Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The objective of this Management's Discussion and Analysis is to allow investors to view the Company from management's perspective, considering items that would have a material impact on future operations. The following discussion and analysis summarizes the significant factors affecting our results of operations and financial condition as of and during the years ended December 31, 2025 and 2024 and should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this Annual Report. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results and the timing of certain events could differ materially from those anticipated in or implied by these forward-looking statements as a result of several factors, including those discussed in the section captioned "Risk Factors" included under Part I, Item 1A and elsewhere in this Annual Report. See also the section captioned "Forward-Looking Statements" in this Annual Report.

Overview

We are an autonomous vehicle technology company that is focused on addressing industrial uses for autonomous vehicles. We believe that technological innovation is needed to enable adoption of autonomous industrial vehicles that will address the substantial industry challenges that exist today. These challenges include labor shortages, lagging technological advancements from incumbent vehicle manufacturers, and high upfront investment commitment.

Industrial sites are typically rigid environments with consistent standards as opposed to city streets that have more variable environmental and situational conditions and diverse regulations. These differences in operational design domains will be major factors that make proliferation of industrial AVs in private settings achievable with less time and resources than AVs on public roadways. Namely, safety and infrastructure challenges are cited as roadblocks that have delayed AVs from operating on public roadways at scale. Our focus on industrial AVs simplifies these challenges because industrial facilities (especially those belonging to a single end customer that operates similarly at different sites) share much more in common than different cities do. Furthermore, our end customers own their infrastructure and can make changes more easily than governments can on public roadways.

With these challenges in mind, we are developing an Enterprise Autonomy Suite ("EAS") that leverages advanced in-vehicle autonomous driving technology and incorporates leading supporting technologies like data analytics, asset tracking, fleet management, cloud, and connectivity. EAS provides a differentiated solution that we believe will drive pervasive proliferation of industrial autonomy and create value for customers at every stage of their journey towards full automation and the adoption of Industry 4.0.

EAS is a suite of technologies and tools that we divide into three complementary categories:

Legacy automation providers manufacture specialized industrial vehicles with integrated robotics software for rigid tasks, limiting automation to narrow uses. Unlike these specialized vehicles, EAS can be compatible with the existing vehicle assets in addition to new vehicles that have been purpose built for autonomy by vehicle manufacturers. EAS is operationally expansive, vehicle agnostic, and compatible with indoor and outdoor environments. By offering flexible autonomous services, we aim to remove barriers to industry adoption.

We understand that scaling of autonomy solutions will require an ecosystem made up of different technologies and services that are enablers for AVs. Our approach is to forge strategic collaborations with complementary technology providers that accelerate AV development and deployment, provide access to new markets, and create new capabilities. Our focus on designing DriveMod to be modular will combine with our experience deploying AV technology on diverse industrial vehicle form factors, which will be difficult for competitors to replicate.

We expect our technology to generate revenue through two main methods: deployment and EAS subscriptions. Deploying our EAS requires us and our integration partners to work with a new client to map the facility, gather data, and install our AV technology within their fleet and site. These deployments typically result in revenue based on the overall scope of the project and the integrated solution delivered.

Following deployment, we continue to generate revenue through ongoing access to and use of our Enterprise Autonomy Suite ("EAS"), which includes software-enabled functionality, monitoring, updates, and support. These arrangements provide customers with continuous access to our evolving autonomous vehicle capabilities and are generally structured over a contractual term during which the customer receives and consumes the benefits of the integrated solution.

We will seek to achieve sustained revenue growth largely from ongoing SaaS-style EAS subscriptions that enable companies to tap into our ever-expanding suite of AV and AI capabilities as organizations transition into full industrial autonomy.

Although both the components and the combined solutions of EAS are still under development, we have EAS licenses with paying customers and have piloted EAS for paid customer trial and pilot deployments. We expect EAS to continually be developed and enhanced according to evolving customer needs, which will take place concurrently while other completed features of EAS are commercialized. We expect annual R&D expenditures in the foreseeable future to exceed that of 2025. We also had limited paid deployments in 2025 that offset some of the ongoing R&D costs of continually developing EAS.

Our go-to-market strategy is to acquire new customers that use industrial vehicles in their mission-critical and daily operations by (a) leveraging the relationships and existing customers of our network of strategic partners, (b) bringing AV capabilities to industrial vehicles as a software service provider, and (c) executing a robust in-house sales and marketing effort to nurture a pipeline of industrial organizations. Our focus is on acquiring new customers who are either looking (a) to embed our technology into their vehicle product roadmaps or (b) to apply autonomy to existing fleets with our vehicle retrofits. In turn, our customers are any organizations that could utilize our EAS solution, including OEMs that supply industrial vehicles, end customers that operate their own industrial vehicles, or service providers that operate industrial vehicles for end customers.

