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 following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this annual report. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the "Risk Factors" section of this annual report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

OVERVIEW

Aptera Motors Corp. is a public benefit corporation and development stage company focused on the development and commercialization of solar electric vehicles. In October 2025, the Company completed a direct listing of its Class B common stock on The Nasdaq Capital Market.

The Company has not commenced production or generated any revenue from the sale of its products. The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which is dependent upon the Company obtaining additional financing and ultimately achieving profitable operations. To that end, in November 2025, we established an equity line of credit ("ELOC") as a mechanism to incrementally access capital. We successfully utilized this ELOC between mid-November 2025 and January 2026 to raise approximately $3.0 million. Furthermore, during the first quarter of 2026, we successfully raised an aggregate of approximately $17.1 million in gross proceeds, consisting of $9.0 million from a follow-on public offering in January 2026 and an additional $8.1 million from subsequent warrant exercises, including a warrant inducement transaction completed in March 2026. This management's discussion and analysis discusses the Company's progress to date, its challenges, and its plans for the future, but should be read in conjunction with the consolidated financial statements and accompanying notes.

Aptera was formed as a Delaware corporation on March 4, 2019, and transitioned to a Delaware public benefit corporation in October 2025, for the purpose of engaging in the production of energy-efficient, solar-powered vehicles. We first began accepting $100 reservations for our vehicle in December 2020 and as of December 31, 2025, we had approximately 49,000 reservation holders. We conducted two promotional programs that allowed investors to reserve priority reservations for initial customer vehicles. Under the first program, which ran from January 2023 through January 2024, the initial 2,000 delivery positions were offered through an auction process, resulting in an average investment exceeding $20,000 per position. Under the second program, which was conducted from April to August 2025, an additional 1,000 delivery positions were made available to investors making minimum investments of $5,000. We have not delivered any products to customers and have not recognized any revenue from the sale of vehicles.

During the past three years, we engaged with strategic partners to supply validated production parts, and we are currently executing our validation vehicle program. While we require substantial capital to commence commercial production, core physical assets-including our proprietary Body in Carbon (BinC) structural tooling and automated transport systems-are physically on-site and undergoing final engineering assessments. Alongside efforts to secure necessary financing, our current operational focus remains on completing this validation and durability testing process to ensure the reliability of our production-intent design. Our marketing team is expected to engage with the public to educate them on our brand proposition, expand our reservation backlog, and optimize our initial production mix. As a result of these activities, the Company expects to continue to experience increased spending on production equipment and tooling.

Our production timeline has evolved and remains heavily dependent on our ability to secure sufficient capital in substantial tranches. This shift to larger funding rounds is necessary to allow us to place large-scale purchase orders and fulfill supplier commitments for our finalized production tooling. Our production plan for our Carlsbad facility is phased. The initial "low-volume" production phase requires an estimated $45 million to 50 million in capital to fund the remaining necessary tooling and validation programs. Following the initiation of low-volume production, a second phase to ramp to high-volume production (a target rate of approximately 20,000 vehicles per year, which we believe is our current facility's maximum capacity based on consultations with Munro & Associates) would require an estimated additional $140 million to $160 million. Until the necessary funding for a given production phase is secured, we are unable to predict if and when that phase of production will commence, and our previously anticipated timelines are no longer indicative of our current expectations.

Commencing production also depends on key factors beyond funding, including:

	●	Availability of resources: Production is contingent on the availability of materials, components, manufacturing facilities, and an uninterrupted supply chain.
	●	Addressing technical challenges: We may encounter further technical challenges during our validation programs that require redesign, mechanical modification, or alternative sourcing of components.
	●	Meeting regulatory requirements: We must meet all necessary safety and regulatory requirements to certify our vehicles.

