Sono Group N.V.

NOTE 1 - 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, 2023 and 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 Form 25 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”. On September 4, 2025, the Company received approval to list its ordinary shares on the Nasdaq Capital Market, and the ordinary shares commenced trading on Nasdaq under the ticker symbol “SSM” on September 5, 2025.

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 Waldmeisterstraße 93, 80935 Munich, Germany (trade register number: 80683568). Sono N.V.’s 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 HRB 224131. Sono Motors’ registered headquarters is Waldmeisterstraße 93, 80935 Munich, Germany. Sono N.V.’s wholly-owned subsidiary Sono Group S.à r.l., a private limited liability company (société à responsabilité limitée) incorporated under the laws of the Grand Duchy of Luxembourg, having its registered office at 8 Avenue de la Gare, L-1610 Luxembourg, Grand Duchy of Luxembourg. Such subsidiary was funded with €12,000 for purposes of providing share capital, and it has no operations at this time. 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 onto third 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. Subsequent to December 31, 2025, the Company's management board, with the approval of the supervisory board, adopted the Treasury Strategy (as defined herein), under which the principal holding in the Company's treasury reserve will be allocated to digital assets, principally Bitcoin, by applying a covered-call yield strategy. In connection with the Treasury Strategy, the Company entered into a series of agreements with Blockchain.com (BVI) II Limited to facilitate related derivative and hedging transactions. Concurrently, the Company determined to cease funding to the Subsidiary (Sono Motors GmbH) and to initiate its exit from the legacy solar operations. The Company intends to solicit the ratification by its shareholders of the engagement by the Company in the Treasury Strategy. See “Note 16 Subsequent Events” and “Note 3 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 (“U.S. 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.

NOTE 2–** 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 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.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. 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.

Cash

For financial statement purposes, the Company considers all highly liquid investments with original maturities of three months or less to be cash and cash equivalents. Accounts maintained in US bank accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to US$250,000. The Company had US$0.0 M and $0.0 M in US bank cash balances in excess of the FDIC insured limit as of December 31, 2025 and December 31, 2024, respectively.

Leases

The Company accounts for leases pursuant to ASC 842 “Leases”. Accordingly, 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 lease liabilities within current liabilities and within other long-term liabilities on the Company’s consolidated balance sheets. Additionally, the Company elected the exemption available under ASC 842-20-25-2 for short term lease agreements and recognizes lease payments on a straight line basis.

ROU assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company’s leases do not 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 Note 8 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 the first-in, first-out method. Stock counts are taken routinely and obsolete, outdated inventory is directly charged off to the cost of sales.

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 of, 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. During the twelve months ending December 31, 2025 and 2024 there were no indicators of impairment.

Revenue Recognition

Revenue recognition is based on Accounting Standards Codification (ASC) Topic 606 – Revenue from Contracts with Customers. In general, the Company recognizes revenue when the amount of revenue can be reliably measured, it is probable that future economic benefits will flow to the Company, where there is evidence of an arrangement, when the selling price is fixed or determinable, and when specific criteria have been met or there are no significant remaining performance obligations for each of the Company's activities as described below. Revenue is recognized at the point in time when control of the goods or services is transferred to the customer. The Company typically recognizes revenue upon formal acceptance by the customer. Control is considered to be transferred when the customer has the ability to direct the use of and obtain substantially all of the remaining benefits of that good. We consider this the point at which the performance obligation is fulfilled, and the customer obtains control of the promised good or service.

Since control does not transfer over time but rather at a single point (usually project completion or delivery), revenue is recognized at a point in time in accordance with ASC 606-10-25-30 and related guidance. Progress billings on projects where this criteria has not been met are recorded as deferred revenue. Deferred revenue at December 31, 2025 and December 31, 2024 was EUR 5 k and EUR 0.00 respectively.

Additionally, the Company participates in government sponsored collaborations whereby they are awarded participation grants. There is no certainty as to the timing or amounts of grants that will ultimately be received. Accordingly, the company records these grants as other income upon receipt.