As OEMs and leading industrial vehicle users seek to increase productivity, reinforce safer working environments, and scale their operations, we believe we are uniquely positioned to deliver a dynamic autonomy solution via our EAS to a wide variety of industrial uses. Our long-term vision is for EAS to become a universal autonomous driving solution with minimal marginal cost for companies to adopt new vehicles and expand their autonomous fleets across new deployments. We have already deployed DriveMod software on more than 10 different vehicle form factors that range from stockchasers and forklifts to 14-seat shuttles and 5-meter-long cargo vehicles demonstrating the extensibility of our AV building blocks.

Our strategy upon establishing a customer relationship with an OEM, is to seek to embed our technology into their vehicle roadmap and expand our services to their many clients. Once we solidify an initial AV deployment with a customer, we intend to seek to expand within the site to additional vehicle platforms and/or expand the use of similar vehicles to other sites operated by the customer. This "land and expand" strategy can repeat iteratively across new vehicles and sites and is at the heart of why we believe industrial AVs that operate in geo-fenced, constrained environments are poised to create value.

Critical Accounting Policies and Estimates and Judgements

Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known. Besides the estimates identified below that are considered critical, we make many other accounting estimates in preparing our consolidated financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

The Company considers costs to develop software, warrants and share-based compensation to be critical accounting estimates and believes the associated assumptions and estimates to have the greatest potential impact on our consolidated financial statements.

Costs to Develop Software

The Company incurs costs related to internally developed software. Based on the nature of the software the Company capitalizes software costs under the following guidance.

Internal-Use Software

The Company capitalizes certain costs related to internal-use software, primarily consisting of direct labor and third-party vendor costs associated with creating the software. Software development projects generally include three stages: the preliminary project stage (all costs are expensed as incurred), the application development stage (certain costs are capitalized and certain costs are expensed as incurred) and the post-implementation/operation stage (all costs are expensed as incurred). Costs capitalized in the application development stage include costs related to the design and implementation of the selected software components, software build and configuration infrastructure, and software interfaces. Capitalization of costs requires judgment in determining when a project has reached the application development stage, the proportion of time spent in the application development stage, and the period over which the Company expects to benefit from the use of that software. Once the software is placed in service, these costs are amortized on the straight-line method over the estimated useful life of the software, which is generally three to five years. There is judgment involved in the determination of the useful life. Internal-use software is classified as property and equipment in accordance with ASC 350, Intangibles - Goodwill and Other.

Costs to Develop Software to be Sold, Leased or Otherwise Marketed

The Company accounts for research costs of computer software to be sold, leased or otherwise marketed as expense until technological feasibility has been established for the product. Once technological feasibility is established, all software costs are capitalized until the product is available for general release to customers. Judgment is required in determining when technological feasibility of a product is established. We have determined that technological feasibility for our software products is reached shortly after a working prototype is complete and meets or exceeds design specifications including functions, features, and technical performance requirements. After technological feasibility is established, judgment is required to determine the amount of payroll and stock-based compensation costs to be capitalized on the remaining development efforts. These costs will continue to be capitalized until such time as when the product or enhancement is available for general release to customers.

Computer software to be sold, leased or otherwise marketed is classified as an intangible asset. Capitalized software development costs are amortized using the greater of (a) the amount computed using the ratio that current gross revenue for a product bear to total of current and anticipated future gross revenue for that product or (b) the straight-line method, beginning upon commercial release of the product, and continuing over the remaining estimated economic life of the product, not to exceed three years to five years and recorded as cost of revenue. Amortization will begin when the product or enhancement is available for general release to customers. No amortization has begun for externally sold software, as the software enhancement is still in development. Management evaluates the useful lives of these assets on a quarterly basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. No impairment charges were associated with the Company's sold, leased or otherwise marketed software for the year ended December 31, 2025.

During the year ended December 31, 2025, management completed a review of the Company's capitalized software development projects. Based on this review, management determined that projects previously capitalized as developed software no longer met the criteria for capitalization under ASC 985-20, External-Use Software, resulting from new technical development issues that did not exist and could not have been reasonably anticipated in prior periods.

As a result, the Company revised its estimate regarding the point at which technological feasibility is achieved for software development activities. This change in estimate was made to reflect management's current expectations about the timing and certainty of future technological milestones.