Historically, we have experienced challenges in raising capital in the amounts needed to fully fund our operations, and we have faced production delays due to financial constraints, supply chain disruptions, technological challenges, and regulatory requirements. While we currently do not anticipate any major supply chain disruptions, changes in global trade policies, including the imposition of new tariffs or changes to existing tariffs, could impact the cost and availability of components and materials, potentially affecting our production timelines and profitability. We have experienced price fluctuations for vehicle components and labor in the past, which have led to increased costs and negatively affected our results of operations.

We are actively working to address these challenges through our direct listing, recent capital raises, and utilization of our ELOC (subject to lock-up periods and facility limitations). We will provide further updates on our progress as we achieve significant milestones. However, we cannot assure you that we will be successful in securing the remaining necessary funding, overcoming technical challenges, or meeting regulatory requirements on a timely basis, or at all.

Operating Expenses

General, Selling and Administrative

General, selling and administrative expenses consist of administrative, compliance, legal, investor relations, financial operations, and information technology services. They include related department salaries, office expenses, meals and entertainment costs, software/applications for operational use, and other general and administrative expenses, including but not limited to technology subscriptions and travel expenses. These expenses account for a significant portion of our operating expenses.

Research and Development

We spend significant resources on engineering, tooling and design capabilities, which are classified as research and development expenses. Research and development expenses consist primarily of personnel costs, materials to build prototype and validation vehicles, specialized out-sourced engineering services, facilities and software licenses.

Results of Operations

Comparison of the results of operations for the years ended December 31, 2025 and December 31, 2024

General, Selling and Administrative Expenses

(in thousands)		For the year ended December 31,
		2025				2024				$ Change				% Change
Share-based compensation		$	16,922			$	11,302			$	5,620				50	%
Corporate and overhead expenses			9,673				8,629				1,044				12	%
Depreciation			173				159				14				9	%
Selling, general and administrative		$	26,768			$	20,090			$	6,678				33	%

The increase in selling, general and administrative costs compared to the prior year was primarily driven by higher stock-based compensation, increased legal and regulatory costs associated with our transition to a public company, partially offset by reduced advertising expenses and employee-related costs.

The increase in share-based compensation was primarily driven by $10.7 million in expense recognized in 2025 for advisory services provided by third-party consultants. This increase was partially offset by the non-recurrence of a $5.5 million charge recognized in 2024 related to the modification of stock options for certain former employees and executives.

Corporate and overhead expenses increased, primarily driven by a $2.2 million increase in legal, audit, and other advisory fees. Legal fees increased by $1.0 million compared to the prior year, with the majority of the increase related to regulatory matters initiated in 2025, as well as litigation and compliance costs associated with our October 2025 direct listing on Nasdaq. Additionally, we incurred $0.5 million of non-recurring advisory fees in connection with the direct listing. Outside consultant fees, primarily for executive and administrative staff, increased by $0.3 million, and audit fees increased by $0.1 million. These increases were partially offset by a $0.9 million reduction in advertising costs reflecting lower crowdfunding-related marketing activity, a $0.3 million decrease in travel and employee-related costs, and a $0.1 million decrease in property taxes.

We expect general and administrative expenses to remain elevated in the near term as we incur the incremental costs of operating as a publicly traded company, including higher legal, accounting, insurance, and investor relations expenses.

Research and Development Expenses

(in thousands)		For the year ended December 31,
		2025				2024				Change ($)				Change (%)
Engineering, design and development		$	13,558			$	13,228			$	330				2	%
Share-based compensation			7,391				3,464				3,927				113	%
Depreciation			393				339				54				16	%
Research and Development		$	21,342			$	17,031			$	4,311				25	%

Research and development expenses increased by $4.3 million, or 25%, for the year ended December 31, 2025, compared to the year ended December 31, 2024. The increase was primarily driven by higher stock-based compensation expense, which increased by approximately $3.9 million. This was attributable to a series of option grants issued in April and December 2025 to recognize the engineering team's contributions to ongoing vehicle development and validation activities.

