Quarterly Report for Quarter Ending June 30, 2026 (Form 10-Q)

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

Overview

Our mission is to power the future of sustainable transportation by creating stylish, innovative and cost-efficient premium electric vehicles centered around differentiated designs and solutions tailored for every lifestyle. We are a technology innovator and a developer of premium electric vehicles ("EVs"). We have developed several proprietary technologies which are the building blocks of the Thunder Power family of EVs.

We focus on the development and manufacturing of premium EVs with differentiated designs and solutions for every lifestyle. Four models are currently featured in our phased development and roll-out strategy: the limited-edition coupe, (the "Coupe" or "488"), long-range Sedan (the "Sedan"), compact city car (the "City Car")and the long-range SUV (the "SUV", and together with the Coupe, Sedan, and City Car, the "Models"). We intend to target not just consumers who desire EVs, but consumers who desire practical and innovative EVs, as well as consumers who seek a luxury experience. We believe that by leveraging our modular integration concept starting with the modularized chassis system patented by us, we are creating a family of EVs (excluding the City Car) which share common parts and modules which we believe require lower investment and reduced design and production time as opposed to those of traditional automotive manufacturers. We intend to first create the initial design for our Sedan and then scale upwards to create the Coupe and scale downward to create the City Car. In time, we expect to round off our offering with the SUV.

We expect to offer to the market eco-friendly, premium EVs positioned to earn market share based on design, quality, comfort, range, and price. Among other advantages, we believe that our proprietary technologies will significantly increase the driving range for our EVs while allowing for faster recharging and lower costs of ownership.

Recent Developments

On December 19, 2024, the Company entered into a Share Exchange Agreement (the "Agreement") with certain shareholders (the "EPT Shareholders") of Electric Power Technology Limited, a Taiwan corporation ("EPT"). On January 27, 2025, the Company and the EPT Shareholders have executed an amendment to the Agreement and certain subsequent amendments (the "Amendments", and together with the Agreement, the "Amended Agreements"). Pursuant to the terms of the Amended Agreements, a portion of the EPT Shareholders are expected to exchange a total of 26,783,838 ordinary shares in EPT for an aggregate of 31,872,768 shares of newly issued Common Stock of the Company in weeks. As of June 30, 2026, an aggregate of 1,715,000 shares of EPT are yet to be transferred to the Company for 2,040,850 shares of the Company. The Company expected to close the transfer in a few months. On June 26, 2025, the Company held its 2025 Annual Meeting of Stockholders (the "Annual Meeting"). At the Annual Meeting, the shareholders voted to approve, among others, the Transaction.

On April 9, 2026, the Company issued an aggregate of 31,872,768 shares of its common stock, par value $0.0001 per share (the "Shares"), to six eligible shareholders of EPT, in exchange for an aggregate of 26,783,838 ordinary shares of EPT, representing 31.68% equity interest in EPT. The Company assigned board members to EPT and exercised significant influence over EPT, therefore the Company used equity method to measure the investment in EPT. As of June 30, 2026, the Company used equity method to account for the investment. The Company assessed indicators reflecting an other-than-temporary decline in fair value below the carrying value and did not provide impairment against the investment in EPT.