The change in estimate was accounted for prospectively in accordance with ASC 250, Accounting Changes and Error Corrections, and did not require restatement of prior-period financial statements. For the year ended December 31, 2025, the Company recognized a total of $1.4 million related to costs originally capitalized in 2024 and $1.2 million related to costs capitalized during the first two quarters of 2025 as research and development expense resulting from this change.

Common Stock Warrants

The Company issued to its lead underwriter in the Company's initial public offering consummated in October 2021, (the "IPO"), warrants to purchase up to 9 shares of its common stock, exercisable at a price per share of $40,650 and expiring on October 19, 2026. Additionally, in connection with the Private Placement offering completed on April 29, 2022, the Company issued warrants to purchase 426 shares of its common stock, exercisable at a price per share of $140,625 and expiring on April 29, 2027. The Company accounts for warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, depending on the specific terms of the warrant agreement. The Company determined the fair value of the warrants using the Black-Scholes pricing model and treated the valuation as equity instruments in consideration of the cashless settlement provisions in the warrant agreements.

The Company also applied the guidance in ASC 340-10-S99-1, Other Assets and Deferred Costs, that states specific incremental costs directly attributable to a proposed or actual offering of equity securities may properly be deferred and charged against the gross proceeds of the offering. The Company treated the valuation of the warrants as directly attributable to the issuance of an equity contract and, accordingly, classified the warrants as additional paid-in capital.

The Company issued Series A warrants and Series B warrants in connection with securities purchase agreement on December 20, 2024. The Company accounts for warrants in accordance with ASC 480, Distinguishing Liabilities from Equity, depending on the specific terms of the warrant agreement. The estimated fair value of the Company's warrant agreements has been determined to be Level 3 measurement, as certain inputs used to determine the fair value of these agreements are unobservable. The Company determined the fair value of the warrants using the Monte Carlo pricing model and treated the valuation as a liability in consideration of the variable number of the issuer's equity shares in the warrant agreements. The resulting warrant liabilities are re-measured at each balance sheet date until their exercise or expiration, and any change in fair value is recognized in the Company's consolidated statements of operations under other income (expense). After shareholder approval on January 30, 2025, the strike price and the number of equity shares are now fixed. Therefore, in accordance with ASC 815-40-35-8, Derivatives and Hedging Reclassification of Contracts, the Series A warrants were re-measured utilizing the Black Scholes model and reclassified into equity. The Series A warrants are included in equity in the consolidated balance sheet as of December 31, 2025. The Series B warrants were re-measured utilizing the Black Scholes model immediately before exercise and were fully exercised in February 2025.

Stock-based Compensation

The Company recognizes the cost of share-based awards granted to employees and directors based on the estimated grant-date fair value of the awards. Cost is recognized on a straight-line basis over the service period, which is generally the vesting period of the award. The Company recognizes stock-based compensation cost and reverses previously recognized costs for unvested awards in the period forfeitures occur, if any. The Company determines the fair value of stock options using the Black-Scholes option pricing model, which is impacted by the fair value of the Company's common stock, expected price volatility of the common stock, expected term, risk-free interest rates, and expected dividend yield.

Results of Operations

Revenue

We derive revenue from EAS subscriptions with relative add-on offerings such as hardware revenue and other revenue (i.e., deployment costs). Revenue from these subscriptions and add-ons are recognized monthly over the service contract life, beginning at the time that a customer acknowledges acceptance of the service.

During 2025, the Company recognized $0.2 million of revenue, substantially all related to EAS subscriptions and hardware revenue. During 2024, the Company recognized $0.4 million of revenue, substantially all related to EAS subscriptions and hardware revenue.

Cost of Revenue

Cost of revenues consists primarily of direct labor and related fringe benefits for internal engineering resources costs incurred for the completion of the contracts and hardware costs.

During 2025, the Company reported cost of revenue of $0.1 million consisting primarily of deployment costs related to personnel costs and travel expenses. During 2024, the Company reported cost of revenue of $0.5 million consisting primarily of deployment costs, related to personnel costs, travel expenses and associated hardware costs to specific customers.

Research and Development

Research and development expense consist primarily of internal engineering and development expenses, materials, labor and stock-based compensation and outsourced engineering services related to development of the Company's products and services. Research and development costs incurred during deployments are capitalized and expensed when the associated contract revenue is recognized. All other research and development costs are expensed as incurred.

Research and development expense for the year ended December 31, 2025 increased by $1.2 million or 10.7% to $12.5 million from $11.3 million for the year ended December 31, 2024. The increase is primarily attributable to personnel related costs and expanded leased space.