Engineering, design, and development expenses increased slightly by $0.3 million. This variance was primarily driven by a $1.0 million increase in personnel costs resulting from engineering headcount additions to support our vehicle program, a $0.7 million net increase in materials and supplies expense related to validation vehicle builds and testing and $0.3 million increase in facilities and engineering software expenses. These increases were partially offset by a $0.8 million decrease in outside professional services, as the expansion of our in-house engineering team reduced our reliance on external consultants, as well as the non-recurrence of a $0.8 million impairment charge recorded in the prior year related to certain R&D assets.

Other Income

Other income for the year ended December 31, 2025 was $4.2 million, compared to $2.2 million for the year ended December 31, 2024, representing an increase of $2.0 million.

The increase was primarily attributable to a $1.9 million increase in grant reimbursements recognized during 2025 and $0.4 million of research and development tax credits recognized in other income during 2025, which is due to an increase in qualified spend. Other income also increased $0.2 million due to a reduction in interest expense and an increase in interest income. Additionally, the Company recognized $0.1 million of foreign currency exchange gains during 2025.

These increases were partially offset by a $0.4 million decrease in investment income compared to the prior year.

	●	Year ended December 31, 2025: Other income consisted of $3.2 million in grant funding from the California Energy Commission, $0.4 million in federal research and development payroll tax credits earned during the year, and $0.6 million from investment income and merchandise and event sales.
	●	Year ended December 31, 2024: Other income consisted of $1.3 million in grant funding from the California Energy Commission, $0.7 million in investment income, and $0.2 million in interest income

Net Loss

As a result of the foregoing, the Company's net loss for the year ended December 31, 2025 was $43.9 million compared to $34.9 million for the year ended December 31, 2024.

Liquidity and Capital Resources

As of December 31, 2025, the Company had $30.2 million in total assets. Our primary source of liquidity at that date was $9.6 million in cash and cash equivalents. Unlike prior periods, we did not have a recognized grant funds receivable balance as of December 31, 2025, as management recorded a full allowance against the remaining $0.7 million balance due to uncertainties regarding the timing of the capital raises required to trigger those reimbursements.

Our current operational cash burn rate, covering essential personnel, ongoing regulatory compliance, and fixed costs, is approximately $1.5 to $2.0 million per month. This baseline burn rate was elevated in the fourth quarter of 2025 and first quarter of 2026 by significant expenses associated with becoming and operating as a publicly traded company, fees associated with Class B common stock offerings and by substantial legal and other professional fees related to the SEC Investigation (as defined below). Such costs are difficult to predict with certainty but are expected to continue to be material in the near term.

Our existing cash and cash equivalents are not sufficient to fund our baseline operations for the next twelve months, nor are they sufficient to advance our vehicle production business plan. These factors continue to raise substantial doubt about our ability to continue as a going concern.

Management's plan to address the Company's liquidity needs and fund operations over the next twelve months relies primarily on accessing capital through the ELOC and potentially through other public market financings.

Subsequent to December 31, 2025, we conducted two financing transactions. On January 26, 2026, we closed a registered public offering, issuing 4,500,000 shares of Class B common stock and accompanying warrants for gross proceeds of approximately $9.0 million. Furthermore, during the first quarter of 2026, we received an additional $8.1 million in aggregate gross proceeds from warrant exercises, including a $6.3 million warrant inducement transaction completed in March 2026.

We estimate that we will require an additional $45 million to $50 million to complete vehicle validation and prepare for low volume production-including increased spending on engineering, validation, testing, production tooling, and the hiring of additional sales, marketing, and administrative personnel. We expect that the associated work would take approximately 12 to 18 months to complete from the time such capital is fully secured. This capital must be secured in substantial tranches. The ELOC provides a potential mechanism to access capital incrementally, subject to the conditions and limitations previously described.

Our awarded $21.9 million grant from the CEC remains a component of our potential future liquidity. Through December 31, 2025, we have received approximately $3.2 million in cash disbursements. We anticipate receiving further portions of the grant only if we are able to secure sufficient financing to make the eligible expenditures and meet the project milestones.