Under the terms of the exchange, the Company is entitled to nominate two of EPT's seven directors. The Company does not hold a majority of EPT's voting shares or board seats and does not have the power to direct EPT's operating and financial policies; however, through its board representation and 31.68% shareholding it has the ability to exercise significant influence over EPT. Accordingly, the Company accounts for the investment using the equity method and does not consolidate EPT. As of June 30, 2026, the carrying amount of the investment was approximately $5.7 million, which exceeded the Company's share of EPT's net assets of approximately $2.1 million. Management evaluated whether this excess indicated an other-than-temporary decline in the fair value of the investment, considering the short period between the April 9, 2026 acquisition date and the reporting date, the absence of significant adverse changes in EPT's business, management and operating environment since acquisition, and the fair value of EPT implied by the terms of the exchange. On that basis, management concluded that the decline was not other than temporary and no impairment was recorded. The Company continues to pursue the remaining share exchange arrangements involving EPT and is evaluating potential changes to EPT's governance arrangements that may result in the Company obtaining control over EPT in a future reporting period. Under the terms of the exchange, the Company is entitled to nominate two of EPT's seven directors. The Company does not hold a majority of EPT's voting shares or board seats and does not have the power to direct EPT's operating and financial policies; however, through its board representation and 31.68% shareholding it has the ability to exercise significant influence over EPT. Accordingly, the Company accounts for the investment using the equity method and does not consolidate EPT. As of June 30, 2026, the carrying amount of the investment was approximately $5.7 million, which exceeded the Company's share of EPT's net assets of approximately $2.1 million. Management evaluated whether this excess indicated an other-than-temporary decline in the fair value of the investment, considering the short period between the April 9, 2026 acquisition date and the reporting date, the absence of significant adverse changes in EPT's business, management and operating environment since acquisition, and the fair value of the investment, considering the short period between the April 9, 2026 acquisition date and the reporting date, the absence of significant adverse changes in EPT's business, management and operating environment since acquisition, and the fair value of EPT implied by the terms of the exchange. On that basis, management concluded that the decline was not other than temporary and no impairment was recorded. Management will continue to monitor the investment for indicators of impairment.

The Company assesses the equity method investment in EPT for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable, and the Company recognizes an impairment loss when a decline in fair value below the carrying amount is determined to be other than temporary. As of June 30, 2026, the carrying amount of the investment of approximately $5.7 million exceeded the Company's share of EPT's net assets of approximately $2.1 million. In assessing whether this indicated an other-than-temporary decline, the Company considered the proximity of the April 2026 acquisition date to the reporting date, the absence of significant adverse changes in EPT's business, management and macroeconomic environment since acquisition, and the fair value of EPT implied by the terms of the share exchange. Estimating the fair value of EPT requires significant judgment, including assumptions about EPT's future operating results and the value of the Company's shares held by EPT. The Company concluded that no impairment was required as of June 30, 2026; a different conclusion could result in a material impairment charge in a future period.

Key Factors Affecting Our Results of Operations

We believe that our performance and future success will depend on several Company specific factors, including those key factors discussed below and other factors in the section under the heading "Risk Factors" of the annual report on Form 10-K filed with the SEC on April 7, 2026.

Our ability to evaluate our business and future prospects

We are an early-stage company with an early stage/limited operating history, operating in a rapidly evolving and highly regulated market. Furthermore, we have not released any commercially available vehicles, and we have no experience manufacturing or selling a commercial product on a scale. Because we have not generated revenue from the sale of EVs, and because of the capital-intensive nature of our business, we expect to continue to incur substantial operating losses for the foreseeable future.

Our ability to develop different models of vehicles

We currently have four models featured in our phased development strategy and our revenue in the foreseeable future will be significantly dependent on a limited number of models. Although we have other vehicle models on our product roadmap, we currently do not expect to introduce another vehicle model until at least 2030. We expect to rely on sales from the Coupe, the Sedan, the City Car, and the SUV, among other sources of financing, for the capital that will be required to develop and commercialize future models. To the extent that production of the models is delayed, reduced or is not well-received by the market for any reason, our revenue and cash flow would be adversely affected, we may need to seek additional financing earlier than we expect, and such financing may not be available to us on commercially reasonable terms, or at all.

Our ability to control the substantial costs associated with our operations

We will require significant capital to develop and grow our business. We have incurred and expect to continue to incur significant expenses as we build our brand and develop and market our vehicles; expenses relating to developing and manufacturing our vehicles, tooling and expanding our manufacturing facilities; research and development expenses (including expenses related to the development of the current and future products), raw material procurement costs; and general and administrative expenses as we scale our operations. As a company, we do not have historical experience forecasting and budgeting for any of these expenses, and these expenses could be significantly higher than we currently anticipate. In addition, any disruption to our manufacturing operations, obtaining necessary equipment or supplies, expansion of our manufacturing facilities, or the procurement of permits and licenses relating to our expected manufacturing, sales and distribution model could significantly increase our expenses.

