Sono Group N.V.

DECEMBER 31, 2024 AND 2023

NOTE1 - BUSINESS AND BUSINESS PRESENTATION

Business

Sono Group N.V. (“Sono N.V.” or the “Company”) is registered in the business register (Netherlands Chamber of Commerce) and its corporate seat is in Amsterdam. In* November 2021,the Company successfully completed an initial public offering (IPO) and became listed on The Nasdaq Global Market (“Nasdaq Global Market”). The Company’s ordinary shares commenced trading on the Nasdaq Global Market under the ticker symbol “SEV” on November 17, 2021.On July 12, 2023and August 28, 2023,the Company received notices from Nasdaq Global Market stating that the staff of the Listing Qualifications Department (the “Staff”) had determined that the Company’s securities will be delisted from Nasdaq in accordance with Nasdaq’s Listing Rules and notifying the Company of the suspension in trading of its ordinary shares as of the opening of business on July 21, 2023.On December 11, 2023,the Company received a decision of the Nasdaq Hearings Panel (the “Panel”) advising the Company that the Panel has determined to delist the Company’s ordinary shares from Nasdaq. On February 15, 2024,Nasdaq filed a Form25* Notification of Delisting with the U.S. Securities and Exchange Commission (the “SEC”) to complete the delisting. On* July 2, 2024,*the quoting of the Company’s ordinary shares commenced on OTCQB under the ticker symbol “SEVCF”.

The Company has its management in the United States of America since* January 31, 2024.Prior to this date, the Company’s management was based in Germany. The business address of the Company is Waldmeisterstraße93,* 80935 Munich, Germany (trade register number:80683568). Sono N.V.’s sole and wholly-owned subsidiary, Sono Motors GmbH (“Sono Motors” or the “Subsidiary”), is registered in the commercial register (Handelsregister) at the local court (Amtsgericht) of Munich, Germany, under HRB224131. Sono Motors’ registered headquarters is Waldmeisterstraße93, 80935 Munich, Germany. Sono N.V. is the ultimate parent of the Group. Hereinafter, Sono N.V. and its consolidated subsidiary collectively are referred to as “Sono Group”, or the “Group”, “Management”, “we” and “us”.

Sono Group intended to develop and manufacture electric vehicles with integrated solar panels (the “Sion passenger car program”). In addition, it planned to license its solar technology to other Original Equipment Manufacturers (“OEMs”). However, on* February 24, 2023,Sono Group announced the decision to terminate the Sion passenger car program and to pivot the business model to exclusively retrofitting and integrating Sono Group’s solar technology ontothird* party vehicles due to lack of available funding. As a consequence, management decided to apply for the opening of the self-administration proceedings with respect to Sono N.V. and Sono Motors (the “Self-Administration Proceedings”) on* May 15, 2023.The Subsidiary withdrew its application for Preliminary Self-Administration Proceedings (as defined herein) on January 31, 2024,and the Subsidiary exited its Self-Administration Proceedings on February**29,* 2024. See “Note3 Liquidity and Going concern” for additional information.

These consolidated financial statements reflect all adjustments including normal recurring adjustments, which, in the opinion of management, are necessary to present fairly the financial position, results of operations and cash flows for the periods presented in accordance with the accounting principles generally accepted in the United States of America (“GAAP”).

On a consolidated basis, the Company’s operations are comprised of the parent company, Sono N.V. and its subsidiary, Sono Motors. All significant intercompany transactions and balances have been eliminated upon consolidation. In addition, certain amounts in the prior periods consolidated financial statements have been reclassified to conform to the current period presentation.

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NOTE2 – SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies applied in the presentation of the accompanying consolidated financial statements follows:

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") for annual financial reporting. All amounts referred to in the notes to the consolidated financial statements are presented in euros (EUR) and have been rounded to the nearest thousand, unless otherwise stated. Substantially all of the Company’s operations are conducted in EUR and the current reporting currency is the same as the functional currency.

At the end of thesecond quarter of2024, the Company determined that itno longer qualified as a foreign private issuer under the SEC rules. As a result, beginning* January 1, 2025,*the Company became subject to the reporting requirements applicable to U.S. domestic issuers. Accordingly, these consolidated financial statements have been prepared in accordance with U.S. GAAP, and the transition from International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”), has been applied retrospectively to all periods presented.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Significant estimates include assumptions about cash flow and fair value assumptions associated with measurements of convertible notes payable carried at fair value, valuation of inventory; the valuation and recognition of stock-based compensation expense; valuation allowance for deferred tax assets; and borrowing rate consideration for right-of-use (“ROU”) lease assets including related lease liability and useful life of fixed assets.

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Cash

For financial statement purposes, the Company considers all cash in the bank to be cash.