Long-Term Cash Requirements

Beyond our immediate capital needs to commence low-volume production, our long-term business plan requires us to raise substantial additional capital for future growth and operational expansion. Our material cash requirements beyond the next 12 months are expected to include, but are not limited to, the following:

	●	Scaling to High-Volume Production: We estimate needing $140 million to $160 million to fully equip our current Carlsbad facility and scale our manufacturing process to achieve our high-volume production target of 20,000 vehicles per year. This includes significant investment in additional automation, assembly line equipment, and quality control systems and is in addition to the $45 million to $50 million necessary to fund the remaining tooling and validation programs mentioned above.
	●	Future Manufacturing Capacity: To meet our longer-term production targets that exceed the capacity of our current facility, we expect to require additional manufacturing capacity. This may involve securing or constructing new, larger facilities, which would represent a material future capital expenditure, the cost and timing of which has not yet been determined.
	●	Expansion of Sales and Service Infrastructure: Our anticipated direct-to-consumer model will require significant investment to scale nationally. We expect to need to fund the establishment of regional pre-delivery and service centers, as well as expand our fleet of mobile service vehicles to support our customers and/or form relationships with third party vendors to provide this level of service.
	●	Research and Development: To maintain our competitive advantage, we intend to continue investing in research and development. This includes developing future vehicle models, enhancing our proprietary solar and battery technology, and exploring other applications for our technology.
	●	Working Capital: As we begin and scale production, our need for working capital is expected to increase significantly. The cash required to fund raw materials, work-in-process, and finished goods inventory is expected to increase substantially as our production volume grows.
	●	Public Company Costs: We expect to continue to incur significant legal, accounting, and other expenses as a public company that we did not incur as a private company.

Our ability to fund these long-term requirements is dependent upon our ability to successfully utilize the ELOC, raise substantial additional capital through future equity or debt financings, and there can be no assurance that the ELOC will provide sufficient capital or that other financing will be available on favorable terms, or at all. Failure to obtain sufficient funding would materially adversely affect our business plan and our ability to continue as a going concern.

Liabilities

As of December 31, 2025, the Company's total liabilities were $9.8 million. Major existing liabilities include $2.5 million in accrued liabilities, $4.1 million in unearned reservation fees, and $1.5 million in operating lease liabilities (current and long-term). We also had approximately $2.1 million of purchase commitments as of December 31, 2025, which are generally cancellable. For further details on our commitments, see "Commitments and Contingencies" below.

Equity Issuances

During the year ended December 31, 2025, we issued 278,417 shares of Class B Common Stock in connection with Regulation A and Regulation D offerings for total consideration of approximately $11.3 million. Additionally, the Company utilized its Equity Line of Credit (ELOC) to raise capital during the period, issuing 565,000 shares of Class B Common Stock for total proceeds of approximately $3.0 million.

During the year ended December 31, 2025, the Company issued 45,474 shares of Class B Common Stock to external consultants and service providers as compensation for services rendered. The aggregate grant-date fair value of these shares was approximately $0.4 million.

Subsequent to December 31, 2025, our capital structure and future liquidity profile were significantly altered by our January 2026 registered public offering and the subsequent warrant inducement transaction in March 2026. As a result of these transactions, we have a substantial number of outstanding warrants to purchase shares of our Class B common stock at fixed exercise prices. To the extent that our market price of the Class B common stock exceeds the respective exercise prices of these warrants, such warrants represent a potential source of significant future cash flow. If the remaining warrants issued in these first quarter 2026 transactions are exercised in full for cash, we would receive material additional capital to fund our continued pre-production and vehicle validation efforts; however, there can be no assurance that any of these outstanding warrants will be exercised prior to their expiration.

Commitment and Contingencies

Leases

As of December 31, 2025, we leased approximately 77,000 square feet of office, manufacturing and assembly space at our principal facility in Carlsbad, California under an operating lease agreement that expires April 1, 2027. For the year ended December 31, 2025, we recorded $1.0 million of lease expense.