General and Administrative

General, and administrative expense consist primarily of personnel costs, facilities expenses, depreciation and amortization, travel, and advertising costs.

General and administrative expenses increased by approximately $1.9 million or 16.7% to $13.3 million for the year ended December 31, 2025 from $11.4 million for the year ended December 31, 2024. The increase primarily relates to additional executive bonuses and advertising.

Interest income (Expenses), net

Interest income (expense), net increased by $1.3 million to $0.2 million for the year ended December 31, 2025 from ($1.1 million) for the year ended December 31, 2024. Interest income consists primarily of interest earned of $0.2 million from the Company's interest-bearing bank accounts.

Other Income (Expenses), net

Other income (expense), net increased by $12.7 million to $2.2 million for the year ended December 31, 2025 from ($10.5 million) for the year ended December 31, 2024. Other income consists primarily of fair value remeasurement of $1.1 million and realized gains earned on the Company's short-term investments of $0.9 million.

Liquidity and Capital Resources

The Company's principal source of liquidity is its cash and current maturities of short-term investments. Short-term investments consist of placements in U.S. government securities with original maturities between three to nine months. As of December 31, 2025, the Company had unrestricted cash of approximately $0.1 million and short-terms investments of $33.7 million. As of December 31, 2024, the Company had unrestricted cash of approximately $23.6 million and no short-terms investments.

On April 23, 2024, the Company entered into an underwritten agreement with Aegis Capital Corp. ("Aegis"), pursuant to which Aegis acted as the Company's underwriter on a firm commitment basis in connection with the sale by the Company of an aggregate of 3,333 shares of common stock in a public offering, which included: (i) 1,320 shares of common stock, and (ii) pre-funded warrants to purchase 2,013 shares of common stock. The pre-funded warrants had a nominal exercise price of $0.0015. Each share of common stock was sold at an offering price of $1,500, and each pre-funded warrant was sold at an offering price of $1,499.85. The pre-funded warrants are classified as a component of permanent stockholders' equity within additional paid-in capital and were recorded at the issuance date concluding the purchase price approximated the fair value. The offering closed on April 25, 2024. On May 3 2024, the Company closed on the sale of an additional 136 shares of common stock, upon exercise by the underwriter of the over-allotment option. The Company received net proceeds of approximately $4.6 million, after deducting the estimated offering expenses payable by the Company, including the placement agent fees.

On November 12, 2024, the Company entered into a securities purchase agreement with certain investors pursuant to which we sold, in a private placement, senior notes with an aggregate principal amount of $4,375,000 (the "Notes"), and received proceeds before expenses of $3,500,000. As consideration for entering into the agreement, we issued a total of 2,701 shares of common stock of the Company to the Purchasers on November 13, 2024. The principal amount of the Notes were repaid on December 23, 2024.

On November 12, 2024, the Company implemented a cost reduction plan in order to reduce its average monthly cash burn from approximately $1.8 million per month to approximately $1 million per month for 90 days. This included reducing staff from approximately 80 people to approximately 60 people, temporarily suspending certain non-essential operations and reducing or eliminating all discretionary expenses. With the additional capital raised in December 2024, the Company has resumed normal operations.

On December 20, 2024, the Company entered into a securities purchase agreement for the sale and issuance of (i) 20,507 units at a public offering price per Unit of $241.50 with each Unit consisting of one share of common stock, par value $0.00001 per share, one Series A warrant to purchase one share of Common Stock at an exercise price of $301.875 per share and one Series B warrant to purchase one share of Common Stock at an exercise price of $301.875 and (ii) 62,309 pre-funded units at a public offering price of $241.485 per Pre-Funded Unit, with each Pre-Funded Unit consisting of one pre-funded warrant exercisable for one share of Common Stock at an exercise price of $0.015 per share, one Series A Warrant and one Series B Warrant. The net proceeds to the Company from the Offering were approximately $18.2 million, after deducting placement agent's fees and the payment of other offering expenses associated with the offering that were payable by the Company.

On December 30, 2024, the "Company entered into a securities purchase agreement pursuant to which the Company agreed to sell and issue, in a registered direct offering, 44,333 shares of its common stock, par value $0.015 per share at a purchase price of $90 per share and 55,667 pre-funded warrants to purchase shares of Common Stock, at a purchase price of $89.985 per Pre-Funded Warrant. The Company received net proceeds of approximately $8.1 million from the offering, after deducting the estimated offering expenses payable by the Company, including the placement agent fees.