Leases

Upon transition under ASU2016-02, the Company elected the suite of practical expedients as a package applied to all of its leases, including (i)not reassessing whether any expired or existing contracts are or contain leases, (ii)not reassessing the lease classification for any expired or existing leases, and (iii)not reassessing initial direct costs for any existing leases. For new leases, the Company will determine if an arrangement is or contains a lease at inception. Leases are included as ROU assets within other assets and ROU liabilities within accrued expenses and other liabilities and within other long-term liabilities on the Company’s consolidated balance sheets. Additionally, the Company elected the exemption available under ASC842-20-25-2 for short term lease agreements and recognizes lease payments on a straight line basis.

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company’s leases donot provide an implicit rate. The Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term. See Note8 for more complete details on balances as of the reporting periods presented herein.

Inventory

Inventory consisting of stock used in development, is stated at the lower of cost or net realizable value. Cost is determined by thefirst-in,first-out method. Stock counts are taken routinely and obsolete, outdated inventory is directly charged off to cost of goods sold.

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Concentrations of Credit Risk

The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. Generally, the Company’s cash and cash equivalents are in checking accounts.

Property and Equipment

Property and equipment are stated at cost. When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts and the net difference less any amount realized from disposition, is reflected in earnings. For consolidated financial statement purposes, property and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 5 to 7 years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.

The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value* may**not* be recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value.

Fair Value of Assets and Liabilities

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market in an orderly transaction between market participants. In determining fair value, the accounting standards have established athree-level hierarchy that distinguishes between (i) market data obtained or developed from independent sources (i.e., observable data inputs) and (ii) a reporting entity’s own data and assumptions that market participants would use in pricing an asset or liability (i.e., unobservable data inputs). Financial assets and financial liabilities measured and reported at fair value are classified inone of the following categories, in order of priority of observability and objectivity of pricing inputs:

● Level1 – Fair value based on quoted prices in active markets for identical assets or liabilities;

● Level2 – Fair value based on significant directly observable data (other than Level1 quoted prices) or significant indirectly observable data through corroboration with observable market data. Inputs would normally be (i) quoted prices in active markets for similar assets or liabilities, (ii) quoted prices in inactive markets for identical or similar assets or liabilities or (iii) information derived from or corroborated by observable market data;

● Level3 – Fair value based on prices or valuation techniques that require significant unobservable data inputs. Inputs would normally be a reporting entity’s own data and judgments about assumptions that market participants would use in pricing the asset or liability.

The fair value measurement level for an asset or liability is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques should maximize the use of observable inputs and minimize the use of unobservable inputs.

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The Company utilizes a binomial lattice option pricing model to estimate the fair value of options, warrants, beneficial conversion features and other Level3 financial assets and liabilities. The Company believes that the binomial lattice model results in the best estimate of fair value because it embodies all of the requisite assumptions (including the underlying price, exercise price, term, volatility, and risk-free interest-rate) necessary to fairly value these instruments and, unlike less sophisticated models like the Black-Scholes model, it also accommodates assumptions regarding investor exercise behavior and other market conditions that market participants would likely consider in negotiating the transfer of such an instruments.

Stock-Based Compensation

The Company accounts for stock-based compensation to employees and nonemployees under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)718 “Compensation – Stock Compensation” using the fair value-based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period. This guidance establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that* may*be settled by the issuance of those equity instruments. The Company uses a binomial lattice pricing model to estimate the fair value of options and warrants granted.

Income Taxes

The Company follows Accounting Standards Codification subtopic740-10, Income Taxes (“ASC740-10”) for recording the provision for income taxes. Deferred tax assets and liabilities are computed based upon the difference between the financial statement and income tax basis of assets and liabilities using the enacted marginal tax rate applicable when the related asset or liability is expected to be realized or settled. Deferred income tax expenses or benefits are based on the changes in the asset or liability during each period. If available evidence suggests that it is more likely thannot that some portion or all of the deferred tax assets willnot be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely thannot to be realized. Future changes in such valuation allowance are included in the provision for deferred income taxes in the period of change. Deferred income taxes* mayarise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that arenot* related to an asset or liability are classified as current or non-current depending on the periods in which the temporary differences are expected to reverse and are considered immaterial. No income tax has been provisioned for the years ended* December 31, 2024and2023,* since the Company has sustained losses historically and has substantial net operating loss carryforwards for both periods. Due to the uncertainty of the utilization and recoverability of the loss carry-forwards and other deferred tax assets, management has determined a full valuation allowance for the deferred tax assets, since it is more likely thannot that the deferred tax assets willnot be realizable.