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 a three-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 in one of the following categories, in order of priority of observability and objectivity of pricing inputs:

● Level 1 – Fair value based on quoted prices in active markets for identical assets or liabilities;

● Level 2 – Fair value based on significant directly observable data (other than Level 1 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;

● Level 3 – 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.

The Company utilizes a binomial lattice option pricing model to estimate the fair value of options, warrants and other Level 3 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 instrument.

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 subtopic 740-10, Income Taxes (“ASC 740-10”) 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 than not that some portion or all of the deferred tax assets will not be realized, a valuation allowance is required to reduce the deferred tax assets to the amount that is more likely than not 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 may arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. No income tax has been provisioned for the years ended December 31, 2025 and 2024, 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 than not that the deferred tax assets will not 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.

Foreign Currency Transactions

Transactions denominated in currencies other than the functional currency are re-measured into the functional currency at the exchange rate in effect at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are re-measured at the exchange rate in effect at the balance sheet date. Gains and losses resulting from these transactions are included in "Other income (expense), net" in the consolidated statements of operations.

Net Income / (Loss) per Share

For the years ended December 31, 2025 and 2024, all potentially dilutive securities were included in the computation of diluted net income per share as their effect was dilutive given the net income position in each period.

Business Segments

We operate our business asone operating segment. An operating segment is defined as a component of an enterprise for which separate discrete financial information is available and evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. Our CODM is the Company’s Chief Executive Officer. Reportable segment information is consistent with how management reviews the business, makes investing and resource allocation decisions and assesses operating performance. Our CODM is regularly provided with consolidated expense information and uses consolidated net income (loss) as the measure of profit or loss in deciding whether to continue with research and development efforts or to return capital to shareholders.

Correction of an Immaterial Revision in Previously Issued Financial Statements

The Company has revised the statement of cash flow for the year ended December 31, 2024 to revise the presentation of net cash used in operating activities to include a gain on foreign currency exchange rates that was previously included in the effect of exchange rate changes on cash and cash equivalents. As a result, net cash used in operating activities and the effect of exchange rate changes on cash and cash equivalents decreased by EUR 0.4 million for the year ended December 31, 2024.

Recently Issued Pronouncements

In March 2024, the FASB issued ASU No. 2024-01, “Compensation—Stock Compensation (Topic 718): Scope Applications of Profits Interests and Similar Awards” (“ASU 2024-01”). ASU 2024-01 adds an example to Topic 718 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 Topic 718 or under other U.S. GAAP. ASU 2024-01 is effective for annual periods beginning after December 15, 2025, although early adoption is permitted. Upon adoption, ASU 2024-01 is not expected to have an impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40).” 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 ASU 2024-04, “Debt - Debt with Conversions and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments” (“ASU 2024-04”). ASU 2024-04 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 are not currently convertible, should be accounted for as an induced conversion. The requirements of ASU 2024-04 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

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.

NOTE 3–** LIQUIDITY AND GOING CONCERN ANALYSIS**

Liquidity and Going Concern

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 within twelve months after the date the financial statements are issued, in accordance with ASC 205-40. 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, 2027.

As of December 31, 2025, the Company had cash and cash equivalents of €206 thousand, an accumulated deficit of €317.4 million, net operating loss of €7.7 million and negative operating cash flows of €7.3 million for the year then ended. The Company has incurred recurring operating losses and negative cash flows from operations since inception, primarily attributable to the operations of its solar technology subsidiary, Sono Motors GmbH. These conditions raised substantial doubt about the Company's ability to continue as a going concern.

Subsequent to December 31, 2025, management implemented a series of actions intended to improve the Company's liquidity position and reduce its ongoing cash requirements. These actions included: (i) raising gross proceeds of approximately $5.0 million in March 2026, consisting of a $3.0 million convertible debenture and a pre-funded warrant issued for aggregate proceeds of approximately $2.0 million; (ii) adopting the Treasury Strategy and entering into an institutional framework with Blockchain.com (BVI) II Limited in the form of the ISDA Master Agreement and the related Schedule and Credit Support Annex, to facilitate related derivative and hedging transactions in connection with the Company's digital asset holdings; and (iii) terminating current and future funding commitments to the Subsidiary (Sono Motors GmbH) and initiating the Company's exit from its legacy solar operations conducted through the Subsidiary, which is expected to materially reduce the Company's ongoing cash outflows.