On June 26, 2025, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 192,496 shares of its common stock, par value $0.00001 per share, at a purchase price of $5.01 per share and 2,801,516 pre-funded warrants to purchase shares of common stock, at a purchase price of $5.00999 per pre-funded warrant. The Company received net proceeds of approximately $15.9 million from the offering, after deducting the estimated offering expenses payable by the Company of $1.3 million, including the placement agent fees.

On June 27, 2025, the Company entered into a securities purchase agreement with certain investors, pursuant to which the Company agreed to sell and issue, in a registered direct offering, 313,564 shares of its common stock, par value $0.00001 per share, at a purchase price of $7.50 per share and 1,979,769 pre-funded warrants to purchase shares of common stock, at a purchase price of $7.49999 per pre-funded warrant. The Company received net proceeds of approximately $13.7 million from the offering, after deducting the estimated offering expenses payable by the Company of $1.3 million, including the placement agent fees.

On September 5, 2025, the Company entered into an At-The-Market Issuance Sales Agreement (the "Sales Agreement") with Aegis Capital Corp. (the "Agent"), under which the Company may, from time to time, sell shares of the Company's common stock having an aggregate offering price of up to $100,000,000 in "at the market" offerings through or to the Agent, as sales agent or principal. Sales of the shares of common stock, if any, will be made at prevailing market prices at the time of sale, or as otherwise agreed with the Agent. The Agent will receive a commission from the Company of up to 3.0% of the gross proceeds of any shares of common stock sold under the Sales Agreement.

In October 2025, the Company sold an aggregate of 935,114 shares of common stock pursuant to the Sales Agreement for gross proceeds of $5,778,031. The Company paid a commission of $173,341 to Aegis Capital Corp., representing 3% of the gross proceeds, and $131,990 in issuance costs resulting in net proceeds of approximately $5,472,691. The shares were issued at a par value of $0.00001 per share. The par value of the shares issued was recorded as common stock, with the excess of net proceeds over par value recorded as additional paid-in capital.

The Company's liquidity is based on its ability to enhance its operating cash flow position, obtain capital financing from equity interest investors and borrow funds to fund its general operations, research and development activities and capital expenditures.

Based on cash flow projections from operating, investing and financing activities and the existing balance of cash and short-term investments, management is of the opinion that the Company has sufficient funds for sustainable operations, and it will be able to meet its payment obligations from operations and related commitments for the 12 months following the date these consolidated financial statements were issued.

Cash Flows

Operating activities

Net cash used in operating activities for the year ended December 31, 2025 was $23.6 million, an increase of approximately $4.4 million or 22.8% compared to $19.2 million for the year ended December 31, 2024. The increase is primarily attributed to an increase in inventory related to tuggers, the fair value remeasurement of the warranty liabilities, and the security deposit for the new office location.

Investing activities

Net cash used in investing activities for the year ended December 31, 2025 was $34.1 million, an increase of approximately $37.1 million compared to net cash provided by investing activities of $2.9 million for the year ended December 31, 2024. The increase consists of short-term investment maturities of $54.5 million, which were offset by short-term investment purchases of approximately $87.4 million, R&D-related hardware equipment purchases of approximately $1.2 million, and approximately $0.03 million in acquisition of intangible assets.

Financing activities

Net cash provided by financing activities for the year ended December 31, 2025 was $35.1 million, a decrease of approximately $1.2 million compared to $36.3 million for the year ended December 31, 2024. The decrease is due to the following net proceeds received in each year:

Emerging Growth Company Status

We are an "emerging-growth company", as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies but not to emerging growth companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. As an emerging growth company we can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We intend to avail ourselves of these options. Once adopted, we must continue to report on that basis until we no longer qualify as an emerging growth company.

We will cease to be an emerging growth company upon the earliest of: (i) the end of the fiscal year following the fifth anniversary of the initial public offering; (ii) the first fiscal year after our annual gross revenue are $1.07 billion or more; (iii) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (iv) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If, as a result of our decision to reduce future disclosure, investors find our common shares less attractive, there may be a less active trading market for our common shares and the price of our common shares may be more volatile.

We are also a "smaller reporting company", meaning that the market value of our stock held by non-affiliates plus the aggregate amount of gross proceeds to us as a result of the IPO is less than $700 million and our annual revenue was less than $100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our stock held by non-affiliates is less than $250 million or (ii) our annual revenue was less than $100 million during the most recently completed fiscal year and the market value of our stock held by non-affiliates is less than $700 million. If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.