Recurring Fair Value Measurements

The carrying value of the Company’s financial assets and financial liabilities is their cost, which* may*differ from fair value. The carrying value of cash held as demand deposits, accounts payable, and accrued liabilities approximated their fair value.

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Net Income / (Loss) per Share

Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. During the year ended* December 31, 2023the Company reported a net loss and excluded all outstanding stock options and other dilutive securities from the calculation of diluted net loss per common share because inclusion of these securities would have been anti-dilutive. As of December 31, 2024*the Company reported net income and accordingly, included outstanding stock options and the shares indexed to the Convertible Notes Payable at Fair Value of 33,689 and 15,771,230 respectively.

Business Segments

The Company uses the “management approach” to identify its reportable segments. The management approach designates the internal organization used by management for making operating decisions and assessing performance as the basis for identifying the Company’s reportable segments. Using the management approach, the Company determined that it hasone operating segment, solar retrofitting of vehicles.

Correction of an Error in Research and Development Expenses

During the preparation of the financial statements for the year ended* December 31, 2024,the Company identified an error resulting from the misclassification of certain costs associated with research and development activities. Specifically, amounts incurred for services provided in fiscal year2023* were erroneously recorded within fiscal year2024.

The error has been corrected retrospectively by reclassifying the affected amounts to the proper fiscal year. As a result,2023 Research and Development expenses which had been reported at $15,783 was restated to $16,136 and Accounts payable and accrued expenses which had been reported at $55,798 was restated to $56,576. The accumulated deficit was restated as a result of the foregoing changes from $385,677 to $386,454.

Recently Issued Pronouncements

In* March 2024,the FASB issued ASUNo.* 2024-01, “Compensation—Stock Compensation (Topic718): Scope Applications of Profits Interests and Similar Awards” (“ASU2024-01”). ASU2024-01 adds an example to Topic718 which illustrates how to apply the scope guidance to determine whether profits interests and similar awards should be accounted for as share-based payment arrangements under Topic718 or under other U.S. GAAP. ASU2024-01 is effective for annual periods beginning after* December 15, 2025,although early adoption is permitted. Upon adoption, ASU2024*-01 isnot expected to have an impact on the Company’s consolidated financial statements.

In* March 2024,the FASB issued ASUNo* 2024-02, “Codification Improvements - Amendments to Remove References to the Concepts Statements” (“ASU2024-02”). ASU2024-02 removes references to various Concepts Statements. In most instances, the references are extraneous andnot required to understand or apply the guidance. ASU2024-02 is effective for fiscal years beginning after* December 15, 2024.Early adoption is permitted. ASU2024*-02 can be applied prospectively or retrospectively. Upon adoption, ASU2024-01 isnot expected to have an impact on the Company’s consolidated financial statements.

In* November 2024,the FASB issued ASUNo.* 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220-40).” This standard requires disclosure of specific information about costs and expenses and becomes effective* January 1, 2027.*We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

In* November 2024,the FASB issued ASU2024*-04, “Debt - Debt with Conversions and Other Options (Subtopic470-20): Induced Conversions of Convertible Debt Instruments” (“ASU2024-04”). ASU2024-04 clarifies the requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that arenot currently convertible, should be accounted for as an induced conversion. The requirements of ASU2024-04 are effective for the Company for fiscal years beginning after* December 15, 2025,*and interim periods within those periods. We are currently evaluating the impact of this standard on our consolidated financial statements and related disclosures.

Recently Adopted Pronouncements

In* November 2023,the FASB issued Accounting Standards Update2023*-07, Segment Reporting (Topic280): Improvements to Reportable Segment Disclosures (“ASU2023-07”), which requires public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC280, on an interim and annual basis. ASU2023-07 is effective for fiscal years beginning after* December 15, 2023,and for interim periods within fiscal years beginning after December 15, 2024,with early adoption permitted. The Company adopted this standard in the year ended December 31, 2024.The adoption didnot* have a material effect on the Company’s consolidated financial statements.

In* December 2023,the FASB issued Accounting Standards Update2023*-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures (“ASU2023-09”), which requires public entities, on an annual basis, to provide disclosure of specific categories in the rate reconciliation, as well as disclosure of income taxes paid disaggregated by jurisdiction. ASU2023-09 is effective for fiscal years beginning after* December 15, 2024,with early adoption permitted. The Company adopted this standard in the year ended December 31, 2024.The adoption didnot* have a material effect on the Company’s consolidated financial statements.

No other new accounting pronouncements were issued or became effective in the period that had, or are expected to have, a material impact on our consolidated Financial Statements.