Management has evaluated the significance of the conditions described above in relation to the Company's ability to meet its obligations and believes that these actions, taken together, may provide sufficient resources to fund its streamlined operating plan, consisting principally of holding company overhead and public company compliance costs, for at least twelve months from the date the financial statements are issued.

However, the Company's ability to maintain adequate liquidity remains subject to significant uncertainties, including the price volatility and liquidity characteristics of digital assets, the terms and potential collateral requirements of transactions entered into in connection with the Treasury Strategy pursuant to the Credit Support Annex, the timing and costs associated with exiting the legacy solar operations (which the Company is currently unable to estimate), and the maturity of the convertible debenture issued to Yorkville in March 2026, which matures in March 2027 and may require refinancing or conversion prior to or at maturity. Based upon this uncertainty, management has concluded that there is substantial doubt that the company will continue as a going concern. SeeNote 16—* Subsequent Events*for additional information regarding the matters described above.

NOTE 4–** RECONSOLIDATION OF SONO MOTORS GMBH**

In February 2023, Sono Group announced its decision to restructure its business model and discontinued the Sion passenger car program. Following subsequent insolvency proceedings under German law, Sono N.V. lost control over its subsidiary Sono Motors GmbH and deconsolidated it effective May 19, 2023, in accordance with ASU 810-10-55. On February 29, 2024, Sono Motors GmbH exited its Self-Administration Proceedings via its plan under the German Insolvency Code, which set out how the Subsidiary intended to restructure its debt and procure the inflow of new cash, including pursuant to a funding commitment from Yorkville. As a result, all outstanding debts between the Company and the Subsidiary were extinguished, and the Subsidiary was reconsolidated into our consolidated financial statements effective March 1, 2024.

The reconsolidation resulted in a net gain of approximately EUR 62.6 million, reflecting the revaluation of the Subsidiary’s net assets and the extinguishment of parental guarantees and related liabilities. This gain is recorded in our operating results for the year ended December 31, 2024 and represents the financial impact of regaining control over the Subsidiary.

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:

NOTE 5–** PROPERTY, PLANT, AND EQUIPMENT**

Property, plant and equipment as of December 31, 2025 and 2024 were as follows:

Depreciation expense during the years ended December 31, 2025 and 2024 was EUR 31 thousand and EUR 18 thousand, respectively.

NOTE 6–** LEASES**

The Company leases its office and warehouse space. The lease has a remaining life of 5.3 years. The Company accounts for its leases according to ASC 842 Leases.

Maturities of operating lease liabilities were as follows as of December 31, 2025:

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

Cash paid to satisfy lease liabilities and building lease expense for the twelve months ended December 31, 2025 and 2024 consisted of:

NOTE 7–** ACCOUNTS PAYABLE AND ACCRUED EXPENSES**

Amounts related to accounts payable and accrued expenses as of December 31, 2025 and 2024 were as follows:

NOTE 8–** CONVERTIBLE NOTES PAYABLE AT FAIR VALUE**

As of December 31, 2025 and 2024, 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, 2024 and August 30, 2024, Company issued additional convertible debentures in the amounts of $4.3 million and $3.3 million, respectively, (the “February 2024 Debenture” and “August 2024 Debenture” 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. On December 30, 2024 the Company and Yorkville entered into a securities purchase agreement (the “Securities Purchase Agreement”) and an exchange agreement (the “Exchange Agreement”). Under the terms of the Securities Purchase Agreement, Yorkville committed to provide limited financing to the Company in the amount of $5 million, subject to certain conditions and limitations. Following a number of amendments to the Securities Purchase Agreement the Company issued to Yorkville six additional debentures (“2025 Debentures”) in the amounts of $1 million, $1 million, $0.50 million, $0.75 million, $0.19 million and $0.35 million on February 12, 2025, March 25, 2025, April 24, 2025, May 27, 2025, August 6, 2025 and August 15, 2025 respectively. In connection with the Company’s uplisting to the Nasdaq Capital Market, on September 5, 2025 Yorkville increased the total funding commitment under the terms of the Securities Purchase Agreement from $5 million to $7.2 million and following the respective amendment the Company issued the final debenture for the remaining part of the total funding commitment, which amounted to $3.4 million. According to the terms of the Exchange Agreement and following the uplisting of Company’s Ordinary Shares to the Nasdaq Capital Market, the total amount of all convertible debentures issued by the Company to Yorkville and outstanding as of September 5, 2025, including accrued interest, totaling 42.1 M USD were converted into 1,401 preferred shares with €300 nominal value each (please refer to Note 9 for details on preferred shares). The following table reflects the outstanding debt and accrued interest for each tranche as of September 5, 2025 and December 31, 2024:

The 2022 Debentures carry a coupon of 4% and were convertible into common stock at the holder’s option at, the lower of (i) $131.25, 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, the 2022 Debentures have a maturity date of the later of July 1, 2025 or 12 months from the issuance date of each such new note. The 2022 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, the 2022 Debentures have been in default since the filing with the bankruptcy court. The conversion price was changed to the lower of $18.75 and 85% of the minimum daily volume-weighted average price on theseven trading days before conversion, provided that the conversion price will not 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 will not be lower than the Floor Price of USD 0.006.

The 2024 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 the 2024 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 of one ordinary share. The 2024 Debentures contain default provisions that accelerate the payment of principal and interest calculated at the default rate of 18%. The February 2024 Debenture has a maturity date of July 2025, and the August 2024 Debenture has a maturity date of August 2025.

The 2025 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 the 2024 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 of one ordinary share. The 2024 Debentures contain default provisions that accelerate the payment of principal and interest calculated at the default rate of 18%. The February 2025 Debenture has a maturity date of February 2026, the March 2025 Debenture has a maturity date of March 2026, the April 2025 Debenture has a maturity date of April 2026, and the May 2025 Debenture has a maturity date of May 2026.

The Company has evaluated the terms and conditions of the convertible notes under the guidance of ASC 815. The conversion feature did not meet the definition of “indexed to a company’s own stock” provided for in ASC 815 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 ASC 815-15-25-4.

The carrying value of the convertible notes, which under ASC 815-15-25-4 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 September 5, 2025 and December 31, 2024 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.

(1) Adjusted for a discount for lack of marketability of 50%.

On September 5, 2025, pursuant to an exchange agreement dated December 30, 2024, as amended, the debt was exchanged for 1,401 shares of perpetual preferred stock. The Preferred Stock is convertible into common shares at 85% of the lowest VWAP for the 10 preceding trading days. As part of the commitment, the holder has agreed to a conversion price floor of $4.00 for six months and $1.00 thereafter. These terms have been embodied into the calculation of fair value as of September 5, 2025.

The fair value calculated on September 5, 2025 was EUR 18.5 M indexed to 7,718,300 common shares. The debt was extinguished through the issuance of perpetual preferred stock in the amount of EUR 18.5 M and reclassified into equity.

NOTE 9–** SHAREHOLDERS**’** EQUITY**

As of December 31, 2025, the Company had authorized share capital of 120,000,000 ordinary shares with a nominal value of €0.01 per share,40,000 high voting shares with a nominal value of €0.25 per share and 1,401 preferred shares with a nominal value of €300 per share with 1,424,834 ordinary shares,40,000 high voting shares and 1,401 preferred shares issued and outstanding.

Each ordinary share confers the right on the holder to cast one vote at the general meeting, each high voting share confers the right on the holder to cast twenty-five votes at the general meeting and each preferred share confers the right on the holder to cast thirty thousand votes at the general meeting, subject to a contractually agreed between the Company and Yorkville voting blocker equal to 4.99% of the combined voting power in the share capital of Sono Group N.V.