Purchase Orders

We regularly enter into purchase obligations with vendors and service providers, which represent expected payments and commitments during the normal course of our business. These purchase obligations are generally cancellable with or without notice and without penalty, although certain vendor agreements provide for cancellation fees or penalties. As of December 31, 2025, we had approximately $2.1 million in open purchase orders.

Litigation and Regulation

Various aspects of our business and service areas are subject to U.S. federal, state, and local regulation, as well as regulation outside the United States.

As of the date of this Annual Report, the Company is a party to a lawsuit with Zaptera and the Company received subpoena related to the SEC Investigation, as described below.

Zaptera

In August 2024, Zaptera USA, Inc. ("Zaptera") filed a complaint against Aptera Motors Corp. in U.S. District Court for the Southern District of California. Following amendments and motions to dismiss, Zaptera presently asserts claims against Aptera Motors Corp. and certain associated individuals for design patent infringement, misappropriation of trade secrets, and declaratory judgment of patent ownership. It also asserts breach of contract claims against the individuals, but not the Company itself. Zaptera seeks various remedies, including damages and injunctive relief.

On October 10, 2025, Aptera Motors Corp. and the individual defendants filed their answers and affirmative defenses to Zaptera's amended complaint. Aptera Motors Corp. intends to vigorously defend this litigation and continues to believe the claims are without merit. However, litigation is inherently uncertain, and an unfavorable outcome could materially harm our business.

SEC Investigation

In January 2025, we received a subpoena for documents from the staff of the SEC related to our securities offerings and the production, design, and manufacture of our vehicles (the "SEC Investigation"). This subpoena is part of the ongoing SEC Investigation. We are cooperating fully with the investigation and are producing documents in response to the subpoena.

The SEC has informed us that the investigation does not mean that it has concluded that anyone has violated the law and that the receipt of the subpoena does not mean that the SEC has a negative opinion of any person, entity, or security. However, we cannot provide any assurances as to the outcome of this investigation or its potential effect, if any, on our Company.

Trend Information

The Company's operating environment in 2025 and early 2026 has been defined by shifting regulatory incentives and a strategic realignment of supply chains in response to heightened geopolitical instability. The September 2025 expiration of federal electric vehicle tax credits resulted in significant market volatility, including a surge in third-quarter demand followed by an industry-wide contraction in the fourth quarter. Furthermore, the initiation of military conflict in the Middle East in February 2026 has introduced renewed volatility to global energy markets and disrupted maritime logistics. We are addressing these trends by actively focusing our sourcing efforts on trade-friendly jurisdictions to mitigate supply chain exposure and by leveraging our solar-integrated design to serve a market increasingly focused on extreme efficiency independent of charging infrastructure. While elevated interest rates and global macroeconomic developments continue to influence capital availability, we believe our focus on operational resilience aligns with the current structural shifts in the global automotive industry.

Tariffs

Recent U.S. tariff measures on imported materials are not expected to materially impact our current vehicle development stage, as we have not yet built significant inventory. However, we are evaluating the potential effects on our future supply chain. Our sourcing strategy primarily prioritizes quality, availability, and price for unique components, with domestic procurement typically being a secondary consideration. This approach may increase our exposure to international trade disruptions and tariff-related cost volatility and we expect to adjust our approach accordingly.

Due to our current development stage, we believe we are well-positioned to react to potential future cost increases from suppliers. Furthermore, our long-standing plan to assemble vehicle components in the United States provides us with the flexibility to maintain competitive pricing.

However, recent proposals to change the international trade framework events have resulted in substantial regulatory uncertainty regarding international trade and trade policy, both in the United States and abroad. The U.S. government has also raised the possibility of other initiatives that may affect importation of goods including renegotiation of trade agreements with other countries and the introduction of new or increased import duties or tariffs with respect to products from a number of different countries. In light of this uncertainty and the unknown impact on the broader U.S. and global economy in the future, we do not have clarity at this point over the potential medium to long term impacts our business may face. The availability of certain goods could be affected if foreign suppliers choose to limit their exposure to U.S. markets in response to unfavorable trade policies, which could negatively impact the ability of our suppliers to deliver materials or manufacturing equipment to us and, therefore, delay or impede our deliveries. Furthermore, rising inflation, slower economic growth and increases in unemployment that may result from global trade disruptions could further deflate consumer demand, reducing demand for our products.