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NOTE3 – LIQUIDITY AND GOING CONCERN ANALYSIS

Liquidity and Going Concern

During thesecond quarter of2014, the FASB issued ASUNo. 2014-15, Presentation of Financial Statements - Going Concern (Subtopic205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. This update provided U.S. GAAP guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and about related footnote disclosures. Under this standard, the Company is required to evaluate whether there is substantial doubt about its ability to continue as a going concern each reporting period, including interim periods. In evaluating the Company’s ability to continue as a going concern, management considered the conditions and events that could raise substantial doubt about the Company’s ability to continue as a going concern within12 months after the Company’s financial statements were issued (* April 1, 2026).Management considered the Company’s current financial condition and liquidity sources, including current funds available, forecasted future cash flows and the Company’s obligations due before April 1, 2026.*

The Company is subject to a number of risks, including uncertainty related to product development and generation of revenues and positive cash flow from its Sono Motors GmbH division and a dependence on outside sources of capital. The attainment of profitable operations is dependent on future events, including obtaining adequate financing to fulfill the Company’s growth and operating activities and generating a level of revenues adequate to support the Company’s cost structure.

As of* December 31, 2024,the Company had cash balances of EUR1.4 million, a working capital deficit of EUR22.9 million and an accumulated deficit of EUR(321.4) million. For the year ended December 31, 2024,the Company had net income of EUR65.0 million, which includes a gain from deconsolidation/reconsolidation. The Company used cash from operating activities of EUR(14.7) million. The Company expects to continue to incur small net losses and have net cash outflows for at least the next12* months, offset by cash flows from financing activities.

Management has evaluated the significance of the conditions described above in relation to the Company’s ability to meet its obligations and concluded that, if the additional funding commitment from YA II PN, Ltd (“Yorkville”) is achieved based upon the notification from Nasdaq of our uplisting to the Nasdaq Capital Market, which cannot be guaranteed, the Company will have sufficient funds to meet its obligations withinone year from the date of the consolidated financial statements. Based upon this uncertainty, Management has concluded that there is substantial doubt that the company will continue as a going concern.

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NOTE4 – DECONSOLIDATION DUE TO LOSS OF CONTROL

Gain from Deconsolidation and Extinguishment of Debt

At the close of* February 2023,Sono Group announced the decision to restructure the business model to focus exclusively on retrofitting and integrating solar technology intothird*-party vehicles going forward. At the same time, Sono Group discontinued the Sion passenger car program with immediate effect and terminated approximately 250 employees. Management ultimately concluded that Sono Motors was over-indebted and faced impending illiquidity (drohende Zahlungsunfähigkeit), with Sono N.V., in turn, becoming over-indebted and also facing impending illiquidity. Consequently, management decided to apply for the opening of self-administration proceedings with respect to Sono N.V. and Sono Motors with the goal of sustainably restructuring the business.

On* May 15, 2023,Sono N.V. applied to the insolvency court of Munich, Germany (the “Court”), to permit the opening of a self-administration proceeding (Eigenverwaltung) with respect to Sono Group N.V. pursuant to Section270* (b) of the German Insolvency Code (Insolvenzordnung). On the same day, Sono Motors GmbH applied to the same court to permit the opening of self-administration proceeding in the form of a protective shield proceeding (Schutzschirmverfahren) with respect to Sono Motors GmbH pursuant Section270 (d) of the German Insolvency Code. Sono Group N.V. conducts its business through its subsidiary Sono Motors GmbH, and is jointly referred to as “the Company”.

Self-administration proceedings are debtor-in-possession type proceedings under German insolvency law, which are available to businesses in financial distress and typically aim to preserve the business and the entity that are the subject of the proceedings. In these proceedings, Management retains control and operation of the subject company’s business under the supervision of a custodian, who is initially appointed on a preliminary basis (vorläufiger Sachwalter) and is primarily responsible for monitoring the subject company’s compliance with German insolvency law.

On* May 17and May 19, 2023,respectively, the Court admitted the opening of Self-Administration Proceedings with respect to the Company and the Subsidiary on a preliminary basis (the “Preliminary Self-Administration Proceedings”). The Court also appointed preliminary custodians for each of the Company and the Subsidiary in their respective Preliminary Self-Administration Proceedings. On September 1, 2023,*the Court opened the Self-Administration Proceedings with respect to the Subsidiary (the “Opened GmbH Self-Administration Proceedings”).

As a result, considering all facts and conditions, management concluded that Sono N.V. lost control over Sono Motors upon opening of insolvency proceedings in self-administration (protective shield proceedings,* May 19, 2023).Sono N.V. therefore deconsolidated Sono Motors as of May 19, 2023in accordance with ASU810*-10-55.

Upon loss of control, Sono N.V. derecognized the assets and liabilities of Sono Motors from the consolidated statement of financial position, recognized its remaining investment retained in Sono Motors at its fair value and subsequently accounted for the investment under the equity method of accounting pursuant to ASU810-10-55.