Our ability to develop a third-party retail product distribution and a full-service network

We anticipate utilizing third-party retail product distribution and full-service networks to execute on such plans in all markets. If our use of third-party retail production and full-service networks is not effective, our results of operations and financial conditions could be adversely affected.

Key Components of Results of Operations

The following section presents the key components of our results of operations by the nature of corresponding operating activities for the periods indicated. You should read this financial information in conjunction with those presented elsewhere in this report including our unaudited condensed consolidated financial statements and notes to our financial statements.

Revenues and Cost of revenues

We have not generated revenue from the sale of EVs. No cost of revenues incurred during the period.

General and administrative expenses

General and administrative expenses primarily consist of personnel salary and welfare expenses and professional and consulting expenses. Over the next several years, we anticipate an increase in our general and administrative expenses related to professional and consulting expenses associated with uplisting to NASDAQ and acquisition of other income-generating companies.

Taxation

The Company was incorporated in the State of Delaware and, effective June 23, 2026, reincorporated in the State of Nevada. For the period prior to the reincorporation, the Company was required to pay either income tax or franchise tax, whichever was applicable, to the State of Delaware on an annual basis. The Company is also registered as a foreign corporation with the State of New Jersey Department of the Treasury. The Company would be subject to New Jersey state tax laws if it had operation in the State of New Jersey.

On August 16, 2022, the Inflation Reduction Act of 2022 (the "IRA") was signed into federal law. The IRA provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases (including redemptions) of stock by publicly traded domestic (i.e., U.S.) corporations and certain domestic subsidiaries of publicly traded foreign corporations. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of the Treasury (the "Treasury") has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The IRA applies only to repurchases that occur after December 31, 2022. In connection with share redemptions that occurred in June 2024, the Company initially recorded an excise tax liability of $913,742 under IRA. During the year ended December 31, 2025, the Company reassessed the estimated excise tax obligation based on additional share issuances during the period, which reduced the Company's net excise tax obligation under the IRA. Accordingly, the Company reduced the excise tax liability from $913,742 to $502,251. No additional adjustments were recorded during the three and six months ended June 30, 2026.

Our operating subsidiary, TP NEV, is incorporated in the BVI and is not subject to tax on income or capital gains.

TPAI-HK is incorporated in Hong Kong and is subject to Hong Kong Profits Tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Hong Kong tax laws. The applicable tax rate for the first HKD$2 million of assessable profits is 8.25% and assessable profits above HKD$2 million will continue to be subject to the rate of 16.5% for corporations in Hong Kong.

TPAI-TW is incorporated in Taiwan and is subject to Taiwan corporate income tax on the taxable income as reported in its statutory financial statements adjusted in accordance with relevant Taiwan tax laws. The applicable tax rate for the first TWD120,000 of assessable profits is exempt from tax and assessable profits above TWD120,000 (approximately $3,800) will be subject to the rate of 20% for resident companies in Taiwan.

For the three months ended June 30, 2026 and 2025

The following table sets forth a summary of our results of operations for the three months ended June 30, 2026 and 2025. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

		For three months ended June 30,
		2026				2025
Revenues		$	-			$	-
Operating expenses
General and administrative expenses			(280,920	)			(454,805	)
Total operating expenses			(280,920	)			(454,805	)
Other income (expenses)
Share of equity loss			(81,004	)			-
Interest expenses, net			(69,894	)			(48,248	)
Other income (expenses), net			125				(450	)
Foreign currency exchange income (loss)			269				-
Total other (expenses) income, net			(150,504	)			(48,698	)
Loss before income taxes			(431,424	)			(503,503	)
Income tax expenses			-				-
Net loss		$	(431,424	)		$	(503,503	)

General and administrative expenses. For the three months ended June 30, 2026 and 2025, our general and administrative expenses were approximately $0.3 million and $0.5 million, respectively. The decrease in general and administrative expenses was primarily due to a decrease of approximately $0.1 million in professional and consulting expenses and a decrease of $0.1 million in insurance expenses. As the Company has not commenced to generate revenue, management has implemented cost-control measures to reduce operating expenses.