Critical Accounting Policies and Estimates

Long-Lived Assets

Our impairment assessment for the year ended December 31, 2025, involved significant judgment due to our pre-revenue status and the "going concern" conditions described in Note 1.

During the fourth quarter of 2025, we identified triggering events including continued operating losses and the requirement for substantial additional capital to reach commercial production. We performed a recoverability test (Step 1) by comparing the carrying value of our long-lived asset group-which includes our production tooling and construction-in-progress-to the probability-weighted undiscounted future cash flows expected to be generated by the assets.

The recoverability of these assets is materially dependent on our ability to secure approximately $45 million to $50 million in additional capital to complete vehicle validation and initiate low-volume production. Based on our current projections and probability-weighted scenarios, which assume successful access to capital markets and the utilization of our Equity Line of Credit, we determined that the undiscounted cash flows exceed the carrying value of the asset group. Accordingly, no impairment was recorded in 2025.

However, if we are unable to obtain sufficient financing on a timely basis, or if there are significant further delays in our production timeline, we may be required to recognize a material impairment charge in future periods, which could result in a near-total write-down of our construction-in-progress assets.

For the year ended December 31, 2024, we recorded impairment charges of $0.8 million related to construction-in-progress assets, as further discussed in Note 4 to our consolidated financial statements.

Stock-Based Compensation

Stock-based compensation expense is a significant component of our operating expenses. We recognize the cost of stock-based awards granted to employees, directors, and consultants, including stock options and restricted stock units ("RSUs"), based on the estimated grant-date fair value. The determination of the fair value of these awards, particularly stock options, requires management to make critical estimates and assumptions. These estimates and assumptions include the expected volatility of our stock price, the expected term of the awards, and the risk-free interest rate. We have elected to account for forfeitures as they occur rather than estimating a forfeiture rate at the time of grant.

Valuation Inputs:

●

Stock Options: The fair value of stock options is determined using the Black-Scholes-Merton option-pricing model, which requires inputs that are subjective and may significantly impact the resulting valuation. These inputs include the expected volatility, which is estimated based on the historical volatility of a peer group of publicly traded companies due to our limited trading history; and the expected term, which is calculated using the "simplified method." Prior to our direct listing in October 2025, the fair value of the underlying common stock was determined by active selling prices of our Class B Common Stock in our Regulation A and Regulation D offerings; subsequent to the listing, it is based on the closing market price of our Class B Common Stock.

●

RSUs: The fair value of RSUs is determined based on the closing market price of our Class B Common Stock on the date of grant. While this valuation requires fewer subjective estimates than stock options, the timing of expense recognition remains dependent on the satisfaction of the requisite service periods.

●

Option Modifications: We have a history of modifying the terms of stock options, including adjustments to exercise prices, vesting schedules, and other contractual provisions. These modifications can result in significant changes to the fair value of the awards and, therefore, have a substantial impact on the related stock-based compensation expense recognized in the period of modification. The determination of the incremental fair value resulting from these modifications requires complex calculations and assumptions, and any changes in these assumptions could materially affect the recognized expense.

JOBS Act Accounting Election

We meet the definition of an emerging growth company under the JOBS Act, which permits us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We have elected to use this extended transition period until we are no longer an emerging growth company or until we affirmatively and irrevocably opt out of the extended transition period. As a result, our consolidated financial statements may not be comparable to companies that comply with new or revised accounting pronouncements applicable to public companies.

Recent Accounting Pronouncements

See Note 2 of the notes to our unaudited condensed consolidated financial statements included elsewhere in this annual report for recently issued accounting pronouncements not yet adopted as of the date of this annual report.