ASC 835-30 and ASC 815. Debt issuance costs are allocated consistently with this initial measurement approach. The portion of issuance costs allocated to the derivative liability is expensed immediately in the period of issuance. The portion of issuance costs allocated to the host debt instrument is recorded as a contra-debt balance (debt issuance costs) and amortized to interest expense over the expected term of the note using the effective interest method (“EIM”).

The combined discount on each host debt instrument consisting of OID, the fair value of the bifurcated derivative at issuance, and allocated debt issuance costs is accreted to the face amount of the note using the EIM over the expected term of each note in accordance with ASC 835-30.

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Where a convertible note has no stated maturity date, the Company estimates the expected term based on management’s best estimate of the period over which the debt is expected to remain outstanding, considering the economic substance of the instrument, the contractual terms, the expected timing and pattern of conversion or settlement, and other relevant facts and circumstances. The expected term used for accretion of the host debt instrument is applied consistently with the expected term used in valuing any bifurcated embedded derivative. This estimate is reassessed when facts and circumstances indicate a change may be warranted.

Bifurcated derivative liabilities are recognized at fair value on the issuance date of the applicable convertible note and are subsequently remeasured at fair value at each reporting date and at each conversion date, in accordance with ASC 815. Changes in fair value are recognized in earnings as a gain or loss on change in fair value of derivative liabilities and are presented as a separate line item within other income (expense) in the statement of operations.

When the conversion feature’s fair value cannot be estimated using a closed-form solution because the conversion price is based on a formula that incorporates path-dependent inputs, the Company estimates fair value using a Monte Carlo simulation model. The model simulates a large number of potential stock price paths and computes the expected present value of the conversion payoff under each path. The significant unobservable inputs used in the Monte Carlo simulation include the expected equity volatility, expected instrument term, risk-free rate, and debt discount rate. These instruments are classified within Level 3 of the fair value hierarchy established under ASC 820, Fair Value Measurement, because their valuation relies on significant unobservable inputs. See NOTE 5 for a description of the valuation methodology and significant assumptions.

When a noteholder elects to convert a portion or all of a convertible note into shares of common stock, the Company accounts for the conversion as follows:

The pro-rata portion of the carrying value of the host debt instrument, including the related pro-rata unamortized OID and pro-rata unamortized debt issuance costs, is derecognized upon conversion. If the carrying amount of the net host instrument differs from the consideration transferred, the difference is recognized as a gain or loss on conversion of debt in accordance with ASC 470-50.

The pro-rata portion of the bifurcated derivative liability attributable to the converted principal is remeasured to fair value as of the conversion date. The change in fair value from the most recent prior remeasurement date to the conversion date is recognized in earnings as a gain or loss on change in fair value of derivative liability. Upon conversion of the convertible notes payable, the pro-rata portion of the remeasured fair value of the derivative liability is then derecognized from the balance sheet with a credit to additional paid-in capital.

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Income Taxes

The Company recognizes current and deferred tax assets and liabilities for temporary differences between the financial reporting and tax bases of assets and liabilities and for operating loss carryforwards in accordance with ASC 740, Income Taxes. A valuation allowance is established when, based on the weight of available evidence, it is more-likely-than-not that some or all of the deferred tax assets will not be realized. The Company has recorded no current or deferred income tax benefit primarily due to losses and a full valuation allowance on deferred tax assets.

Recently Adopted Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires the disclosure of a tabular reconciliation for state and local income tax, tax credits, and changes in valuation allowance. The requirements are effective for annual reporting periods beginning after December 15, 2024, and may be applied prospectively or retrospectively. The Company has adopted the additional disclosure requirements under ASU 2023-09. The additional requirements did not have a material impact on the financial statements.

In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments provide a practical expedient allowing entities to assume that conditions existing at the balance sheet date are expected to remain unchanged over the life of current accounts receivable when estimating expected credit losses. The amendments are effective for annual reporting periods beginning after December 15, 2025, including interim periods within those fiscal years. The impact of adopting this standard was immaterial to the Company.

Recently Issued Accounting Pronouncements 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.

NOTE 3 – REVENUE

During the three months ended March 31, 2026, subscription fees of $14,925 were recognized as services were transferred over time.

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NOTE 4 - LIQUIDITY AND GOING CONCERN

Liquidity

As of March 31, 2026, the Company had cash and cash equivalents of approximately $5,667,553 and short-term investments of $2,802,060.

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

Going Concern

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

In accordance with ASC 205-40, Presentation of Financial Statements — Going Concern, management evaluated whether conditions or events, considered in the aggregate, raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these financial statements are available to be issued.