Share of equity loss. In April 2026, we acquired 31.68% equity interest in EPT over which we exercised significant influence and used equity method to account for the investment. For the three months ended June 30, 2026, EPT reported net loss of approximately $0.3 million and we recorded share of equity loss of approximately $0.1 million.

Net loss. As a result of the foregoing, we incurred a net loss of approximately $0.4 million and $0.5 million for the three months ended June 30, 2026 and 2025, respectively.

For the six months ended June 30, 2026 and 2025

The following table sets forth a summary of our results of operations for the six months ended June 30, 2026 and 2025. This information should be read together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this report. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

		For six months ended June 30,
		2026				2025
Revenues		$	-			$	-
Operating expenses
General and administrative expenses			(711,680	)			(1,172,821	)
Total operating expenses			(711,680	)			(1,172,821	)
Other income (expenses)
Share of equity loss			(81,004	)			-
Interest (expenses) income, net			(132,228	)			(84,888
Other income (expenses), net			(297	)			(702	)
Foreign currency exchange income (loss)			134				5
Total other (expenses) income, net			(213,395	)			(85,585	)
Loss before income taxes			(925,075	)			(1,258,406	)
Income tax expenses			-				-
Net loss		$	(925,075	)			(1,258,406	)

General and administrative expenses. For the six months ended June 30, 2026 and 2025, our general and administrative expenses were approximately $0.7 million and $1.2 million, respectively. The decrease in general and administrative expenses was primarily due to a decrease of approximately $0.4 million in professional and consulting expenses and a decrease of $0.1 million in insurance expenses. As the Company has not commenced to generate revenue, management has implemented cost-control measures to reduce operating expenses.

Share of equity loss. In April 2026, we acquired 31.68% equity interest in EPT over which we exercised significant influence and used equity method to account for the investment. For the six months ended June 30, 2026, EPT reported net loss of approximately $0.3 million and we recorded share of equity loss of approximately $0.1 million.

Net loss. As a result of the foregoing, we incurred a net loss of approximately $0.9 million and $1.3 million for the six months ended June 30, 2026 and 2025, respectively.

Liquidity and Capital Resources

To date, we have financed our operating activities primarily through cash raised in loans from related parties (see "Note 11 - Related Party Transactions and Balances"), and equity financing including private placements.

As of June 30, 2026, the Company had cash of $11,649 and has incurred recurring losses from operations since inception. The Company reported a net loss of approximately $0.9 million for the six months ended June 30, 2026 and has an accumulated deficit of approximately $40.0 million. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The Company faces several significant uncertainties, including:

●

Operating losses and liquidity constraints - The Company has not generated sufficient revenues to support its operations and has limited cash resources available to meet its obligations as they become due.

●

Prepaid Forward Contract - The Company has recorded a prepaid balance related to a forward purchase agreement as a current asset. The realization of this balance is dependent on the counterparty's sales of the Company's shares and is subject to significant uncertainty, including market conditions and the Company's listing status. The arrangement is not expected to generate near-term cash inflows and may not be readily realizable in cash. Accordingly, this balance does not provide immediate liquidity to support the Company's operations. The Company continues to classify the prepaid balance as a current asset based on management's expectation that the balance will be realized within twelve months from June 30, 2026; however, the timing of realization remains subject to the uncertainties described above.

●

Nasdaq delisting - Trading of the Company's common stock on the Nasdaq Stock Market was suspended on April 21, 2025, and the Company's securities were subsequently delisted on July 31, 2025. The Company's securities are currently quoted in the over-the-counter market. The delisting significantly limits the Company's ability to access public capital markets and creates uncertainty regarding its ability to obtain future financing.