In connection with the deconsolidation, the Company recognizedno fair value of the subsidiary at the date of deconsolidation, derecognized the carrying value of assets and liabilities transferred, and recorded a gain for the excess of liabilities extinguished over the carrying value of assets derecognized. Additionally, the Company recognized a provision for potential creditor claims during the Self-Administration Proceedings. The provision was charged against the deconsolidation gain. The net deconsolidation gain and reversal of the parental guarantee provision was EUR62.6 million.

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Reconsolidation of Sono Motors GmbH

On* March 1, 2024,the Company was deemed to have regained control of Sono Motors. The Company recorded the fair value of net assets consolidated at March 1, 2024.The following table reflects the March 1, 2024*Balance Sheet of Sono Motors:

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NOTE5 – PREPAID EXPENSES AND OTHER

Prepaid and other expenses as of* December 31, 2024and2023* were KEUR103 and KEUR778, respectively.

NOTE6 – PROPERTY, PLANT, AND EQUIPMENT

Property, plant and equipment as of* December 31, 2024and2023* were as follows:

Depreciation expense during the years ended* December 31, 2024and2023* was $18 and $29, respectively.

NOTE7 – LEASES

The Company leases its office and warehouse space. The lease has a remaining life of5yrs. The Company accounts for its leases according to ASC842 Leases.

Lease expense was $169 and $209 in the years ended* December 31, 2024and2023,* respectively.

Maturities of operating lease liabilities were as follows as of* December 31, 2024:*

The lease was calculated over a 122 month period at a weighted average discount rate of 18%.

NOTE8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Amounts related to accounts payable and accrued expenses as of* December 31, 2024and2023* were as follows:

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NOTE9 – CONVERTIBLE NOTES PAYABLE AT FAIR VALUE

As of* December 31, 2024and2023,* the estimated fair value of our convertible debt is as follows:

On* December 7, 2022,the Company entered into a share purchase agreement with Yorkville to purchase up to $31.1 million in convertible debentures (the “2022 Debentures”). On February 5, 2024and August 30, 2024,Company issued additional convertible debentures in the amounts of $4.3 million and $3.3 million, respectively, (the “February 2024Debenture” and "August 2024Debenture” respectively, and together, the“2024* Debentures”), pursuant to a funding commitment letter entered into between the Company and Yorkville in connection with Sono Group’s restructuring in connection with the Self-Administration Proceedings. The following table reflects the outstanding debt and accrued interest for each tranche as of* December 31, 2024and December 31, 2023:*

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The2022 Debentures carry a coupon of 4% and were convertible into common stock at the holder’s option at, the lower of (i) $1.75, or (ii)96.5% of the lowest daily VWAP of the Ordinary Shares during the (7) consecutive Trading Days immediately preceding the conversion date or other date of determination). As a result of the amendment described below, the2022 Debentures have a maturity date of the later of* July 1, 2025or12* months from the issuance date of each such new note. The2022 Debentures contain default provisions that accelerate the payment of principal and interest calculated at the default rate of 12%. Resulting from the Company’s application for its Self-Administration Proceedings, the2022 Debentures have been in default since* May 15, 2025.*

In* November 2023,the contractual terms of the2022* Debentures were renegotiated and significantly amended resulting in modified convertible debentures. The maturity date was extended until* July 1, 2025.The conversion price was changed to the lower of USD 0.25 and 85% of the minimum daily volume-weighted average price on theseven trading days before conversion, provided that the conversion price willnot* be below the nominal value of EUR 0.06, as translated to USD, and, if and only if the shares of Sono Group are listed and traded on Nasdaq on the relevant conversion date, the conversion price willnot be lower than the Floor Price of USD 0.006.

The2024 Debentures carry a coupon of 12% and are convertible into common stock at the holder’s option at, the lower of (x) a price per Ordinary Share equal to $18.75 or (y)85% of the lowest daily volume weighted average price of the Ordinary Shares during theseven consecutive trading days immediately preceding the date of conversion (the*“2024* Variable Conversion Price”); provided, that the2024 Variable Conversion Price* may**not* be lower than (i) a price equal to 20% of the closing price of the ordinary shares on the trading day immediately prior to the issuance date of the debenture and (ii) the nominal value ofone ordinary share. The2024 Debentures contain default provisions that accelerate the payment of principal and interest calculated at the default rate of 18%. The* February 2024Debenture has a maturity date of July 1, 2025,and the August 2024Debenture has a maturity date of August 30, 2025.*

The Company has evaluated the terms and conditions of the convertible notes under the guidance of ASC815. The conversion feature didnot meet the definition of “indexed to a company’s own stock” provided for in ASC815 due to the variable number of shares issuable at conversion. Therefore, the conversion feature requires bifurcation and liability classification. Rather than bifurcating and recording the embedded derivative as a derivative liability, the Company elected to initially and subsequently measure the convertible note in its entirety at fair value, with changes in fair value recognized in earnings in accordance with ASC815-15-25-4.