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

Management has developed plans to address these conditions, which include the following:

●	Utilizing existing cash and cash equivalents of approximately $5,667,553 as of March 31, 2026;

●	Liquidate approximately $2,802,060 of existing short-term investments;

●	Potentially drawing additional amounts under the Securities Purchase Agreement with Streeterville, which provides up to an additional $19.0 million in gross borrowings, subject to certain conditions including a limitation on total outstanding indebtedness, a minimum market capitalization of $100 million and a minimum book value of $4 million at the time of each draw. The Company’s ability to access these funds is dependent on satisfying these conditions and on Streeterville’s willingness to continue funding draws.

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The Company’s continued existence is dependent on its ability to continue its operating plan and to access remaining funds under the Securities Purchase Agreement (“SPA”) or obtain additional debt or equity financing. There can be no assurance that the Company will be able to access funds under the SPA or obtain additional debt or equity financing. Accordingly, substantial doubt about the Company’s ability to continue as a going concern is not alleviated by management’s plans. These financial statements do not include any adjustment that might result from the Company’s inability to continue as a going concern.

As of May 12, 2026, the Company’s cash, cash equivalents, and short-term investments were approximately $7.1 million.

NOTE 5 - FAIR VALUE MEASUREMENTS

The Company accounts for fair value measurements in accordance with ASC 820, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-level hierarchy for inputs used in measuring fair value:

	●	Level 1 — Quoted prices in active markets for identical assets or liabilities

	●	Level 2 — Observable inputs other than quoted prices included in Level 1

	●	Level 3 — Unobservable inputs supported by little or no market activity

The Company measures its bifurcated derivative liabilities associated with its convertible notes at fair value on a recurring basis, see NOTE 10. These instruments are classified within Level 3 of the fair value hierarchy because their valuation relies on significant unobservable inputs, including expected equity volatility, expected term, and debt discount rates.

The following table presents the Company’s financial liabilities measured at fair value on a recurring basis:

Description	Level	March 31, 2026		December 31, 2025
Investments at fair value	1	$	2,802,060	$	-
Derivative liabilities	3	$	1,440,000	$	1,460,000

The carrying amounts of cash, accounts receivable, accounts payable, and accrued liabilities approximate fair value due to their short-term nature.

The vehicle note payable is carried at amortized cost. The estimated fair value of this instrument approximates its carrying value due to the interest rate approximating current market rates for similar collateralized borrowings.

Derivative Liabilities

In connection with the convertible notes issued under the Securities Purchase Agreement with Streeterville Capital, LLC, as described in NOTE 10, the Company bifurcated the embedded conversion feature from each note and recognized it as a derivative liability under ASC 815. Each derivative liability is initially recognized at fair value on the issuance date of the respective convertible note and is subsequently remeasured at fair value at each reporting date and each conversion date. Changes in fair value are recognized in the statement of operations.

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The Company estimates the fair value of each derivative liability using a Monte Carlo simulation model, which simulates a large number of potential stock price paths and computes the expected present value of the conversion payoff under each path.

Valuation Inputs and Basis of Significant Assumptions

The following inputs were used in the Monte Carlo simulation at each instrument inception measurement date:

Input	Derivative 1 (Convertible Note 1)			Derivative 2 (Convertible Note 2)			Derivative 3 (Convertible Note 3)			Derivative 4 (Convertible Note 4)
Assumed instrument term		3.0 years			3.0 years			3.0 years			2.93 years
Stock price	$	13.25		$	6.78		$	3.90		$	2.40
Selected equity volatility		135	%		130	%		150	%		140	%
Risk-free rate (continuous compounded)		3.91	%		3.68	%		3.47	%		3.62	%
Debt discount rate		25.72	%		28.69	%		27.06	%		27.94	%

The following inputs were used in the Monte Carlo simulation to remeasure the derivative liabilities at each reporting date:

Input	12/31/2025			3/31/2026
Assumed instrument term		3.0 years			2.75 years
Stock price	$	2.63		$	0.80
Selected equity volatility		150	%		135.0	%
Risk-free rate (continuous compounded)		3.52	%		3.77	%
Debt discount rate		27.10	%		28.70	%

The following range of inputs were used in the Monte Carlo simulation to remeasure the derivative liabilities at conversion dates (derivatives with multiple conversions are presented with the range of inputs):

Input	Derivative 4 (Convertible Note 4)
Assumed instrument term	2.79 - 2.93
Stock price	$	0.94 - 2.40
Selected equity volatility		130 – 145	%
Risk-free rate (continuous compounded)		3.47 – 3.73	%
Debt discount rate		27.94 – 28.97	%

SEC Form 10-Q filed by Arrive AI Inc.