●

Dependence on principal shareholder - The Company has historically relied on financial support from its principal shareholder and related parties to fund operations. During the six months ended June 30, 2026, the Company received additional related-party financing of approximately $0.5 million through promissory notes from the principal shareholder. Although management obtained a written financial support letter from the principal shareholder indicating a present intention to continue providing financial support to the Company for at least twelve months following the issuance date of these unaudited condensed consolidated interim financial statements, such support remains subject to the shareholder's financial ability to provide funding. In addition, ongoing legal proceedings involving the principal shareholder create uncertainty regarding the availability of future financial support. Security and stock pledge arrangements - On May 29, 2026, the Company and its subsidiary entered into a Security Agreement and Stock Pledge Agreement with related-party lenders Mr. Wellen Sham and Ms. Ling Houng Sham. Under these agreements, the Company granted a first-priority security interest over substantially all of its assets, including the prepayment of approximately $13.1 million under the Forward Purchase Agreement, and its subsidiary pledged 100% of the issued share capital of TP NEV. The arrangements secure the Company's outstanding related-party obligations. In the event of an uncured default, the secured parties may exercise remedies against the collateral. Accordingly, these arrangements expose the Company to additional liquidity risk in the event of default. The security and pledge arrangements are supported by the related-party analysis, which documents that the security package covers substantially all property of the Company and that 100% of TP NEV was pledged as collateral for the related-party obligations. The Company has historically relied on financial support from its principal shareholder. Due to ongoing legal proceedings involving the shareholder, there is significant uncertainty regarding the shareholder's ability and willingness to continue providing financial support.

Management has undertaken certain actions intended to improve liquidity and support ongoing operations, including seeking additional financing through equity or debt arrangements, obtaining continued support from related parties, implementing cost reduction initiatives, and pursuing strategic transactions and business opportunities. On May 29, 2026, the Company and Mr. Wellen Sham executed allonges extending the maturity dates of certain promissory notes payable to Mr. Sham. As of June 30, 2026, six of these notes, with aggregate principal amounts of $0.6 million, had amended maturity dates ranging from July 25, 2027 through April 28, 2028 and were classified as amounts due to related parties, non-current. Accordingly, the loans of $0.6 million were classified as amount due to related parties, non-current, as of June 30, 2026. The borrowing bears an interest rate of 8%. On April 9, 2026, the Company completed a portion of the amended Share Exchange Agreement with Electric Power Technology Limited ("EPT"), resulting in the Company acquiring approximately 31.68% of EPT. The investment is accounted for under the equity method. The Company continues to pursue the remaining share exchange arrangements involving EPT and is evaluating potential changes to EPT's governance arrangements that may result in the Company obtaining control over EPT in a future reporting period. The Company is also pursuing strategic transactions, including a proposed acquisition; however, such transaction remains subject to completion and other uncertainties, and there can be no assurance that such transaction will improve the Company's liquidity position.

However, there can be no assurance that these plans will be successfully implemented or will be sufficient to alleviate the substantial doubt regarding the Company's ability to continue as a going concern, including the Company's ability to realize value from the forward purchase arrangement.

Accordingly, the Company's ability to continue as a going concern is dependent upon its ability to obtain additional financing and generate sufficient cash flows from operations. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

Cash Flows

The following table sets forth a summary of our cash flows for the periods presented:

		For six months ended June 30,
		2026				2025
Net cash used in operating activities		$	(521,475	)		$	(1,005,688	)
Net cash used in investing activities			-				(1,400	)
Net cash provided by financing activities			522,000				1,051,642
Effect of exchange rates on cash			1,031				284
Net increase in cash			1,556				44,838
Cash at beginning of period			10,093				52,616
Cash at end of period		$	11,649			$	97,454

Operating Activities

Net cash used in operating activities for the six months ended June 30, 2026 was approximately $0.5 million, primarily attributable to net loss of approximately $0.9 million, adjusted for non-cash item of share of equity loss of approximately $0.1 million, and for changes in operating assets and liabilities, including an increase of approximately $0.2 million due to related parties and an increase of approximately $0.2 million in other payable and accrued expenses.