The preferred shares are convertible at a price per share equal to 85% of the lowest daily volume weighted average price of the Ordinary Shares during the 10 Trading Days immediately preceding the date of the conversion notice, subject to a floor price (the “Floor Price”). Upon the conversion of each Preferred Share, the Investor shall surrender the Preferred Share being converted, plus the Investor will automatically sell and transfer to the Company for no consideration (the “Repurchase”) additional Preferred Shares such that the total number of Preferred Shares surrendered and subject to the Repurchase shall be equal to (a) the total number of Ordinary Shares issuable upon such conversion, multiplied by (b) the Effective Conversion Price, divided by (c) 30,000. The Parties acknowledge that pursuant to Section 2:98 paragraph 2, of the Dutch Civil Code, the Company cannot hold more than half of its issued nominal share capital. If, as a result of the Repurchase the Company will exceed the aforementioned threshold, the Parties hereby agree that such repurchase for no consideration is postponed until the Company has taken appropriate measures.

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 of 1-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 2024 EGM”). 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 into one ordinary share, and every 75 high voting shares were converted into one high voting share. Fractional shares resulting from the Reverse Share Split were rounded down to the nearest whole number, with no 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.

On December 30, 2024, the Company entered into an Exchange Agreement with YA II PN, Ltd. (“Yorkville”) (as subsequently amended), pursuant to which Yorkville agreed to exchange all outstanding debentures it held for preferred shares of the Company, subject to closing conditions, including among others the Company’s receipt of notice that its ordinary shares met all requirements for listing on the Nasdaq Capital Market.

On August 13, 2025, shareholders approved amendments to the Company’s Articles of Association that, among other things, create the preferred share class and adjust the Company’s authorized share capital, with such amendments to become effective on the Closing Date of the Exchange Agreement. These amendments included, among others, the following changes in the authorized capital: from 4,300,000 Ordinary Shares, with a nominal value of €0.02 each, to 120,000,000 Ordinary Shares, with a nominal value of €0.01 each, from 53,400 High Voting Shares, with a nominal value of €0.50 each, to 40,000 High Voting Shares, with a nominal value of €0.25 each, fromno Preferred Shares to 1,401 Preferred Shares, with a nominal value of €300 each. Following receipt of Nasdaq approval on September 4, 2025 and commencement of trading on September 5, 2025 under ticker “SSM”, the conditions to closing were satisfied and the Exchange Agreement closed, resulting in the exchange of Yorkville’s outstanding debentures into preferred shares in accordance with its terms. These corporate actions followed the previously disclosed reverse share split and nominal value adjustments (ordinary shares to €0.02; high-voting shares to €0.50) and, upon the Closing Date of the Exchange Agreement, the effectiveness of the shareholder-approved amendments to the Articles of Association further decreased the nominal value per share to €0.01 for ordinary shares and €0.25 for high-voting shares.

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, 2025 and December 31, 2024 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 from 2017 and 2018 (respectively, “VESP 2017” and “VESP 2018”) 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 41,157 fully vested stock options, each with an exercise price of €4.50 and which are not 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 expired on November 18, 2025, four years after the closing of our IPO.

Certain former supervisory board members received one-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 854 RSUs were granted on November 21, 2021 and vest in four equal, annual installments on each anniversary of the grant date, with the fourth installment vesting on the earlier of (a) the fourth anniversary of the grant date or (b) the Company's annual general meeting of shareholders to be held in 2025. As of December 31, 2022 there were 213 RSUs fully vested. As of December 31, 2023 there were 266 RSUs fully vested. Due to termination of the former supervisory board membersno further RSUs were vested in the year 2024.

The following table summarizes stock option activity as of and for the years ended December 31, 2025 and 2024:

The total intrinsic value of options exercised during the years ended December 31, 2025 and December 31, 2024 was EUR 1,850 and EUR(1,938), respectively. As of December 31, 2025, the aggregate intrinsic value of options outstanding and exercisable was EUR 1,862, with a weighted average remaining contractual term of 5.83 years.