The carrying value of the convertible notes, which under ASC815-15-25-4 is Fair Value, is on the balance sheet, with changes in the carrying value being recorded in earnings. The components of the convertible promissory notes as of* December 31, 2024and2023* are as follows:

The Company utilized a binomial lattice option pricing model to estimate the fair value per share of the underlying common equity. The Company believes that the binomial lattice model results in the best estimate of fair value because it embodies all of the requisite assumptions (including the underlying price, exercise price, term, volatility, and risk-free interest-rate) necessary to fairly value these instruments and, unlike less sophisticated models like the Black-Scholes model, it also accommodates assumptions regarding investor exercise behavior and other market conditions that market participants would likely consider in negotiating the transfer of such an instruments. The table below reflects the assumptions used as inputs to the binomial lattice option pricing model.

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NOTE10 – SHAREHOLDERS’** EQUITY**

As of* December 31, 2024,the Company had authorized share capital of 4,300,000 ordinary shares with a nominal value of€0.02 per share and 53,400 high voting shares with a nominal value of€0.50 per share. As of December 31, 2024,*1,409,885 ordinary shares and 40,000 high voting shares were issued and outstanding.

On* December 23, 2024,the Company amended its articles of association to implement a reverse share split (the “Reverse Share Split”) of both its ordinary shares and high voting shares at a ratio of1*-for-75. The Reverse Share Split had been previously approved by the Company’s shareholders at an extraordinary general meeting held on* January 31, 2024 (the “January 2024EGM”). The Reverse Share Split took market effect on January 6, 2025,*following confirmation from the Financial Industry Regulatory Authority (“FINRA”) that it had received and reviewed all necessary documentation to process the Reverse Share Split.

In connection with the Reverse Share Split, every 75 ordinary shares issued and outstanding immediately prior to the Reverse Share Split were converted intoone ordinary share, and every 75 high voting shares were converted intoone high voting share. Fractional shares resulting from the Reverse Share Split were rounded down to the nearest whole number, withno cash or other compensation paid in lieu of fractional shares. All share and per-share data have been retroactively adjusted throughout this report to account for this share split. In connection with the reverse share split, the Company also decreased the nominal value per share from€0.06 to€0.02 for Ordinary Shares and from€1.50 to€0.5 for High Voting Shares. The amounts presented for the year ended* December 31, 2023*reflect the prior nominal values of€0.06 and€1.50.

As a result of these actions, the presentation of the Company’s ordinary shares and high voting shares in the consolidated financial statements as of* December 31, 2024and2023* has been adjusted to reflect the post-split basis for comparative purposes.

Stock Options

In* December 2020,against the background of our intention to terminate all relevant benefits under former employee participation programs from2017* and2018 (respectively, “VESP2017” and “VESP2018”) pursuant to which employees were granted virtual shares, we adopted our conversion stock option program under the LTIP (“CSOP”). Under the CSOP, the Company granted 1,850,100 fully vested stock options, each with an exercise price of€0.06 and which arenot subject to any performance criteria, with effect as of the closing date of our IPO on* November 19, 2021.*The stock options became exercisableone year after the closing of our IPO and are exercisable only in certain windows. The stock options will expire four years after the closing of our IPO.

Certain former supervisory board members receivedone-time awards of restricted stock units for Ordinary Shares (“RSUs”) under the LTIP in connection with the Company’s IPO and such individual’s appointment as a member of the supervisory board, starting from the date of the Company’s IPO. The awards of a total of 63,868 RSUs were granted on* November 21, 2021and vest infour* equal, annual installments on each anniversary of the grant date, with thefourth installment vesting on the earlier of (a) thefourth anniversary of the grant date or (b) the Company's annual general meeting of shareholders to be held in2025. As of* December 31, 2022there were 15,967 RSUs fully vested. As of December 31, 2023there were 19,724 RSUs fully vested. Due to termination of the former supervisory board membersno further RSUs were vested in the year2024.*

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For purposes of the table below, all outstanding stock options and exercise prices have been retrospectively adjusted to reflect the Reverse Share Split implemented on* December 23, 2024.The following table summarizes stock option activity as of and for the years ended December 31, 2024and2023:*

NOTE11 – GENERAL AND ADMINISTRATIVE EXPENSES

The table below provides details on general and administrative expenses:

NOTE12 – RESEARCH AND DEVELOPMENT EXPENSES

**NOTE13 **–SELLING AND DISTRIBUTION EXPENSES

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NOTE14 – COMMITMENTS AND CONTINGENCIES

Service contracts

The Company carries various service contracts on its office buildings and certain copier equipment for repairs, maintenance and inspections. All contracts are short term and can be cancelled on notice.