Net cash used in operating activities for the six months ended June 30, 2025 was approximately $1.0 million, primarily attributable to net loss of approximately $1.3 million, adjusted for an increase of approximately $0.1 million in due to related parties and an increase of approximately $0.1 million in other payable and accrued expenses.

Investing activities

For the six months ended June 30, 2026, we did not report cash provided by or used in investing activities.

For the six months ended June 30, 2025, we reported cash used in investing activities of $1,400, which was used in purchase of short-term investments.

Financing Activities

For the six months ended June 30, 2026, we reported cash provided by financing activities of approximately $0.5 million, which was primarily provided by borrowings of approximately $0.5 million from our controlling shareholder.

For the six months ended June 30, 2025, we reported cash provided by financing activities of approximately $1.1 million, which were primarily provided by borrowings of approximately $1.1 million from our controlling shareholder and his family member.

Contingent Consideration

On June 21, 2024, the Company entered into an escrow agreement (the "Escrow Agreement") with Mr. Wellen Sham, Yuanmei Ma, and CST, pursuant to which, among other things, (1) CST will act as the escrow agent under the Escrow Agreement; (2) at the closing of the Business Combination, the Company deposited with CST 20,000,000 shares of common stock as Earnout Shares, to be held by CST in a segregated escrow account ("Earnout Escrow Account"); and (3) if any portion of the Earnout Shares becomes eligible for release in accordance with the terms of the Escrow Agreement, CST will release the applicable portion of the Earnout Shares from the Earnout Escrow Account in accordance with the terms of the Escrow Agreement and disburse to each eligible recipient the applicable portion of Earnout Shares therefrom.

The Earnout Shares shall be released or otherwise forfeited as follows: (i) an aggregate of 5,000,000 Earnout Shares (the "Tranche 1 Earnout Shares") will be vested, if and only if, on the occurrence that the amount of sales/revenues of the Company for any of the fiscal years (such fiscal year is referred to as "Tranche 1 Fiscal Year") ending from December 31, 2023 to December 31, 2025 is no less than $42,200,000 as evidenced by the audited financial statements of the Company prepared in accordance with U.S. GAAP for the Tranche 1 Fiscal Year that is contained in an annual report on Form 10-K filed by the Company with the SEC (the "Tranche 1 Annual Report"); (ii) an aggregate of 15,000,000 Earnout Shares (the "Tranche 2 Earnout Shares") will be vested, if and only if, on the occurrence that the amount of sales/revenues of the Company for any of the fiscal years (such fiscal year is referred to as "Tranche 2 Fiscal Year") ending from December 31, 2023 to December 31, 2026 is no less than $415,000,000 as evidenced by the audited financial statements of the Company prepared in accordance with U.S. GAAP for the Tranche 2 Fiscal Year that is contained in an annual report on Form 10-K filed by the Company with the SEC (the "Tranche 2 Annual Report"); (iii) Within five (5) business days following the determination that all or any portion of the Tranche 1 Earnout Shares or Tranche 2 Earnout Shares become vested, the Company, together with Mr. Sham and Ms. Ma, shall instruct the Escrow Agent to irrevocably and unconditionally release the vested tranche of Earnout Shares from the Escrow Account in accordance with the terms of the Escrow Agreement to certain of the Company's shareholders. Each tranche of Earnout Shares may be released only once, but more than one tranche can be released in any year in accordance with the Escrow Agreement.

The Earnout Shares were issued in connection with the Business Combination and are classified as equity instruments. The Earnout Shares were measured at their grant-date fair value on June 21, 2024 and recorded within additional paid-in capital. Because the Earnout Shares are classified as equity instruments, they are not subsequently remeasured. For the years ended December 31, 2025 and 2024, the revenue performance conditions required for vesting were not achieved. Accordingly, Tranche 1 Earnout Shares were forfeited and no Earnout Shares were released from escrow as of June 30, 2026. As of June 30, 2026, the 15,000,000 Tranche 2 Earnout Shares were the only Earnout Shares that remained contingent and could vest, with fiscal year 2026 being the last year in which they may vest.