NOTE 10–** GENERAL AND ADMINISTRATIVE EXPENSES**

The table below provides details on general and administrative expenses:

NOTE 11–** RESEARCH AND DEVELOPMENT EXPENSES**

NOTE 12–SELLING AND DISTRIBUTION EXPENSES

NOTE 13–** 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.

NOTE 14–** 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 will not 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 may only be recognized up to the amount of the deferred tax liabilities as it is not 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.

Rate Reconciliation

Deferred Tax Assets/(Liab.) Detail

The table above presents the gross deferred taxes only for reasons of understanding and completeness, as no deferred taxes have been recognized due to a (deferred tax asset/liabilities) net position of zero. As the net deferred tax asset was not booked in a first step, no valuation allowance is booked. Given the loss history of the Company, deferred tax assets are not recognized on the balance sheet. The amount of deferred tax assets/liabilities as of December 31, 2025 and 2024 arezero.

There are no deferred taxes with regard to Outside Basis Differences as those are permanent differences.

NOTE 15–** 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. All financial instruments carried at fair value fall within Level 3 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, 2025 and 2024:

Convertible notes payable is a Level 3 financial instrument that is measured at fair value on a recurring basis. The table below summarizes the activity for the years ended December 31, 2025 and 2024 respectively.

NOTE 16 –** SUBSEQUENT EVENTS**

Subsequent to December 31, 2025, the Company entered into the following material financing and digital-asset transactions. Management has evaluated these events in accordance with ASC 855, Subsequent Events, and determined that they represent non-recognized subsequent events requiring disclosure but no adjustment to the consolidated financial statements as of and for the year ended December 31, 2025.

a) ** Yorkville Financings**

2026 Convertible Debentures

On January 26, 2026, the Company issued a convertible debenture to Yorkville in the aggregate principal amount of $600,000 (the “January 2026 Debenture”). The January 2026 Debenture matures on January 26, 2027, which maturity date may be extended at the option of Yorkville. Further, interest accrues on the outstanding principal balance of the January 2026 Debenture at an annual rate of 12%, which will increase to an annual rate of 18% upon an Event of Default (as defined in the January 2026 Debenture). for so long as such Event of Default remains uncured. Yorkville will have the right to convert the January 2026 Debenture 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 the seven 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 January 2026 Debenture) then in effect or the nominal value of one Ordinary Share. Net proceeds to the Company from the January 2026 Debenture were $600,000.

In addition, on February 19, 2026, the Company issued a convertible debenture to Yorkville in the aggregate principal amount of $750,000 (the “February 2026 Debenture”). The February 2026 Debenture matures on February 19, 2027, which maturity date may be extended at the option of Yorkville. Further, interest accrues on the outstanding principal balance of the February 2026 Debenture at an annual rate of 12%, which will increase to an annual rate of 18% upon an Event of Default (as defined in the February 2026 Debenture), for so long as such Event of Default remains uncured. Yorkville will have the right to convert the February 2026 Debenture into Ordinary Shares of the Company at the Variable Conversion Price; provided that the Variable Conversion Price may not be lower than the Floor Price (as defined in the February 2026 Debenture) then in effect or the nominal value of one Ordinary Share. Net proceeds to the Company from the February 2026 Debenture were $750,000.

Further, on March 10, 2026, the Company issued a convertible debenture (the “March 2026 Debenture”) to Yorkville in the aggregate principal amount of $3,000,000. The March 2026 Debenture matures on March 10, 2027, which maturity date may be extended at the option of Yorkville. Further, interest accrues on the outstanding principal balance of the March 2026 Debenture at an annual rate of 12%, which will increase to an annual rate of 18% upon an Event of Default (as defined in the March 2026 Debenture), for so long as such Event of Default remains uncured. Yorkville will have the right to convert the March 2026 Debenture into Ordinary Shares of the Company at the Variable Conversion Price; provided that the Variable Conversion Price may not be lower than the Floor Price (as defined in the March 2026 Debenture) then in effect or the nominal value of one Ordinary Share. Net proceeds to the Company from the March 2026 Debenture were $3,000,000.