Litigation

None.

NOTE15 – INCOME TAXES

Current tax assets and liabilities

Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities based on the tax rates and tax laws that are enacted or substantively enacted at the end of the reporting period.

Deferred taxes

Deferred tax is recognized using the liability method on temporary differences as of the end of the reporting period between the carrying amounts of assets and liabilities and their tax bases.

Deferred tax liabilities are recognized for all taxable temporary differences. The only exception is if the deferred income tax arises from initial recognition of an asset or liability in a transaction other than a business combination which, at the time of the transaction, affects neither accounting profit or loss nor taxable profit or loss. Deferred tax liabilities are recognized for all taxable temporary differences associated with investments in subsidiaries and associates, except where the Group is able to control the reversal of the temporary differences, and it is probable that the temporary difference willnot reverse in the foreseeable future.

Deferred tax assets are recognized for deductible temporary differences and to the extent that it is probable that future taxable income will allow the deferred tax asset to be realized.

Deferred tax assets and deferred tax liabilities are measured at the tax rates that are expected to apply in the year when the asset is realized, or the liability is settled based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting period. Deferred tax assets* mayonly be recognized up to the amount of the deferred tax liabilities as it isnot* sufficiently probable that future taxable profit will be available against which they can be utilized.

If transactions and other events are recognized directly in equity, any related taxes on income are also recognized directly in equity. As transaction costs are recognized in the capital reserve, corresponding (deferred) tax effects are recognized partly due to the loss situation of Sono Group and the fact that deferred taxes for losses carried forward were partly recognized at the level of Sono N.V.

Deferred tax assets and deferred tax liabilities are offset if there is a legally enforceable right to offset current tax assets and current tax liabilities and these relate to income taxes levied by the same tax jurisdiction.

F-20

Rate Reconciliation

Deferred Tax Assets/(Liab.) Detail

The table above presents the gross deferred taxes only for reasons of understanding and completeness, asno deferred taxes have been recognized due to a (deferred tax asset/liabilities) net position of zero. As the net deferred tax asset wasnot booked in afirst step,no valuation allowance is booked. Given the loss history of the Company, deferred tax assets arenot recognized on the balance sheet. The amount of deferred tax assets/liabilities as of* December 31, 2024and2023* are zero.

There areno deferred taxes with regard to Outside Basis Differences as those are permanent differences.

NOTE16 – FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of certain financial instruments, including cash and cash equivalents, accounts receivable and accounts payable, approximate their respective fair values due to the short-term nature of such instruments. The Company measures certain financial instruments at fair value on a recurring basis, including certain convertible notes payable, derivative financial instruments arising from conversion features embedded in convertible notes for which the conversion rate wasnot fixed, and equity-class. All financial instruments carried at fair value fall within Level3 of the fair value hierarchy as their value is based on unobservable inputs. The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. This determination requires significant judgments to be made.

The following table summarizes the conclusions reached regarding fair value measurements as of* December 31, 2024and2023:*

Convertible notes payable is a Level3 financial instrument that is measured at fair value on a recurring basis. Gains/(Losses) from the change in fair value of convertible notes payable were KEUR8,923 and KEUR5,404, respectively.

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NOTE17 – SUBSEQUENT EVENTS

On* December 23, 2024,the Company amended its articles of association to implement the Reverse Share Split. The Reverse Share Split was previously approved by the Company’s shareholders at the January 2024EGM. The Reverse Share Split took market effect on January 6, 2025,following confirmation from the Financial Industry Regulatory Authority that it had received and reviewed all necessary documentation to process the Reverse Share Split. See “Note10–Shareholders’* Equity”.

On* December 30, 2024,*the Company and Yorkville entered into an exchange agreement (the “Exchange Agreement”), pursuant to which the Company agreed, subject to the satisfactions of certain conditions precedent, to issue 1,242 shares of preferred stock of the Company (the “Preferred Shares”), each with a nominal value of€300, to Yorkville solely in exchange for the surrender and cancellation of all of the debentures held by Yorkville, including the New Commitment Debenture (if issued) and the Advance Debentures (as defined herein) (the “Debt Conversion”).