Off-Balance Sheet Arrangements

On May 29, 2026, we granted Mr. and Ms. Sham a first-priority security interest over substantially all of our assets, including the prepayment of approximately $13.1 million under the Forward Purchase Agreement, and pledged 100% of the shares of TP NEV.

On April 9, 2026, we issued an aggregate of 31,872,768 shares of our common stock, par value $0.0001 per share, to six eligible shareholders of EPT in exchange for an aggregate of 26,783,838 ordinary shares of EPT, representing a 31.68% ownership interest in EPT. At the same time, EPT owned 10,034,898 shares of our common stock, representing a 9.78% ownership interest in us.

Other than the above, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any third parties. In addition, we have not entered into any derivative contracts that are indexed to the shares of our common stock and classified as shareholder's equity or that are not reflected in our unaudited condensed consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in product development services with us.

Research and Development

We have incurred minimal research and development expenses for the three and six months ended June 30, 2026 and 2025. The research and development expenses were recorded in "general and administrative expenses" in the unaudited condensed consolidated statements of operations and comprehensive loss.

Critical Accounting Estimates

We prepare our financial statements in accordance with U.S. GAAP, which requires our management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities on the date of the unaudited condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. We continually evaluate these judgments, estimates and assumptions based on our own historical experience, knowledge and assessment of current business and other conditions, our expectations regarding the future based on available information and various assumptions that we believe to be reasonable, which together form our basis for making judgments about matters that are not readily apparent from other sources. Since the use of estimates is an integral component of the financial reporting process, our actual results could differ from those estimates. Some of our accounting policies require a higher degree of judgment than others in their application.

We consider an accounting estimate to be critical if: (i) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made, and (ii) changes in the estimate that are reasonably likely to occur from period to period or use of different estimates that we reasonably could have used in the current period, would have a material impact on our financial condition or results of operations.

When reading our unaudited condensed consolidated financial statements, you should consider our selection of critical accounting policies, the judgment and other uncertainties affecting the application of such policies and the sensitivity of reported results to changes in conditions and assumptions. See Note 2 - Summary of Significant Accounting Policies to our unaudited condensed consolidated financial statements for the disclosure of these accounting policies.

While management believes its judgments, estimates and assumptions are reasonable, they are based on information presently available and actual results may differ significantly from those estimates under different assumptions and conditions. We believe that the following critical accounting estimates involve the most significant judgments used in the preparation of our financial statements.

(i)

Allowance for expected credit losses of other receivable

We assessed the collectability by reviewing other receivable on an individual basis in accordance with ASC Topic 326, Credit Losses ("ASC 326"). Before entering into a Merger Agreement with FLFV, we entered into a letter of intent with Aetherium Acquisition Corp. ("GMFI") to explore a potential business combination. We paid extension loans in an amount of $300,000 and working capital loans in an amount of $15,000 on behalf of GMFI. In March 2024, the letter of intent with GMFI was terminated.

As of June 30, 2026 and December 31, 2025, we assessed the payment intention and payment ability of GMFI and provided full allowance for credit losses against the balance due to l remote collection from GMFI.

(ii)

Allowance for prepaid expenses for Forward Purchase Contract

As of June 30, 2026 and December 31, 2025, we assessed the recoverability of prepaid expenses for forward purchase contract which will be realized as the counterparty sells our shares.

The evaluation of impairment requires significant judgment, particularly in assessing whether the prepaid balance will be fully recovered through future share transactions. Key factors considered include: (a) our current and expected share price relative to the reference/reset price under the agreement, (b) the enforceability of the Forward Purchase Contract, (c) the counterparty's performance, including whether the counterparty continues to sell shares in accordance with the contract, (d) the volume of remaining shares held and expected pace of future sales, and (e) overall market conditions and liquidity of the Company's shares.

Given that recovery of the prepaid amount is dependent on future share sales and market prices, there is inherent uncertainty in the timing and amount of recovery. As of June 30, 2026 and December 31, 2025, we did not provide allowance against prepaid expenses for Forward Purchase Contract.