Pre-Funded Warrant Private Placement

As previously announced in the March 10 Current Report, concurrently with the entry into the March 2026 Debenture, on March 10, 2026, the Company and Yorkville entered into a Pre-Funded Warrant Securities Purchase Agreement, dated March 10, 2026 (the “Warrant Purchase Agreement”), pursuant to which, at the closing which occurred on March 10, 2026, the Company issued and sold to Yorkville a pre-funded warrant to purchase up to 283,367 Ordinary Shares of the Company (the “Warrant Shares”), exercisable in whole or in part at any time after issuance (the “Pre-Funded Warrant”). The aggregate subscription amount for the Pre-Funded Warrant was $2,000,004.29. Such amount was paid by Yorkville at the closing of the Warrant Purchase Agreement. The aggregate gross proceeds to the Company from the Private Placement were approximately $2,000,004.29, before deducting the offering expenses payable by the Company, which expenses consist solely of legal fees. The Company intends to use the net proceeds from the offering for working capital purposes. In addition, the per share exercise price of the Pre-Funded Warrant is €0.01.

The Pre-Funded Warrant is exercisable for up to 283,367 Ordinary Shares at an exercise price of €0.01 per share (subject to certain adjustments), is exercisable immediately upon issuance, and may be exercised, in whole or in part, at any time until exercised in full. Yorkville (together with its Attribution Parties (as defined in the Pre-Funded Warrant)) may not exercise any Pre-Funded Warrant to the extent that Yorkville would own more than 4.99% of the outstanding Ordinary Shares immediately after giving effect to the issuance of Ordinary Shares issuable upon exercise of such Pre-Funded Warrant, which percentage may be changed at Yorkville’s election to a lower or higher percentage not in excess of 9.99% upon 61 days’ notice to the Company, subject to the terms of the Pre-Funded Warrant. The Pre-Funded Warrant provides for standard anti-dilution adjustments to the exercise price and the number of Warrant Shares issuable upon exercise in connection with stock dividends, splits, combinations, reclassifications and similar events.

Registration Rights Agreement

In connection with the Private Placement, the Company entered into a Registration Rights Agreement with Yorkville, dated March 10, 2026 (the “Registration Rights Agreement”). The Registration Rights Agreement provides that the Company shall file a registration statement covering the resale of all of the Warrant Shares and any other Registrable Securities (as defined in the Registration Rights Agreement) with the SEC no later than the 30th calendar day following the date of the Registration Rights Agreement, and have the registration statement declared effective by the SEC as promptly as practicable after the filing thereof, but in any event no later than the 90th calendar day following the date of the Registration Rights Agreement, or in the event of a “full review” by the SEC, the 120th day following the date of the Registration Rights Agreement.

Upon the occurrence of any Event (as defined in the Registration Rights Agreement), which, among others, prohibits Yorkville from reselling the Registrable Securities for more than ten consecutive calendar days or more than an aggregate of twenty calendar days during any twelve-month period, the Company is obligated to pay to Yorkville, on each monthly anniversary of each such Event, an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1.0% multiplied by the aggregate subscription amount paid by Yorkville pursuant to the Warrant Purchase Agreement. All fees and expenses incident to the performance of or compliance with the Registration Rights Agreement by the Company will be borne by the Company, whether or not any Warrant Shares are sold pursuant to a registration statement.