Under the terms of the Exchange Agreement, as amended on* February 12, 2025,** March 7, 2025and March 25, 2025,the Company agreed to issue 1,242 Preferred Shares to Yorkville solely in exchange for the surrender and cancellation of all of the debentures held by Yorkville, including the New Commitment Debenture (if issued) and the Advance Debentures. In connection with the conversion of each Preferred Share, the effective conversion price (the “Effective Conversion Price”) per share will be equal to 85% of the lowest daily volume weighted average price of the Company’s ordinary shares during the10* trading days immediately preceding the date of the notice of conversion, subject to a floor price equal to (i) $4.00, from the closing date until the end of the day that issix months from the date the ordinary shares are listed on the Nasdaq Capital Market, and (ii) $1.00 thereafter.

On* February 12, 2025,the Company and Yorkville entered into the into an Omnibus Amendment to Transaction Documents (the “First Omnibus Amendment”), pursuant to which the parties agreed to modify the terms of the Exchange Agreement and the terms of the securities purchase agreement entered into between the Company and Yorkville on December 30, 2024 (the “Securities Purchase Agreement”). Under the terms of the Securities Purchase Agreement, Yorkville committed to provide limited financing to the Company in the amount of $5 million (the “Yorkville Commitment”) in the form of a new convertible debenture (the “New Commitment Debenture”), subject to certain conditions and limitations, including the Company’s receipt of notice from Nasdaq that the Company has met all the applicable requirements for listing of its ordinary shares on the Nasdaq Capital Market. The First Omnibus Agreement modified the terms of the Securities Purchase Agreement to, among other things, (i) provide for an immediate advance of $1,000,000 of the Yorkville Commitment in the form of a $1,000,000 secured convertible debenture (the “First Advance Debenture”), and (ii) extend the termination date with respect to the obligations of Yorkville under the Securities Purchase Agreement from January 15, 2025to February 28, 2025.In addition, the parties agreed in the First Omnibus Amendment that any and all obligations of Yorkville to provide additional funding to the Company, including any obligations arising under the including in connection with the funding commitment letter entered into between the Company and Yorkville that became effective on November 20, 2023,*shall be considered to be satisfied by the commitments made pursuant to the Securities Purchase Agreement and the First Omnibus Amendment. In addition, under the terms of the First Omnibus Amendment, the Company and Yorkville amended the Exchange Agreement to include the First Advance Debenture and the remaining New Commitment Debenture within the scope of the Exchange Agreement and therefore within the scope of the Debt Conversion, subject to the satisfaction of the conditions precedent thereto.

On* March 7, 2025,the Company and Yorkville entered into asecond* Omnibus Amendment to Transaction Documents (the “Second Omnibus Amendment”) pursuant to which the parties agreed to modify the terms of the Exchange Agreement to (i) amend the floor price provided for in the Exchange Agreement and (ii) to extend the termination date with respect to the obligations of Yorkville under the Exchange Agreement from* January 15, 2025to April 15, 2025.In addition, the parties agreed in the Second Omnibus Amendment to extend the termination date with respect to the obligations of Yorkville under the Securities Purchase Agreement from February 28, 2025to April 15, 2025.*

On* March 25, 2025,the Company and Yorkville entered into the into athird* Omnibus Amendment to Transaction Documents (the “Third Omnibus Amendment”), pursuant to which the parties agreed to modify the terms of the Securities Purchase Agreement to, among other things, provide for an immediate advance of $1,000,000 of the Yorkville Commitment in the form of asecond $1,000,000 secured convertible debenture (the “Second Advance Debenture” and together with the First Advance Debenture, the “Advance Debentures”). As a result of the issuance of the Advance Debentures, and pursuant to the Second Omnibus Amendment, the New Commitment Debenture to be issued to Yorkville, upon the satisfaction of all of the conditions set forth in the Securities Purchase Agreement, will have an aggregate principal amount of $3,000,000. Under the terms of the Third Omnibus Amendment, the Company and Yorkville also amended the Exchange Agreement to include each of the New Commitment Debenture and the Advance Debentures within the scope of the Exchange Agreement and therefore within the scope of the Debt Conversion, subject to the satisfaction of the conditions precedent thereto.

The First Advance Debenture and the Second Advance Debenture will mature on* February 12, 2026and March 24, 2026,respectively. Further, interest accrues on the outstanding principal balance of the Advance Debentures at an annual rate of 12%, which will increase to an annual rate of 18% upon an Event of Default (as defined in the Advance Debentures) for so long as such Event of Default remains uncured. Yorkville will have the right to convert the Advance Debentures into ordinary shares of the Company at the lower of (i) a price per ordinary share equal to $18.75 or (ii)85% of the lowest daily volume weighted average price of the ordinary shares during theseven* consecutive trading days immediately preceding the conversion date or other date of determination (the “Variable Conversion Price”); provided that the Variable Conversion Price* may**not* be lower than the Floor Price (as defined in the Advance Debentures) then in effect and the nominal value ofone Ordinary Share.