(iii)

Classification of prepaid expenses for Forward Purchase Contract

Pursuant to the agreement between us and the counterparty, we made an upfront payment to facilitate a forward share transaction whereby the counterparty acquires and subsequently sells our shares in the market. Our economic benefit is realized through the sales of these shares, with settlement reflected through equity (additional paid-in capital) rather than cash flows.

The arrangement does not meet the definition of a derivative or financial asset in accordance with ASC 815, rather the upfront payment represents a prepaid asset under ASC 340, providing future economic benefit as the underlying shares are sold. Accordingly, the upfront payment is recognized as a prepaid expense and will be derecognized as the related share transactions occur, with any differences recognized in additional paid-in capital in accordance with ASC 505.

(iv)

Classification of prepaid expenses for Forward Purchase Contract as a current asset

We also applied significant judgment in classifying the prepaid balance of approximately $13.1 million as a current asset. The balance has not changed since December 31, 2025 as the counterparty did not sell any of our shares during the six months ended June 30, 2026. Management nevertheless expects the underlying share sales and related settlement to occur within 12 months of the reporting date considering the negotiation with the counterparty who agreed to resume sales within 12 months of the reporting date. Settlement of the prepaid balance will be reflected through equity rather than cash, and it is therefore not a source of liquidity for our operations; see 'Liquidity and Capital Resources - Going Concern'. On May 29, 2026, the prepaid balance was pledged to Mr. and Ms. Sham as collateral for the related-party notes under the security agreement described above. If the expected share sales do not occur within 12 months, the balance would be reclassified as a non-current asset.

(v)

Accrued legal expenses

We exercised significant judgment in estimating accrued legal expenses when invoices were disputed and final settlement had not been reached. Accrued legal expenses were included in "other payables and accrued expenses" on the condensed consolidated balance sheets.

As of June 30, 2026, we recorded an accrual of approximately $0.3 million related to legal services provided by Brown Rudnick, which is included in other payable and accrued expenses. The original invoices totaled approximately $0.7 million, which management disputed due to delayed filings and incomplete services. No settlement agreement had been finalized as of the reporting date. The ultimate amount payable may differ from the amount accrued.

We based our estimation on actual services rendered, which represents the best assessment of the probable obligation under ASC 450. Given the range of possible outcomes and ongoing negotiations, the ultimate settlement amount may differ from the amount accrued.

(vi)

Underwriter fee payable due to D. Boral Capital LLC

D. Boral Capital LLC commenced an action against the Company in the Supreme Court of the State of New York seeking approximately $1.3 million alleged to be due under a Satisfaction and Discharge Agreement, by way of a motion for summary judgment in lieu of complaint. We did not file an opposition, and the motion has been submitted to the court for decision. The amount of $1.3 million was recorded in the account of "underwriter fee payable" upon the consummation of IPO. No additional amount has been accrued for interest or additional penalties relating to the action, which cannot presently be estimated.

(vii)

Impairment of equity-method investment

As of June 30, 2026, the carrying amount of the investment of approximately $5.7 million exceeded the Company's share of EPT's net assets of approximately $2.1 million. In assessing whether this indicated an other-than-temporary decline, the Company considered the proximity of the April 2026 acquisition date to the reporting date, the absence of significant adverse changes in EPT's business, management and macroeconomic environment since acquisition, and the fair value of EPT implied by the terms of the share exchange. Estimating the fair value of EPT requires significant judgment, including assumptions about EPT's future operating results and the value of the Company's shares held by EPT. The Company concluded that no impairment was required as of June 30, 2026; a different conclusion could result in a material impairment charge in a future period.

Recently Issued Accounting Pronouncements

The Company has evaluated all recently issued accounting pronouncements and believes such pronouncements do not have a material effect on the Company's unaudited condensed consolidated financial statements. A list of recently issued accounting pronouncements that are relevant to us is included in the notes to our unaudited condensed consolidated financial statements included elsewhere in this report (see "Note 2 - Summary of Significant Accounting Policies").