b) ** ** ** Digital Asset Treasury Strategy**

As previously announced in the Company’s Current Report on Form 8-K filed with the SEC on March 16, 2026 (the “March 16 Current Report”), on March 10, 2026, in connection with the Treasury Strategy (as defined below), the Company entered into an International Swaps and Derivatives Association, Inc. (“ISDA”) 2002 ISDA Master Agreement, dated as of March 10, 2026 (the “ISDA Master Agreement”) with Blockchain.com (BVI) II Limited, a business company incorporated under the laws of the British Virgin Islands (“Blockchain.com”), facilitating the Company to enter into derivative and/or hedging transactions (collectively, the “Transactions”) to manage the risk associated with the Treasury Strategy. The derivative and hedging transactions will be governed by the ISDA Master Agreement, including the related Schedule to the ISDA Master Agreement executed by the Company and Blockchain.com on March 10, 2026 (the “Schedule”). The structure of the Transactions may include forwards, swaps, futures, options or other derivatives transactions in respect of digital assets. Certain events of default will apply to the Transactions under the ISDA Master Agreement and Schedule, including, but not limited to, failure to pay or deliver, breach of the agreement, credit support default, cross-defaults and misrepresentation. In addition, in connection with the ISDA Master Agreement, the Company and Blockchain.com entered into a Credit Support Annex to the Schedule to the ISDA Master Agreement, dated as of March 10, 2026 (the “Credit Support Annex”), which sets forth the terms and conditions upon which the Company will be required to deliver additional collateral to Blockchain.com (and Blockchain.com will be required to return collateral to the Company) depending upon the mark to market exposure under the ISDA Master Agreement and the value of the collateral. The ISDA Master Agreement, the Schedule and the Credit Support Annex are governed by the laws of England and Wales.

As further announced in the March 16 Current Report, on March 14, 2026, the Company’s management board, with the approval of the supervisory board, ratified the Company’s entry into the ISDA Master Agreement, the Schedule and the Credit Support Annex and approved the adoption of a digital asset treasury strategy and digital asset treasury policy and the purchase by the Company of Bitcoin and other digital assets in connection therewith (the “Treasury Strategy”). Under the Treasury Strategy, the principal holding in the Company’s treasury reserve on its balance sheet will be allocated to digital assets, principally Bitcoin, by applying a covered-call yield strategy. The Company may use available liquidity, including proceeds from previously disclosed financing arrangements, to purchase Bitcoin and other digital assets, subject to applicable law and public disclosure requirements. The Company intends to solicit the ratification by its shareholders of the engagement by the Company in the Treasury Strategy.

c) ** ** ** Exit from Sono Motors GmbH**

As previously announced in the Company’s Current Report on Form 8-K filed with the SEC on March 19, 2026 (the “March 19 Current Report”), on March 14, 2026, our supervisory board resolved to terminate all current and future funding commitments to the Subsidiary and to exit the legacy solar operations conducted through the Subsidiary, with immediate effect. The Company’s decision was driven by the Subsidiary’s historical lack of profitability, which has resulted in the Company having to continuously provide funding to the Subsidiary, and thus incur losses, and a determination by the supervisory board that there was not a clear path for the Subsidiary to achieve profitability in a reasonably desirable timeframe and thus, avoid future losses by the Company. This decision was made in conjunction with the decision on March 14, 2026 by the Company’s management board, with the approval of the supervisory board, to adopt the Treasury Strategy, as previously announced. The Treasury Strategy is projected to generate cash flow for the Company in the first year of its execution. The Company is also exploring other strategic alternatives to maximize shareholder value.

As announced in the March 19 Current Report, the Company is currently unable to make a good faith estimate of the total costs and charges, if any, that may be incurred in connection with the cessation of funding to the Subsidiary and the exit from the Company’s legacy solar business. The determination of any such costs is subject to significant uncertainties, including, among other things, the timing, scope and manner of any actions undertaken with respect to the Subsidiary following the cessation of funding, as well as the extent of any obligations of the Company in connection therewith. Potential costs, if any, may include legal, advisory and other professional fees and expenses associated with activities relating to the Subsidiary. Any such costs and expenditures, if incurred, are expected to be reduced by cash flow to the Company from the Treasury Strategy. The Company will amend the March 19 Current Report to disclose material costs, charges and cash expenditures to be borne directly by the Company, if and when such amounts become reasonably estimable.

Management concluded that these transactions occurred after year-end and therefore did not require adjustment to the accompanying consolidated financial statements.